Weak April Jobs Report Highlights A Troubling Trend by Gary D. Halbert
FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
May 10, 2016
IN THIS ISSUE:
1. April Unemployment Report Was Very Disappointing
2. Labor Force Participation Rate Posts Surprising Reversal
3. Transgender Restrooms: North Carolina Vs. Justice Dept.
4. Enter the US Justice Department, With or Without Authority
Last Friday’s much weaker than expected unemployment report raised serious new questions about the economic recovery. While the headline unemployment rate held steady at 5%, the number of new jobs created last month was disturbingly lower than the pre-report consensus at only 160,000. Forecasters had expected 220,000 new jobs last month.
The anemic 160,000 new jobs in April highlights a worrisome seven-month trend of falling job creation since last October. Combine that with the weaker than expected 1Q GDP report showing growth of only 0.5% and the result is an economy that is barely growing at all, which raises the odds of a new recession just ahead.
Following that discussion, I will veer off my usual writing topics and we will look into the latest national controversy over “gender-neutral” restrooms. The federal government is demanding that “transgender” women (with male body parts) should be able to use the women’s restrooms. Likewise, transgender men (with female body parts) should be able to use the men’s restrooms.
Ground-zero in this fight currently is in North Carolina which recently passed a law mandating that restroom access be determined by the person’s biological gender at birth – as stated on their birth certificate. Last week, the Justice Department threatened to file a lawsuit which could cut off billions in federal funding for North Carolina if the state does not repeal the law. On Monday, the state of North Carolina filed a related lawsuit against the Justice Department.
Obviously, there is a great deal of emotion on this issue, and these so-called “bathroom bills” are only going to intensify in the weeks and months ahead. So we’ll take a look at the issues today. It should make for an interesting E-Letter so let’s jump right in.
April Unemployment Report Was Very Disappointing
Most Americans pay scant attention to the plethora of economic reports released each month from the government and other independent reporting agencies. Among those who do pay attention, most just read or hear what the mainstream media reports. This can be very misleading.
Take last Friday’s unemployment report for April as a prime example. Ahead of the report, the consensus was that the April unemployment rate would be unchanged at 5%, the same as the March report. At 5%, the jobless rate would be almost half what it was at the height of the Great Recession of late 2007/early 2009.
That’s a good thing, right? And that’s what the mainstream media reported. But as is so often the case, the “internals” of the reports often tell a different story. Unless you have an independent source interpreting the economic news, as I and others do, you can have a warped opinion of how the economy is really doing.
With that in mind, let’s look at last Friday’s unemployment report for April. As noted above, the headline unemployment rate came in at 5% as expected, the same as that for March. Yet the details of the report revealed a much different story. I’ll break them down for you.
For starters, the number of new jobs created in April was pathetic. The number of new jobs created in April was only 160,000 versus the pre-report expectation of 220,000 and the weakest new jobs reading in seven months. Prior to April, the US had added 200,000 or more jobs in five of the previous six months.
The latest jobs data provided an unexpectedly negative signal about the nation’s labor market. A surge of Americans dropped out of the workforce and hiring in several key industries, including construction and manufacturing, all but stalled. The Department of Labor also revised downward jobs gains in the prior two months by a combined 19,000.
The deceleration in jobs growth provides the first potential signal that the nation’s recent economic sluggishness – the result of a still-strong dollar, lower corporate profits and cautious business and consumer spending – could be spilling into the labor market. Economists said Friday that employers are growing wary about expanding their payrolls and adding costs.
Some suggested that the weaker than expected job growth in April was an aberration. Others suggested that perhaps the months prior to April were the aberrations. In those earlier months, the US had maintained robust employment growth overall, even though the rest of the economy was stuck in second gear. Now we’re in a seven-month trend of falling jobs growth.
And let’s not forget that the government recently estimated 1Q GDP grew only 0.5% (annual rate) in January-March. Since then economists have said the contradictory mix of rapid hiring and weak GDP growth is unsustainable.
Jobs Report – Labor Force Participation Rate Posts Surprising Reversal
The next disappointing element of Friday’s weak jobs report was the surprise drop in the Labor Force Participation Rate, which had been improving in recent months. The Labor Force Participation Rate includes those who are employed and those who are actively looking for work, even if they haven’t found a new job yet.
This participation number has plummeted from over 66% in early 2007 to near 62% in 2015. Most in the mainstream media attribute this decline to the Baby Boomers retiring, rather than the widespread weakness in the economy. That is not entirely true. Over 300,000 Americans left the labor force in April – meaning they either departed jobs or abandoned their searches.
The participation rate had been improving since late last year due to more people feeling confident enough about the economy to start looking for work again. The bigger than expected drop-off in April has economists worried that the gains since late 2015 may be reversing. It is a serious concern.
The one bright spot in Friday’s report was the fact that wages increased by a solid eight cents per hour on average in April. That’s the third-best monthly gain over the last year, and during that span, wages have risen 2.5% – a notch above the 2.0% pace maintained throughout much of the recovery from the Great Recession.
Finally, with the combination of the weak 1Q GDP report (+0.5%) and Friday’s weaker than expected jobs report, most Fed watchers now believe there will not be a second Fed Funds rate hike at the next Fed policy meeting on June 14-15. Not everyone agrees, see link below.
Transgender Restrooms: North Carolina Vs. US Justice Department
Unless you have been living under a rock, you know that there is currently a heated national debate over which public restrooms certain members of the LGBT (Lesbian, Gay, Bisexual, Transgender) community should be able to use.
The LGBT crowd insists that its constituents should be able to choose whichever restroom fits the lifestyle they currently practice. As an example, they believe that a transgender woman (with male body parts) should be able to use the women’s restrooms in public places. Likewise, a transgender man (with female body parts) should be able to use the men’s restroom.
Most employers are legally required to provide workers reasonable