The US economy added just 88,000 new jobs in March, a reading sharply lower than expected. However, the unemployment rate ticked down to 7.6 per cent, because the share of Americans in the labour force dropped to its lowest level since 1979. On the other hand, jobs figures for January and February were revised up. March was the poorest monthly jobs figure in nine months. In the private sector, manufacturing lost 3,000 jobs and retail lost 24,000. Again, on the other hand, little noticed, the U6 unemployment rate (that includes those not registered but looking for work) fell from 14.3% to 13.8%.
The stock markets greeted the news by selling off and many analysts preached doom and gloom. But these are same experts that jump with delight when there are good figures. Can we see through the noise at the underlying state of the US economy and elsewhere? Well, as readers of this blog know, I rely on a few ‘high-frequency’ indicators to guide me. I start with my ‘combined’ US manufacturing and services sectors purchasing managers’ index (PMI). After the March data came in last week, it looks like this.
On this indicator, the US economy continues to trundle along in a crawl. If we look at the less reliable but even more frequent ECRI weekly indicator, it’s much the same story – if anything, it’s a little bit stronger in the few months.
It seems that most parts of the world capitalist economy are expanding, if at a crawl. Only the Eurozone is in a significant contraction.
Yet this may be the best picture for some time ahead. The US government again faces a close down in the summer unless Congress agrees to raise the debt limit and reaches agreement on budget measures. As it is, the Obama administration is preparing spending cuts in its 2014 budget starting in October, including cutting the real value of average pensions by changing the inflation indexation (see my post, https://thenextrecession.wordpress.com/2012/12/27/the-fiscal-cliff-okuns-law-and-the-long-depression/).
And the private sector remains in the doldrums with investment growth poor, even though profits are at record highs (see my post, https://thenextrecession.wordpress.com/2013/03/30/its-still-a-bear-market/). Sales growth is low by historic standards (see pink in graph below) and there is a limit on how much labour’s share of national income can be squeezed further. At that point, profitability could start to fall.