May’s Job Report Confirms Slowing Economy
Last month the Bureau of Labor Statistics surprised just about everyone by reporting that 274,000 jobs were created during the month of April. Few economists were predicting an equally strong number for May’s report as the consensus forecast was for a modest 180,000 jobs. Friday’s announcement that only 78,000 jobs were created during May disappointed economists looking for signs of continued economic growth. Friday’s report reinforced the volatile nature of the survey, but it also confirms the U.S. economic growth is slowing down.
The lone positive news arising from May’s jobs report was a slight downtick in the unemployment rate to 5.1%. In May the household survey continued to show a much stronger economy than is indicated in the more trusted payroll survey. To date this year, the household survey shows job creation approaching 1.3 million, which is about twice as strong as the payroll survey. Financial Watch believes neither survey accurately portrays the true number of jobs being created so far this year. The actual number probably lies somewhere near 1 million new jobs.
Financial Watch forecasted last month that job creation would fall short of the necessary 150,000 new jobs each month to absorb workers coming into the workforce. Friday’s job report confirmed our belief that the U.S. economy is losing steam due to our large economic imbalances and the efforts of the Federal Reserve to bring short-term interest rates back to a neutral rate. Recent data reinforces our view that the economy is heading into a slowdown or even worse. The time has passed for our elected representatives to take action to create a level playing field for international trade without causing disruption within the financial markets. The longer we continue to wait for our trading partners to act, the most disruptive the changes will be when they inevitably take place.