The third estimate of Q2 Real GDP, released on September 27 shows that previously reported slow growth was even slower. The previous estimate of 1.7% was revised down to an anemic 1.3%. Note, however that the annual benchmark revisions in July increased both 2011 Q4 (was 3.0% now 4.1%) and 2012 Q1 (was 1.9% now 2.0%). Personal consumption was revised down somewhat, 1.5% from 1.7%, after increasing 2.4% in Q1. Secvojnd quarter growth is approaching stall speed and early indications about the third quarter are not encouraging.
According to the establishment survey from the Bureau of Labor Statistics, nonfarm payroll employment increased by 96,000 in August, undershooting expectations by a large margin. Private payrolls increased by 103,000 while government continued to shed jobs, declining by 7,000. Service sector employment rose by 119,000 while the goods-producing sector declined by 16,000, led by a big decline in durable goods manufacturing, falling 17,000. The report undershot expectations by a large margin, many had predicted the labor market would add about 125,000 jobs or so. Moreover, downward back revisions of 41,000 over the previous two months show a much weaker labor market. While there had been some upbeat, hopeful, data released toward the end of this week, the labor market did not listen. The labor market has developed a bit of a bump in the recovery road, according to the BLS, “Since the beginning of this year, employment growth has averaged 139,000 per month, compared with an average monthly gain of 153,000 in 2011.” It has also become evident in the labor market that we continue to drown our sorrows…employment in food and drinking establishments has risen 298,000 over the past 12 months.
The household survey from the BLS revealed a slight decline in the unemployment rate, edging down to 8.1%. However, the number of unemployed persons remained about the same at 12.5 million and of those, about 40% are categorized as long-term unemployed, having been unemployed 27 weeks or longer. More discouraging perhaps is the fact that both the labor force (154.6 million) and the labor force participation rate (63.5%) fell. The last time the participation rate was this low was in June of 1979. It should be noted however that labor force participation began to decline around the year 2000 after rising steadily since the early 1960’s; but since the Great Recession has declined at a faster pace.