March Jobs Report Not All Good News
July 28, 2016 at 4:25 p.m.
By Gary [email protected]
The report out last week showed a surprising increase in hiring and wages.
Employers added a better-than-expected 215,000 jobs and average hourly earnings rose 0.3 percent.
The unemployment rate edged up a tenth of a percent to 5 percent. But that couldn’t be taken completely as a negative because it was caused by more workers attempting to get back into the workforce.
These are good things, to be sure.
But if you dig into the numbers just a little bit, there are some troubling trends.
First of all, in March, the retail sector added the most jobs – 48,000, while construction gained 37,000. Health care added 37,000 as well. But meanwhile, manufacturing shed 37,000 jobs.
So we had good jobs growth, buy we lost manufacturing jobs, which is not so good.
The other thing that was troubling was that for three months running, temporary help has been very weak. In this report, it was only up 4,000.
Analysts, like John Canally, a market strategist at LPL Financial, say this is a leading indicator. He told CNBC that there was “a surprising decline of more than 55,000 temp workers in January and February combined.”
Analysts watch temporary help as an indicator of recovery in a job market after a recession. Strong temporary hiring is a sign that long-term hires aren’t far behind. Weak temp numbers foretell slow future full-time hiring.
Another thing that’s a bit unsettling to me is that all of this is happening amid an economy that’s barely growing.
Maybe that’s a function of the type of jobs that are being created – more service, less manufacturing.
The labor participation rate ticked up 0.1 percent to 63 percent.
That’s the percentage of people either working or looking for work. In 2008 before the recession, the LPR was 66.2 percent. It has been dropping every year since 2000, when it was 67 percent.
There are some demographic reasons for at least part of the drop in the LPR, mainly baby boomers reaching retirement age and lower birth rates. That accounts for around 1.5 percent of the 4 percent decrease.
That means the LPR among people aged 25 to 54 must be low as well. It is. The current rate – which ticked up 0.2 percent last month – is 81.4 percent, down 1.9 percent from 2008.
You have to go back to August of 1985 to find a working aged LPR that low. These are prime working years where we really shouldn’t be seeing LPRs that low.
The highest working-aged LPR ever recorded was in April 2000 at 84.5 percent.
On Monday, the Commerce Department reported new orders for manufactured goods declined 1.7 percent in February and business spending on capital goods was much weaker than initially anticipated.
Factory orders fell across the board, with orders for transportation equipment down 6.2 percent, machinery down 3.4 percent and electrical equipment down 3.6 percent.
The decline reversed January’s 1.2 percent increase. Factory orders have declined in 14 of the last 19 months, the Commerce Department said.
This – along with weak consumer spending and trade data in the first quarter – adds to the concern that economic growth slowed even further in the first quarter than anticipated. It already was expected to dip below one percent.
Growth had slowed to an annualized 1.4 percent in the fourth quarter of 2015.
According to Reuters:
Manufacturing, which accounts for about 12 percent of the economy, has been pressured by a strong dollar and weak global demand, which have undermined exports of factory goods, as well as efforts by businesses to reduce an inventory overhang.
The sector has also been slammed by investment cuts by energy firms as they adjust to reduced profits from cheaper oil.
"We remain hopeful for some upcoming improvement in the data as many of these headwinds have either passed or faded," said Daniel Silver, an economist at JPMorgan in New York.
"We have also been encouraged somewhat by some other more timely manufacturing indicators that have turned more mixed lately following a period of more widespread and severe weakness."
That’s a fairly positive, optimistic perspective, I guess, but that was late last week.
On Friday, CNBC had this:
Some economists now see first-quarter growth as negligible, and it could easily turn out to be negative.
Economists shaved already weak growth forecasts by a few more tenths Friday, after wholesale inventories fell 0.5 percent month over month in February, much more than the anticipated 0.1 percent decline. January was also revised down by 0.4 percent.
The closely watched Atlanta Fed GDPNow model now shows first-quarter growth tracking at 0.1 percent, compared to a 0.4 percent estimate earlier in the week. JPMorgan economists now forecast the economy only expanded by 0.2 percent in the first quarter, from 0.7 percent.
Barclays economists shaved tracking GDP growth for the first quarter to 0.3 percent from 0.4 percent.
All things taken together, I guess I am starting to worry a little bit that the U.S. economy is in some sort of new normal of sluggish growth and moderate underemployment.
I worry that maybe the days of GDP above 5 percent for several consecutive quarters are gone forever.
