Are The Jobs Numbers Fake Now?


When similar results were posted in past employment data, Trump was dismissive and calling them lies. Now that the first labor report of his nascent presidency has been released, he is changing his tune. Trump officials are now openly touting the numbers as evidence that they are facilitating change. In reality, it is not much different than what we have seen over the last year.

There was an increase of 235,000 jobs and a modest decrease of the unemployment rate is 4.7 percent. Certainly, this is a positive development, but we should also recognize that there were 2,000 more jobs created at this time last year.

Having said that, Trump should receive some credit for the upbeat news. His promise to introduce more business-friendly legislation is being warmly received by business leaders and that’s reflected in bulging stock markets. Also, his efforts to reduce environmental oversight has already reaped benefits in manufacturing. After a long period of stagnant growth, there have been 57,000 jobs added in the past three months with almost half of that total occurring in February.

On the other hand, there hasn’t been demonstrative change in other employment factors. The labor force participation rate has changed little from 63.0 percent from 62.9 percent last year. Also, the employment-population ratio edged up slightly from 59.8 percent to 60 percent. An alternative measure of unemployment accounting for those only marginally attached to the labor force dropped to 9.2 percent. While continuing a long-running downward trend, its rate was matched as recently as last December.

As for wage growth, it continues to fall short of the three percent threshold that’s been illusive in recent history. In fact, we haven’t reached that growth level in almost six years. Currently, wages have grown by 2.5 percent over the past twelve months. While that’s better than last month, the average wage growth for the first two months of this year (2.3 percent) is slightly behind last year’s pace of 2.4 percent.

Until Trump passes a legislative agenda that reflects changes to taxes and regulation, it is unfair to judge his record, regardless of whether the future economy expands or contracts over the next few months. Let’s wait until this time next year where we can then more accurately measure his economic stewardship as commander-in-chief.

In summary, the employment picture is brightening, but that trend started long before the inauguration of Trump last November. It is more accurate to say that he effectively crafted a misleadingly gloomy view of employment prospects that elevated him to an improbable victory.

What’s fake is insinuating that the labor market is only now experiencing positive change.

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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?

 

Immigration Enhances Local Economies


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Immigration is a divisive topic.  Whenever a new segment of workers enter the market, it causes apprehension and distrust.  In the early 20th century, it was African American laborers, who were despised as they were willing to do jobs at wages that whites were not willing to take.  In the late 20th century and 21st century, it is foreign workers, who come from countries that pay much lower wages.  Even when it comes to highly skilled jobs, they are willing to work at a fraction of what Americans are accustomed to.   Both caused dissension and angst with many Americans not fully grasping the role that both workers played in our country’s prosperity.

While Arizona, Georgia, and Alabama are passing laws to restrict immigration, St. Louis is openly courting immigrants in order to stem a steady loss of population.  Loss of industry and perceived unfriendliness to minorities are key factors for the steady decline in population since 1950.  In order to counter this negative trend, city leaders have been openly courting immigrants to reverse it.

Even though many are aware of the negatives of immigration, Jack Strauss, Director of Simon Center for Economic Forecasting at St. Louis University, paints a different picture.  He mentioned that many of the foreign-born immigrants are highly skilled and offer needed skills to the area.    Finding ways to increase their presence would improve the vacancies that are a large burden to the area, along with boosting home prices.  Even when considering low-skilled immigrants, their impact is not as bad as the public would believe.  That is because they are less likely to use food stamps and receive less financial assistance than other low-income groups.

In Strauss’ estimation, St. Louis has not been able to maximize their economic potential.  This includes missing out between 4-7% of income growth for the city and 7-11% for the overall region.  They could have reversed poor job growth inflicting the region where they could have experienced 4-5% more job growth.  Lastly, the unemployment rate for both whites and blacks would have dropped by approximately 2%.

