Month: September 2017

By Thomas Cooley and Peter Rupert

The BEA released the 3rd estimate for Q2 real GDP and hiked it from 3% in the 2nd estimate to 3.1% in the third. Real GDP increased 1.2% in Q1, unchanged from the previous estimate. The 3.1% increase is the largest since Q1 of 2015.

 

 

Non-residential fixed investment remained strong for the second quarter in a row, 7.2% in Q1 and 6.7% Q2. These back-to-back increases were the largest over the past three years. Residential investment, on the other hand, dropped 7.3%, the largest decline since 2011.

 

Hurricane Harvey created a lot of uncertainty for the future. On the one hand it foretells a big short term hit to local GDP from lost economic activity and the hit to the oil and gas sector. Hurricanes Irma and Maria will not show up strongly in GDP except insofar as they affected Florida and the U.S. mainland. This is because the GDP from Puerto Rico and the U.S. Virgin Islands does not enter into calculations of U.S. Domestic GDP. Government expenditures on relief will show up.

 

By Thomas Cooley and Peter Rupert

The Bureau of Labor Statistics reports employment increased 156,000 in August along with 41,000 in downward revisions over the past two months. The overall picture, highlighted by the continued use of “little changed” by the BLS:

“and the unemployment rate was little changed at 4.4 percent”,

“Among the major worker groups, the unemployment rates for adult men (4.1 percent), adult women (4.0 percent), teenagers (13.6 percent), Whites (3.9 percent), Blacks (7.7 percent), Asians (4.0 percent), and Hispanics (5.2 percent) showed little or no change in August. (See tables A-1, A-2, and A-3.)”

“The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged in August at 1.7 million and accounted for 24.7 percent of the unemployed. (See table A-12.)”

“The labor force participation rate, at 62.9 percent, was unchanged in August and has shown little movement on net over the past year. The employment-population ratio, at 60.1 percent, was little changed over the month and thus far this year. (See
table A-1.)”

Declines in employment were seen in information services and government. Average hours of work fell slightly from 35.4 to 34.4.

The employment to population ratio has been inching up since 2014 while he labor force participation rate has hovered around 62.9.

 

 

The matching of workers to vacancies, as indicated by the Beveridge Curve, after moving counter-clockwise over the cycle shows a slightly elevated vacancy rate as compared to unemployment.

The weakness from this August report likely gives some pause for the policy moving forward. Nevertheless, it is still a strong labor market with low unemployment rates and  healthy vacancies. The same puzzles that presented themselves in prior months persist – low participation rates and low wage growth. Healthy GDP growth has not translated into gains for most workers.