I hope I am wrong.[[In-content Ad]]
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The report out last week showed a surprising increase in hiring and wages.
Employers added a better-than-expected 215,000 jobs and average hourly earnings rose 0.3 percent.
The unemployment rate edged up a tenth of a percent to 5 percent. But that couldn’t be taken completely as a negative because it was caused by more workers attempting to get back into the workforce.
These are good things, to be sure.
But if you dig into the numbers just a little bit, there are some troubling trends.
First of all, in March, the retail sector added the most jobs – 48,000, while construction gained 37,000. Health care added 37,000 as well. But meanwhile, manufacturing shed 37,000 jobs.
So we had good jobs growth, buy we lost manufacturing jobs, which is not so good.
The other thing that was troubling was that for three months running, temporary help has been very weak. In this report, it was only up 4,000.
Analysts, like John Canally, a market strategist at LPL Financial, say this is a leading indicator. He told CNBC that there was “a surprising decline of more than 55,000 temp workers in January and February combined.”
Analysts watch temporary help as an indicator of recovery in a job market after a recession. Strong temporary hiring is a sign that long-term hires aren’t far behind. Weak temp numbers foretell slow future full-time hiring.
Another thing that’s a bit unsettling to me is that all of this is happening amid an economy that’s barely growing.
Maybe that’s a function of the type of jobs that are being created – more service, less manufacturing.
The labor participation rate ticked up 0.1 percent to 63 percent.
That’s the percentage of people either working or looking for work. In 2008 before the recession, the LPR was 66.2 percent. It has been dropping every year since 2000, when it was 67 percent.
There are some demographic reasons for at least part of the drop in the LPR, mainly baby boomers reaching retirement age and lower birth rates. That accounts for around 1.5 percent of the 4 percent decrease.
That means the LPR among people aged 25 to 54 must be low as well. It is. The current rate – which ticked up 0.2 percent last month – is 81.4 percent, down 1.9 percent from 2008.
You have to go back to August of 1985 to find a working aged LPR that low. These are prime working years where we really shouldn’t be seeing LPRs that low.
The highest working-aged LPR ever recorded was in April 2000 at 84.5 percent.
On Monday, the Commerce Department reported new orders for manufactured goods declined 1.7 percent in February and business spending on capital goods was much weaker than initially anticipated.
Factory orders fell across the board, with orders for transportation equipment down 6.2 percent, machinery down 3.4 percent and electrical equipment down 3.6 percent.
The decline reversed January’s 1.2 percent increase. Factory orders have declined in 14 of the last 19 months, the Commerce Department said.
This – along with weak consumer spending and trade data in the first quarter – adds to the concern that economic growth slowed even further in the first quarter than anticipated. It already was expected to dip below one percent.
Growth had slowed to an annualized 1.4 percent in the fourth quarter of 2015.
According to Reuters:
Manufacturing, which accounts for about 12 percent of the economy, has been pressured by a strong dollar and weak global demand, which have undermined exports of factory goods, as well as efforts by businesses to reduce an inventory overhang.
The sector has also been slammed by investment cuts by energy firms as they adjust to reduced profits from cheaper oil.
"We remain hopeful for some upcoming improvement in the data as many of these headwinds have either passed or faded," said Daniel Silver, an economist at JPMorgan in New York.
"We have also been encouraged somewhat by some other more timely manufacturing indicators that have turned more mixed lately following a period of more widespread and severe weakness."
That’s a fairly positive, optimistic perspective, I guess, but that was late last week.
On Friday, CNBC had this:
Some economists now see first-quarter growth as negligible, and it could easily turn out to be negative.
Economists shaved already weak growth forecasts by a few more tenths Friday, after wholesale inventories fell 0.5 percent month over month in February, much more than the anticipated 0.1 percent decline. January was also revised down by 0.4 percent.
The closely watched Atlanta Fed GDPNow model now shows first-quarter growth tracking at 0.1 percent, compared to a 0.4 percent estimate earlier in the week. JPMorgan economists now forecast the economy only expanded by 0.2 percent in the first quarter, from 0.7 percent.
Barclays economists shaved tracking GDP growth for the first quarter to 0.3 percent from 0.4 percent.
All things taken together, I guess I am starting to worry a little bit that the U.S. economy is in some sort of new normal of sluggish growth and moderate underemployment.
I worry that maybe the days of GDP above 5 percent for several consecutive quarters are gone forever.
I hope I am wrong.[[In-content Ad]]
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