Today is Jobs Day. Here’s what you need to know about the October employment report:
+166,000 net new jobs were added in October. This is almost twice what the markets expected.
The unemployment rate is unchanged at 4.7%.
The US economy has created 1.68 M net new jobs over the past year, and 8.3 M since the labor market turnaround in August 2003.
We’ve had 50 months (4 years and 2 months) of continuous employment growth, a new record.
Wages are up 1.2% over the past year, adjusting for inflation.
In other economic news, on Wednesday we got GDP data:
GDP grew 3.9% in the 3rd quarter, well above market expectations of about 3%. This is the strongest quarterly GDP growth in 1½ years. Extra happy.
We can see the effects of a strong labor market in the consumption numbers – people are working and their real incomes are climbing, so they’re buying more stuff. Since consumption is about 70% of the economy, strong consumption growth is critical to continued GDP growth.
Housing is still a drag – it knocked 1.1% off the third quarter growth number. This is bad but unsurprising. The silver lining is that there’s no evidence the housing decline is spilling over into consumption.
Business investment was solid. Investment in “equipment and software” grew at a 6% rate, the best in 1½ years.
Exports continue to be strong, and they now make up 1 in 8 dollars of our GDP (12%). The rest of the world is growing, and they’re buying our stuff.
This last point is a useful reminder – world economic growth is not a zero sum game. When other countries’ economies grow, they buy more US goods. That’s good for us.
It’s no fun unless you have a picture. The yellow bar shows the total of 3.9% GDP growth. The other bars show where the growth is coming from.
This is my favorite way to show what’s actually going on – you can see that most of our growth is coming from consumption, that business investment and exports are important, and that housing is still a big drag.
We also had some happy news that productivity grew 2.6% in the 2nd quarter of this year. Higher productivity means each worker makes more stuff. Over time, productivity growth leads to wage growth.
Wednesday the Federal Open Market Committee cut the fed funds rate by a quarter point, to 4.5%. They also cut the discount rate by the same amount, to 5%. The FOMC also put out a statement. Since we don’t comment on the Fed’s monetary policy actions, I’ll leave it at that.
There are, however, some clouds going forward.
It’s probably going to take a while to work out of the housing downturn. We expect housing will continue to be a drag on GDP growth.
Oil prices are nearing an all-time inflation-adjusted high (depending on how you measure inflation).
The credit markets are still working through problems that first appeared in August.
One of our favorite words when talking about the US economy is “flexible” – we have extremely flexible labor and capital markets. When bad things happen (e.g., a factory closing, wildfires, housing and credit market troubles), a flexible economy can adjust and recover quickly and with the smallest amount of pain. We’re seeing the benefits of a flexible economy now.
4 comments:
Yes!!!I love good news about our economy! All I hear all day is how crappy people think this country is and how they hate our president. Im so sick of both, but im only going to talk about our economy. Why do our own citizens look at our economy, the same one they buy stuff from and contribute to, and scoff. The only thing you are scoffing at is yourself. If you think there is a problem, well do somehting about it. Frankly, I see no problems economically. Everything but the housing department is on the rise. Wages are up, exports are up, the government just purchased 40 billion worth of aircraft from Lockheed Martin, I am extremely pleased. Uncle Sam just needs to keep on, keeping on! All this speak of recession, bring it on!! According to Keynes, Americans will only spend more! Go America!!!!
This is good news. There's always talk how China will soon dominate the economy, yada yada yada. IMHO, China will eventually hit a wall. I'm not sure when, I'm not sure how bad its going to be, and I'm not sure what's going to happen after, but its going to happen. Why?
1. They're wrecking their environment as fast and hard as they can. I'm not just talking about not enough parks and greenspace. I'm talking about serious and massive health risks (for the rest of the world too). Their cancer rate is going to be off the charts. Just in August, the chairman of the Olympic committee said that they would likely have to postpone certain events for safety purposes on bad air days.
2. The internal politics are a mess. You've got the stress of an authoritarian system with its lack of political expression and religious repression. Add to it the demographic issues and the HUGE gap between rich and poor in China ...its an implosion waiting to happen.
3. They're building a high energy consumption economy at a time when energy (and by that we mean oil) gets more and more scarce and expensive every day.
If I would bet on a new superpower, it would be India. They're doing it right by building an educational foundation, a diverse, sustainable economy, and a liberal pluralistic society. The same things that keep US in good hands will keep them steadily improving.
I don't doubt that our economy is doing well, but I don't understand how the new remains so negative despite this good economic report - o wait it must be our sensationalist media (Michael Moore). At any rate, it is sad that people refuse to look at the positive numbers of our growing economy and instead watch ABC to get all their news. I guess the only real economic problem is the housing market.
I am glad the economy is going well. I hope this economic growth doesn't suddenly change on us and take us downhill. As for the housing market I am gald that we sold our house over the summer, when the market was doing better.
Post a Comment