Month: January 2017

By Thomas Cooley, Ben Griffy and Peter Rupert

Fourth quarter real GDP grew at a 1.9% seasonally adjusted annual rate, according to the advance estimate, as announced by the Bureau of Economic Analysis. Overall, for 2016 GDP increased at a 1.6% clip, one full percentage point lower than the 2.6% increase in 2015 and also lower than the 2.4% growth rate posted in 2014. Although, the year-over-year change has somewhat reversed its downward trend that began in 2015. Compared to other recoveries, our current one depicts slower growth coming out of the trough than previous recoveries going back to the 1960’s. Note, however, that several of the recoveries had slipped back into recession by this time, some eight years after the trough. According to the NBER business cycle dating committee there have been 11 cycles since 1945, the average duration during that time span from trough to peak is 58.4 months.

The principal contributors to the Q4 growth were personal consumption expenditures (contributing 1.70) and investment (contributing 1.67). The decline in exports and increase in imports were the largest drag on growth with net exports contributing -1.70. Over the year, real PCE grew 2.7%, only slightly lower than the 3.2% growth in 2015 and 2.9% in 2014.

 

Overall for 2016 investment fell 1.5%, nonresidential structures down 3.1%, equipment down 2.8 but intellectual property products up 5.0%.

 

By Thomas Cooley, Ben Griffy and Peter Rupert

Happy New Year! Today’s employment report from the BLS revealed that establishments increased employment by 156,000 in December.  In addition, over-the-month revisions decreased October employment by 7,000 while adding 26,000 to November’s job gain. There were 144,000 more private sector jobs, 12,000 of those in goods producing and 132,000 in service sector jobs. 2016 saw an increase of 2.2 million new jobs, lower than the 2.7 million jobs added in 2015.

Health care and social assistance led the way with a 63,300 employment gain. Durable goods manufacturing employment increased 15,000. On the downside, temporary help services shed 15,500 jobs; construction down 3,000 and mining and logging down 2,000.

While employment gains were less than many anticipated (somewhere in the 180,000 range) hours of work were also a bit disappointing, remaining at 34.3 after a downward revision to November from 34.4. to 34.3. Most of 2014 and 2015 saw the workweek in the 34.5 to 34.6 range while 2016 started off with a 34.6 reading but has declined over the year. 

Real earnings of all private workers has been trending up, finally showing signs of wage growth. In real terms, however, the CPI has eaten away some of the gains.

From the household survey the labor force increased 184,000, causing the participation rate to climb slightly to 62.7, while the number of employed increased 63,000, so that the unemployment rate increased from 4.65% to 4.72%.

The overall picture for 2016 shows a labor market that continues to expand, but lethargically, although at a pace higher than the recovery from the 2001 recession.

Looking at the 12 month moving average there is some evidence of a slowing down in employment growth. However, given the recent election and the mostly positive effects on confidence measures as well as the stock market, perhaps signals a brighter future for the labor market.