Economics Speed Round: April 2016

There are three big reports on the economy to talk about this month, including the latest Federal Reserve meeting which occurred in the mid-March. Let’s get straight to the latest release from the Bureau of Economic Analysis.

Real gross domestic product .. increased at an annual rate of 1.4 percent in the fourth quarter of 2015, according to the “third” estimate…

Of interest is a further revision upward of the Q4 2015 GDP numbers, up from 1.0% to 1.4%, all the way up from 0.7% reported in January. This final Q4 revised number is down 0.7 points from 2.1% in Q4 2014 and down 2.4 points from 3.8% in Q4 2013. Discounting for wasteful federal spending (roughly 0.5% to 1.0%), adjusted growth is an abysmal 0.4%.

From the Bureau of Labor Statistics, jobs created remained steady..

Total nonfarm payroll employment rose by 215,000 in March, and the unemployment rate was little changed at 5.0 percent.

This is the first increase in the official unemployment number since May 2015, though the unemployment number has been slowly decreasing for some time. Comparing the jobs numbers for January, February, and March to the nonrecessionary months since 2005 (excluding data from February 2007 through January 2011), January job numbers were 24.0% below target. February and March job numbers were on target..

In March, the labor force participation rate (63.0 percent) and the employment- population ratio (59.9 percent) changed little.

Labor force participation and employment population ratios ticked upward by 0.1 points, which could account for the uptick in the official unemployment number, however..

The number of persons employed part time for economic reasons (also referred to as involuntary part-time workers) was about unchanged in March at 6.1 million..

Part time employment ticked up to 6.1 million from 6.0 million in February, indicating 100,000 of the 245,000 jobs (roughly 40%) created in February (revised upward in March) were effectively part time. That means only 145,000 full time jobs were created in February.

In mid March, the Federal Reserve Board held their quarterly Federal Open Market Committee, and this puts everything into context..

[T]he Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent.. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction..

Basically, the Federal Reserve is keeping the federal funds rate at 0.25% to 0.5%, which is a stimulative rate intended to keep liquidity in the banking system. In addition to this, the Board is also continuing its policy of Quantitative Easing (stimulus). So, despite having double stimulus programs, with a core loans rate at near record lows and “debt free” money, the economy grew at an adjusted rate of only 0.4% in Q4 2015 and 40% of new jobs are part-time work.

The economy remains soft, and indications of a recession by Q3 2016 remain.

That’s the Economics Speed Round for April. Catch everyone next month.

Liberty is For The Win!


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