The rate of entrepreneurialism among immigrants is much higher than native-born Americans, so they are job creators rather than job takers.  Strauss’ study showed that immigrants are 60% more likely to be entrepreneurs.  In particular, Bosnians have been very successful in revitalizing parts of South St. Louis by moving into older neighborhoods and starting businesses in diverse sectors such as bakeries, butcher shops, coffee shops, construction, heating and cooling, and even a truck-driving institute.

Despite the efforts by some St. Louis area officials, they have been hamstrung by a Missouri state legislature bent on restricting the flow of immigration.  Even though many of the measures led by Republicans have not been successful, it might create a climate of unfriendliness that turns off immigrants to St. Louis.  In comparison to other top metro areas, their proportion of immigrants within the St. Louis region is low at 4.5%.  The low number of immigrants is one reason cited for their poor economic growth and stagnant income growth.

Despite public support from St. Louis Mayor Francis Slay and St. Louis County Executive Charlie Dooley toward immigrants, Strauss suggests further strategies are necessary to attract foreign-born talent.  He cites efforts in other metropolitan areas where they are openly courting a more diverse workforce.  This includes connecting them with key resources from governmental and nongovernmental agencies, assistance with various social services, and offering career and leadership opportunities.

Of course, it would be ideal if job creation could occur from domestic citizens.  Most income earned from domestic residents will circulate within the same communities.  On the other hand, immigrants, who have left family back in their home country, are likely to give money back there.  That will offset the gains that their presence brings to the U.S.  However, occupying one vacant home, creating one job from a small business, and paying sales taxes from income earned on a job is better than experiencing neighborhood blight, rising unemployment, and declining services from lack of tax revenue.

It is time that we open our blinders and embrace immigration.  They enhance, rather than hurt communities.

Why Good Jobs Report Might Be Misleading


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The February jobs report exceeded expectations with the unemployment rate falling to 7.7% and 236,000 jobs added.  While that suggests optimism, self-inflicted wounds from congressional gridlock may eventually lead to unnecessary damage to economic growth and unemployment.  What is misunderstood is that the impact of policy is not fully felt until months later.  That is because it takes time for both businesses and consumers to fully respond and react to the recent legislative acts.  Also, spending cuts from the sequester will not take place immediately.  When one takes a closer look at two articles from MarketWatch and CNNMoney, there is evidence that some of these results might be deceptive.

Robert Brusca of FAO Economics has another take on what seemed like a positive report.  Based on February’s short length and high number of holidays, he believes that we should not put too much credence in this report because it can be skewed by seasonal factors.  That is supported by last year’s data where there was 271,000 jobs added last February and  was followed by much less job growth for much of the rest of 2012.  He also noted that there was a downward revision in January’s numbers where job growth was reduced from 157,000 to 115,000 and he thinks that is more indicative of where the market is.  Lastly, he points out that average job growth of 169,000 for the first two months of 2013 was far short from the 291,000 averaged from the first two months of last year.

In reviewing the CNNMoney report, we can see that negative employment trends remain.  First, we have only regained two-thirds of the jobs lost during the Great Recession.  Even with the consistent job growth over the last couple of years, it has not been able to keep pace with a growing labor force and long-term unemployment rates remain very high at 40%.  During normal economic times, we saw only half of that.

Having said that, there are positives.  It was good to see that construction jobs are increasing.  That is undoubtedly a result of a recovering housing market where home prices steadily rising over the last year.  In fact, home prices increased by 7.3% nationally in 2012, which is the highest we have seen since well before the recession.  Housing markets are usually a strong indicator for a robust recovery.  That is because buying homes lead people to buy additional items, such as appliances and other household goods.

In summary, my inclination is that we should expect more headwinds that will slow economic growth, particularly when we get to the second half of the year which is when the sequester will start to show its greatest impact.  Legislative uncertainty remains with a possible government shutdown within the next month.  The combination of that and the delayed effects of the sequester are reasons for caution.  That is unfortunate because there were indications that the economy was on the cusp of a more robust recovery.