‘Consider Me Worried’
Economists and others weigh in on the acceleration in GDP growth tepid rise in payrolls amid a increase in the unemployment rate.
–There has clearly been a “soft patch” in economic performance this spring and as such, the employment growth rate is slowing rather than accelerating. We believe that given what we know now, job growth is still set to accelerate as we believe the recent weakness is, relatively speaking, a bump in the road… The more important problem, in our opinion, is the lack of wage growth among those with a job and those gaining new employment. Between labor market slack, which reduced bargaining power among the employed, and the mix of job creation (leisure, food service and retail) being on the lower end of the scale, there has been no meaningful increase in aggregate earnings. –Dan Greenhaus, Miller Tabak
–What appeared to be a sustainable level of job growth seems to have faded hard in May. Yes nonfarm payrolls increased for the month, but that increase is actually a net-negative considering population growth that adds 75,000 – 85,000 workers to the labor force in an average month. Job growth is (was?) the only thing going for consumer incomes and spending, and this most recent result will throw said spending, responsible for 70% of economic activity, into a questionable state. –Guy LeBas, Janney Montgomery Scott
–Some of the drag causing the soft-patch is temporary. Among those factors are higher oil prices earlier in the year, bad winter weather, spring floods and tornados, and the Japan disaster. Oil has already fallen to near $100 a barrel, weather can only be assumed to normalize, and Japan appears to be making good progress in getting production back up to plan by late summer/early fall. Other factors are longer term including cutbacks in state and local government spending, limits to federal spending, and the ongoing drag from depressed commercial and residential real estate markets. Still other factors contributing to weak economic growth can be termed structural, including lower population/labor force growth and a cyclical decline in productivity growth. –Robert A. Dye, PNC>
–I worry about the fragility of “animal spirits,” and the damage that even ostensibly temporary forces can have in interrupting the building optimism that had led to a nice pickup in hiring and investment by businesses and spending by consumers late last year. My read of the anecdotal information is that the economy has substantial underlying resilience and can quickly recover, but consider me worried. –Stephen Stanley, Pierpoint Securities ...Many MORE
