By Thomas Cooley and Peter Rupert
Employment Report
The Establishment Survey from the BLS showed non-farm payroll employment increasing a paltry 20,000, with small upward revisions over the past two months, totaling 12,000. Economists surveyed by the Wall Street Journal had forecast an increase of 180,000. No one said it was easy. Our economy is buffeted by many, many shocks, from weather (very cold last month in many parts of the US), political drama, other economies (Europe is mostly in recession, see this post), international trade uncertainties, and so on. Construction employment saw a decline of 31,000, the first decline since May of 2016. Other than the big decline in construction employment there were no other very large declines, but no large increases either. So, disappointing across the board.
Average weekly hours fell from 34.5 to 34.4 and average hourly earnings increased from $27.55 to $27.66, a 0.4% rise, however the year over year increase in average hourly earnings was 3.4%, the largest annual gain since 2009.
The household survey indicated a 45,000 decline in the labor force, no change in either the participation rate (63.2) or the employment to population ratio (60.7). The number of unemployed persons fell 300,000 and the unemployment rate, fell from 4.00% to 3.82%. Short term unemployment fell by 131,000 for those unemployed less than 5 weeks and fell 203,000 for those unemployed 5 to 14 weeks. However, those unemployed long term increased, up 40,000 for 15 to 26 weeks and up 19,000 for 27 weeks and over.
Q4 GDP Report
The BEA reported a 2.6% increase in Q4 real GDP on an annualized basis. Instead of an “advance” estimate they call this an “initial” estimate:
Due to the recent partial government shutdown, this initial report for the fourth quarter and annual GDP for 2018 replaces the release of the “advance” estimate originally scheduled for January 30th and
the “second” estimate originally scheduled for February 28th.
After taking a bit of a nose-dive in late 2015 and early 2016, GDP growth has been on an upward trajectory. Personal consumption expenditures grew at 2.8% and year over year, ticking down slightly. Goods consumption rose 3.9% with durable goods rising 5.9% and nondurables 2.8%. Services increased 2.4%
Investment was up 4.6% following a hefty 15.2% increase in Q3. Nonresidential up 6.2% but the structures component was down 4.2% and residential structures down 3.5%. Intellectual property products shot up by 13.1%. The share of intellectual property investment continues to rise and is now almost 5% of GDP.
Where is the Recession?
For months the pundits have been warning of a forthcoming recession. The December stock market swoon fueled the worry. It is certain that there will be one – business cycles are a recurrent phenomenon. But the question of when is more difficult to answer. The economy continues to show strong growth overall. The labor market just sputtered but had very large growth the month before! The decline in residential investment is somewhat troubling however…historically housing investment declines have preceded and were the biggest contributor to GDP declines. There are other big concerns: a widening trade deficit fueled by a strong dollar, a softening Chinese economy and sputtering European economies, not to mention an increasing U.S. debt. There is plenty to be concerned about. But somehow the U.S. economy keeps on trucking with record job vacancies, strong wage growth and improved productivity.