Friday, June 2, 2017

May jobs continue slowdown, but we are not in a Trump recession...yet

With it being the first Friday of the month, that typically means a "jobs Friday". And today's US jobs report for May wasn't as good as recent months had indicated, and prior months were revised down.
Total nonfarm payroll employment increased by 138,000 in May, compared with an average monthly gain of 181,000 over the prior 12 months. In May, job gains occurred in health care and mining. (See table B-1.) …

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in May. In manufacturing, the workweek also was unchanged at 40.7 hours, while overtime edged up by 0.1 hour to 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged down by 0.1 hour to 33.6 hours. (See tables B-2 and B-7.)

In May, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $26.22. Over the year, average hourly earnings have risen by 63 cents, or 2.5 percent. In May, average hourly earnings of private-sector production and nonsupervisory employees increased by 3 cents to $22.00. (See tables B-3 and B-8.)

The change in total nonfarm payroll employment for March was revised down from +79,000 to +50,000, and the change for April was revised down from +211,000 to +174,000. With these revisions, employment gains in March and April combined were 66,000 less than previously reported. Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors. Over the past 3 months, job gains have averaged 121,000 per month.
Job growth of 121,000 a month since February vs 181,000 over the last year sure seems like a decline. And the tepid 2.5% 12-month increase in wages isn’t going to do much to spur things in the near future.

Now, while the jobs market is appearing to be a bit slower over the last 3 months, I’m not going to say “Trump recession” or any other panicky reaction. We’re still seeing GDP and job growth, and unemployment claims are still low. I think Justin Wolfers' analysis is pretty spot-on.

On a related note, unemployment rate dropped again, to 4.3%, which is the lowest it’s been since May 2001 (the last time we had a GOP president who lost the popular vote, and followed a 2-term Dem that presided over economic recovery). The bad news is that drop in unemployment was because of 429,000 people dropping out of the work force (or not yet joining because school wasn’t out at the time of the survey), and the participation rate and employment-population ration also dropped by 0.2% for the month.

( Quick side note, UW’s Menzie Chinn has an interesting post up on Econbrowser that goes into how the household survey that determines the unemployment rate is less reliable than the “total jobs” payroll survey, especially at the state level. Keep that in mind as you hear Scott Walker and WisGOP try to talk up the alleged unemployment rate of 3.2% in Wisconsin.)

Given that the labor force has only increased by 1.27 million in the last 12 months, I have to wonder if this reflects a large number of Boomers aging out of the work force and a lack of new potential workers that are entering (usually younger workers and immigrants). A slowdown in labor force growth would definitely hamper the country’s economy and its chances of continuing the 8-year expansion.

Another item that’s raising my concern is that if you read between the lines of the Trump’s Administration’s statements, you can see some shakiness in the economy’s foundation. And it’s manifesting itself in what could be an unresolved issue that could become a lot more serious over the next 2-3 months.
The legal cap on U.S. borrowing is currently set at $19.81 trillion. Since mid-March, when the last debt ceiling suspension ended, the Treasury Department has been using special accounting measures to keep debt below that limit in order to continue paying all the country's bills in full and on time.

But those measures will only last so long. When they run out, Treasury will only be able to pay bills with the cash and revenue it has on hand. And there won't be enough to cover everything on a daily basis.

Both the Congressional Budget Office and the Bipartisan Policy Center have estimated the so-called extraordinary measures will likely be exhausted sometime this fall. But Treasury Secretary Steven Mnuchin hasn't offered an official estimate.

What he did do last week, however, is suggest to lawmakers that they act before they leave for their August recess. That, combined with a comment from White House Budget Director Mick Mulvaney that revenue appears to be coming in "a little bit slower than expected," has had people worried that the must-act-deadline for Congress will come even earlier than the fall.
Those “slower revenues” are not the sign of an economy that is booming, even with the stock market bubble hitting new records.

Remember, we haven’t seen any new Trump intiatives be passed into law that would disrupt and/or slow the economy - including Trump/Ryancare, the worst-of-both-worlds budget that would both explode debt and cut domestic spending in numerous areas.

So don’t go off the deep end and pull everything under your mattress yet. But you can definitely see the clouds among our still-decent economy, and we’ll see if those blow up into storms in the coming months.

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