Is Jobs Engine Running Out of Steam?


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After experiencing optimism earlier in the year, there are signs that the U.S. jobs engine might be slowing. Certainly, the turmoil experienced in China, Europe, and the Middle East are finally starting to drag down the economy.  Then the lack of robust business investment is especially problematic.  Unless that turns around soon, we might be approaching recessionary status.

The Bureau of Labor Statistics released its jobs report for September and it showed a steady unemployment rate of 5.1 percent with an increase of 142,000. Labor force participation rate continues its steady trickle downward to 62.4 percent, though the employment to population ratio showed a modest tick up to 59.2 percent.

Even though the unemployment rate remains steady, the rate of job growth has slowed. Over the last three months covering July-September, we have experienced an average of 167,000 jobs. That is almost a 30 percent decline from last year’s rate.  With construction, manufacturing and wholesale trade showing little change, that offers a hint that this downward trend could continue as we head toward winter.

It is troubling that business investment hasn’t followed suit with consumer spending.  Though household spending has been relatively healthy at 3.2 percent over the last year, we cannot say the same for industry.

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Even though some of that can be attributed to uncertainty from various political and global events, it will be difficult to maintain a robust economy without further investment.  Both shipments and new orders of core capital goods have shown negative growth over the last year.

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Another issue is that wages remain stagnant.  Over the last year, wages have grown at a 2.2 percent pace, which is well below what we experienced pre-recession.  Until we see wages approach the 3 percent clip, it will be difficult to imagine a more robust economy in the future.

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Is this the beginning of a downward spiral?