The May Jobs report, released by the Labor Department on Friday, offered another exercise in spin: how to take a plunge in non-farm jobs and make the overall picture seem rosey, and self-assured, proclaiming that the American economy was sound, and to that effort a variety of voices were heard, but not always seen.
75,000 was the number of jobs gained, with 180,000 expected, and taking the biggest loss was manufacturing, which took a huge loss, joined by construction, and wages remained flat and labor force participation refused to budge; a reflection of the past few months; but for some the fact that the unemployment rate held at 3.6 seemed to be balm that soothed the savage beasts of bankers, and economists.
Wages, on average, felt only an increase of 3.1 percent, compared to one year ago.
“Slow income growth has been the weakest part of the US economy in its recovery from the Great Recession. Wages have barely kept up with the cost of living, even as the unemployment rate dropped and the economy expanded,” noted Vox in their coverage.
Of note, “Over the past year, the cost of food and housing has gone up, so paychecks have had to stretch further. But because of a recent drop in the price of clothes and utilities, the annual inflation rate has fallen to 2 percent, compared to a high of 2.4 percent in 2018 (based on the Consumer Price Index).
So when you take inflation into account, workers’ real wages only grew about 1.1 percent within the past year. That’s even slower than wages were growing earlier this year,” they added.
“The jobs report follows the smallest increase in private-sector employment in nine years, according to payment processor ADP on Wednesday, which showed that the private sector added 27,000 nonfarm jobs in May, representing the weakest growth since March 2010,” reported Market Watch.
Some economists and market observers see the ADP survey as an indicator of what is to follow in the monthly government report, but “ADP’s survey has not historically been a perfect indicator of the BLS payroll data, but the stark miss was taken by many economists as an augury for a disappointing report Friday,” according to Yahoo Finance.
Those aforementioned voices? Some were eager to say, that Mother Nature, with her storms, and tornadoes, were at fault, and that should be taken into allowance.
Others noted that, “This is the type of [jobs report] the doves will really take to, as it supports the argument for cutting rates beyond politics or trade issues, which were never part of the Fed’s mandate to begin with,” Mike Loewengart, vice president of investment strategy at E-Trade wrote in an email. to Market Watch.
“That said, our historically low unemployment rate hasn’t moved, and even though the number came in low we’re still creating jobs, which supports the case that the economy is still expanding,” he added. “So the Fed will have to walk a really thin line.”
“While the slight decline in wage growth will support the Fed’s patient stance on rates, the average pace of job growth over the last 3 months (at 151,000) is hardly alarming,” Brian Coulton, chief economist at Fitch Ratings, wrote in an email. [to Market Watch]
“It speaks to a slowdown in the domestic economy but there’s no suggestion of demand falling off a cliff.”
“Economic growth is clearly slowing, as indicated by the slower pace of job growth in May, downward revisions in prior months, and a leveling out of wage growth,” Mike Fratantoni, chief economist for the Mortgage Bankers Association, [also] wrote in an email. “The job market remains tight, but this report, coupled with other recent data, shows a distinct cooling of the economy this spring.”
If that does not give hope, then at least, depending on your view there is support for a variety of opinions, yet as my late father said, “Numbers don’t lie,” and the numbers seen give most bankers and economists a deeper sense of loss, than might be publicly acknowledged, and with transportation and warehouse jobs tasking a nosedive from 6,700 to 200, and manufacturing dipping to only a gain of 3,000 jobs added, and construction losses were from 30,000 to 4,000, then Dad was right, as he so often was.
Some more good news was that Toyota and Fiat Chrysler posted gains, but not Ford Motor Company and General Motors; and “An index of manufacturing activity released Monday fell to its lowest level in 2 1/2 years,” according to National Public Radio.
“Manufacturing is especially sensitive to trade disputes, which can raise costs, disrupt supply chains and depress foreign demand. Last month, the administration increased tariffs on $200 billion worth of imports from China. The president has also threatened to impose tariffs on imports from Mexico, beginning next week,” but that bullet has been dodged, with talks between the US and Mexico on intervening to prevent asylum seekers from the United States, at a premium.
While the Trump administration has said that new arrangements were made, and agreed upon, The New York Times reported that these were mostly old agreements made in Miami with the former secretary of the homeland, Kirstjen Nielsen, and the Mexican secretary to the interior, Olga Sanchez, with more of the Mexican National Guard directed to intervene and holding asylum seekers in Mexico after they had seen US immigration judges, an American requirement, but also, in short supply.
What is not clear is how successful these efforts will be, and if they will take more time, as predicted, in the Miami talks, or later.
Most observers say that Trump had to back away from the threatened tariffs, ranging from 5 percent to 25 percent, due to criticism from business executives, and global leaders, and even his own staff, of a trade breakdown that would deeply affect much of his base and that wanting, and needing, to use the economy, as a key plank in the 2020 presidential campaign.
Others say that while this report is not indicative of a pending recession that many had predicted, in the first quarter, moves like the one for Mexico could precipitate one, and that this is one reason Trump backed down after 9 days of threast, while White House spokesperson Sarah Sanders strutted out the news to reporters.
Reality beckons, and "There's increasing evidence that the ongoing trade war here is beginning to have some tangible effects on the U.S. economy," said Tim Quinlan, a senior economist at Wells Fargo Securities. "We're not on the edge of the cliff here. But the pace of expansion in [manufacturing] is the slowest of the Trump era."
“Over all, the economy is on a fragile footing,” said Lindsey Piegza, chief economist at the investment bank Stifel. “We’re still talking about solid growth at the start of the year, but that’s in the rearview mirror. The name of the game is uncertainty,” reported the Times.
Next up is the reaction by the Federal Reserve in its upcoming meeting in ten days, and the experts are all over the map with many markets nervous about rate cuts.
“Until relatively recently, the expectation was that the Fed would continue raising its benchmark interest rate, something it started doing in December 2015. The Fed changed course in January, when Mr. Powell suggested that very modest inflation and weakness in Europe and China warranted a neutral stance.
Michael Gapen, chief United States economist at Barclays, predicted the Fed’s next move would be anything but neutral. On Friday, he estimated that the central bank would cut rates by half a percentage point in July, followed by a quarter-point reduction in September.”
Reaction on the investment side of the equation, has been strongly seen in “The futures market, where traders can bet on the direction of Fed policy, indicated on Friday that investors believe there is a more than 80 percent chance of the Fed easing monetary policy in July, compared with a 17 percent probability just a month ago,” and “Expecting a rate cut, the financial markets bid up the price of stocks and bonds on Friday, with the S&P 500 closing up about 1 percent, the Times added.
According to The Los Angeles Times, “The Fed never had to rescue the economy from past presidents’ trade wars, or from policies that presidents embarked upon against the wishes of advisers,” said Gary Richardson, an economics professor at the University of California at Irvine who used to be the official Fed historian.”
No comments:
Post a Comment