By: Bill Conerly
This morning’s report on employment was indeed weak, with just 88,000 net new jobs. Here are some key points from the report:
1. Growth is weak. Okay, you knew this already, but last month’s big increase fueled optimism. The February gain was not only large, it was revised upward today to a net gain of 268,000 jobs. The housing market is much stronger than in the past few years, and many people look at housing as an indicator for the entire economy. Those who don’t pay much attention to housing often look at the stock market. (This is a poor indicator of the overall economy, but I’ve explained that before.) So this report reinforces what careful analysts have known for quite some time.
2. Growth is positive. The first point was about the half-emptiness of the glass; this point is about its half-fullness. The economy continues to grow, albeit at a low rate. The gradual improvement over time is seen in the unemployment rate. (This is not the best gauge of month-to-month changes in the economy, but it does indicate longer-run trends.
3. Inflation is calm. Wage gains were fairly high late last year. For three months in a row the percentage increase in average hourly earnings was 0.3 percent. That’s not too much in any one month, but it constitutes an annualized rate much higher than we had been experiencing. In March, we learned today, the average wage dropped a penny an hour. Our 12-month growth rate is back down to two percent.
4. The most-likely outlook is more of the same. We don’t have a strong propulsion in the economy, but we have enough to overcome the stultifying factors. This balance probably won’t change over the coming six months. After that I’m a bit more optimistic.
5. Risks abound. Certainly we saw gains in some sectors, such as construction and bars-restaurants. However, other sectors cut back. Looking overseas, plenty of threats to the United States economy continue. Our present low-growth rate won’t last forever. It’s a good time for contingency planning for both stronger growth as well as recession.