I have to say that right around me on the very very outer bands of Washington DC’s influence it doesn’t feel very “recessiony” currently. I will also say that I was in Loudoun County last week, the wealthiest county in the USA per capita and just outside of Washington, and the Target was filled with shoppers. It almost felt like pre-2008. It pays to live close to the crony center of the universe. Sure the traffic is insane, sure it’s miles and miles of suburbia, sure there is nothing really to do but work or shop, but there is money in the Capital City. There is money. There’s always money in crony capitals.
However Friday’s job report indicated that things might not be so rosy in other parts of the country. The report was more than disappointing. The economy officially only created 38,000 jobs in May. In February it “created” 233,000 in comparison and the decline to yesterday has been steady during the intervening period. The trend is down, markedly.
This throws a wrench in to the Fed’s game plan. People were really thinking that Yellen would move to raise rates again if she possibly could this summer. It looks like that is less likely to happen now.
Are we picking up where we left off this winter? Is this jobs number a blip? Are we headed for another bumpy fall? Sell in May – oh wait too late for that…
(From The Economist)
But the economy has fallen spectacularly short at the third hurdle: the labour market. The jobs report was the weakest since 2010. To use up slack in the labour market, it is thought that payrolls must swell by a little under 100,000; the consensus forecast was for about 160,000 net new jobs in May. A mere 38,000 rise in payrolls means that the labour market loosened, rather than tightened, despite low interest rates. That the unemployment rate tumbled from 5% to 4.7% was no consolation: it was caused by falling labour-force participation, which is now back where it was at the start of the year (though a little higher than its trough in September). That is unwelcome news: economists had thought that a strong economy was tempting people back into work.
*Always beware when a publication says “economists thought” or “economists think.” Economists almost never agree on anything yet the financial press often infers that there is some consensus among the economic mandarins. That is pretty much never the case.