Economics Speed Round: May 2016

The job numbers for April 2016 came out last Friday, causing some alarm in the stock market exchanges around the world. Let’s dive into the most recent report from the Bureau of Labor Statistics.

Total nonfarm payroll employment increased by 160,000 in April

While this number may seem relatively large, the reason it causes concern among investors is that it is significantly lower than expected. The 12 month average for job creation from April 2015 to March 2016 was 231,000 jobs. April’s number is 70,000 jobs below that average. It is also significantly lower than the last three April numbers (average of 251,000). Couple this with revisions downward for both February and March, and the economy generated 89,000 fewer jobs in the last three months than expected, or roughly 4 out of the 10 jobs fewer than were expected. This is a dramatic slow down in hiring, and employment is often a lagging indicator of economic downturns.

the unemployment rate held at 5.0 percent

The unemployment number remains elevated, even after the administration was touting a decrease to 4.9% in the jobless number just two months ago. The U-6 number is still at 9.3%, a number which is extremely troubling, especially when coupled with seasonably adjusted part time workers for economic reasons (part time workers who would prefer or need full time work, but are unable to find such jobs).

long-term unemployed (those jobless for 27 weeks or more) declined by 150,000 to 2.1 million

It appears that most of the employment for March is from the long-term unemployed, which is a positive sign for those families, but indicates only a small portion of jobs were created for new entrants into the job market.

the labor force participation rate decreased to 62.8 percent, and the employment-population ratio edged down to 59.7 percent

The percentage of workers in the job market edged downward by 0.2% points in both LFP rate and E-P ratio. This puts America right back to 1978 era levels for these indicators. While part of this is due to the exodus of Baby Boomers from the workforce, there are many working age individuals out of the workforce, who are unable to find full time work.

united-states-labor-force-participation-rate@2x

The most troubling data comes from the Bureau of Economic Analysis, which released the advanced estimate of the 1st Quarter 2016 GDP Growth.

Real gross domestic product increased at an annual rate of 0.5 percent in the first quarter of 2016...

This bodes very poorly for the rest of the year. A recession is still indicated by Q3 of 2016, as the economy looks to be softening under the continued weight of the Obama Administration regulatory regimen.

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

 


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