May’s job report shows the beginning of the end for the recovery
Summary: First, the good news: the May number was awful but probably noise. Then the bad news: job growth is slowing fast. It’s the among last economic metrics to roll over, suggesting that we’re sliding to a recession somewhere ahead of us. But the US is not a “Starbucks Economy”; real wage growth is normal.
The good news about the bad news: May’s job growth was ugly, but might just be noise. Note the other bum months amidst the otherwise steady growth. Graph of the monthly change in jobs since Jan 2013:
Employment is still growing, but slowing fast. Graph of the year-over-year percentage growth in jobs:
Bad news: the slowing of job growth was broad-based. Only the education-health care sector was unaffected. Graph of the change in jobs during May:
What about the information sector, our 21st century jobs machine? We tell youth: “Go to the info sector!” Reality: only slow growth, perhaps now over. Graph of year-over-year percent job growth in the info sector:
Temp workers are the first to get fired, so are a leading indicator. The bad numbers of the past five months are a warning. (Total employment is a lagging indicator). Graph of monthly change in temporary help services jobs:
The number of temporary workers fell 6–12 months before the past two recessions. Graph of number of workers in temporary help services:
Update: the US is not a “Starbucks Economy”. Wage growth is typical of past cycles: slow then accelerating.
The US economy continues to grow slowly, but almost every metric shows that the rate of growth is slowing. While we cannot yet see the next recession, the data suggests that we should begin to prepare — perhaps it will arrive in early 2017. Raising interest rates now would be quite mad.
Much of what you read about jobs is malarkey. See Debunking the happy headlines about job growth.
For More Information
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- Why America’s growth is slowing, and a solution — Imagine bringing June Cleaver from her 1957 home to today’s equivalent; she’d be astonished at our lack of progress. See how we’ve underperformed futurist Herman Kahn’s 1967 expectations for the year 2000.
- Larry Summers gives us the bad news. Worse, the only solution is more of the same.
- Do we face secular stagnation or a new industrial revolution?
- The IMF warns us of economic stagnation & suggests fixes. We should listen.
- Ben Bernanke sees the great slowdown in technological progress.
- Poorly prepared Boomers retiring means hard times for them and for America.
- The Fed sees years of slowing growth. Prepare for years of political turmoil.
- As boomers retire they create a drag on US GDP that will last for decades.
Two books about our slow-grow economy
by Uwe Petersen (2014) and the highly rated Secular Stagnation: Facts, Causes and Cures
by editors Richard Baldwin and Coen Teulings (2014).