Is the US economy breaking out of its short-term data tailspin? Maybe. This week has seen some improved news, none more so than new hiring data released this morning. US hiring in March was much better, with the economy creating 196,000 jobs, significantly higher than forecasted and up hugely from February’s barely positive numbers. Wage growth decreased slightly in pace, but was solid at 3.2%. The unemployment rate remained steady at 3.8%.
FINSUM: This could mean the weak data recently was just a blip and things are still on course. The data is lining up to show this might have been a big bond market overreaction…
The whole market has been on recession watch mode lately. The Fed has gone seriously dovish and weak economic data seems to be emerging by the day. However, some good news, at last: US jobless data just clocked in at the lowest level in 50 years, showing that the labor market is still tight. The numbers were in contrast to economists’ estimates for higher claims. Claims have fallen this far recently, but been revised higher later.
FINSUM: This is good news but it may not be indicative of much as this data could be slightly behind the hiring numbers, which have been weak recently.
Another day, another round of bad news on the economy. In what comes as another round of disappointing data, GDP for the fourth quarter was just revised downward from 2.6% to 2.2%, showing the economy finished the year on a softer note than expected. The data adds to the list of poor numbers—labor, housing etc—that have been hitting investors.
FINSUM: Weak economic and housing data have been flowing like a hose lately, and today is no different. This will only add to the downward momentum in yields.
In one of the most alarming bits of news we have seen about the economy is some time, new data out on the hiring market is showing a bleak trend. The US economy almost failed to produce any new jobs in February, with the total job creation figure at just 20,000. That is a major step down from the hundreds of thousands of new jobs investors had been used to seeing each month. The number is a meteoric fall from the 311,000 created in January, and way under the forecast of 180,000. Following the data, a senior member of the Fed reiterated that the central bank should take no actions on rates until at least the middle of the year.
FINSUM: This is very scary, but there is an important motto to remember here—one point does not a trend make.
One of the big mysteries in this recovery has been the fact that wages have not risen much despite the fact that employment has expanded greatly. Investors have gotten used to massive amounts of new jobs being created, but also to quite meager wage gains. Economists have been somewhat stumped as to why, but a new explanation makes a lot of sense—monopsony. Those with an economics background will immediate recognize the term. It refers to when there are many suppliers of something but only one buyer. In this case it is being applied to the labor market—there are tons of available workers, but quite few employers, especially in more isolated locations. This means the employer has sole negotiating power in dictating wages, leading to widespread wage stagnation despite a competitive labor market.
FINSUM: This seems like the outcome of all the corporate consolidation that has occurred over the last few decades. There are less employers, so they collectively have more power to hold down wages.