Economics Speed Round: June 2016

Straight to business. Buried under the abysmal jobs report from May was the second estimate of the 2016 Q1 GDP Growth from the Bureau of Economic Analysis. The news is not good.

Real gross domestic product increased at an annual rate of 0.8 percent in the first quarter of 2016, according to the "second" estimate released by the Bureau of Economic Analysis.

This represents a gain of only 0.3% points over the first estimate, as other factors are reported to the BEA. With several negative indicators, such as large decreases in hiring, there are indications that the final number for 2016 Q1 will be below 1.0% and that 2016 Q2 will be poor as well. The Bureau of Labor Statistics released their most recent jobs numbers last Friday, with two very interesting and conflicting data points.

The unemployment rate declined by 0.3 percentage point to 4.7 percent in May...

This unemployment rate would normally be cause for celebration, as that’s the lowest rate in a decade, but it’s clear that this number is an artifact of the poor formula for the “official” U-3 number, as the numbers fail to account for people who stop looking for work and are no longer counted as part of the work force. This 0.3% point drop in unemployment is utterly nonsensical when the jobs created are taken into account.

"[N]onfarm payroll employment changed little (+38,000)...

This number is abysmal, full stop.

There isn’t any way to dress this up as a positive number for the economy. We have to go all the way back to September 2010, in the tail end of the Great Recession, to find a jobs number this bad, with major job losses in mining, information, and manufacturing. The bottom may be ready to fall out from under the economy.

U-6 Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force: 9.4%

This is a 0.1% increase in the U-6 unemployment number, which is a larger overall number than the U-3 number. This increase in the U-6 number proves that the officially reported U-3 number (at 4.7%) is misleading, especially given a sharp spike in the number of people who have been moved to part time positions from full time.

The number of persons employed part time for economic reasons .. increased by 468,000 to 6.4 million in May..

With almost half a million people being moved to part time positions, this is a major indicator of an economic slow down. Companies are shedding work hours to brace for impact.

In May, the civilian labor force participation rate decreased by 0.2 percentage point to 62.6 percent. The rate has declined by 0.4 percentage point over the past 2 months, offsetting gains in the first quarter.

The decrease in the civilian labor force participation rate proves that the decrease in the U-3% number is largely due to attrition from the work force, rather than any gains in the job market. Unfortunately, the stage is set for a recession. Brace yourselves.

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

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