By Rick Manning
What does the dismal unemployment report for March mean for the American economy? Are there reasons to be concerned that the optimism in the general media that the economy was finally picking up steam was misplaced? What do other economic reports say?
Make no mistake the unemployment report for March was abysmal with the reported unemployment rate remaining steady due to 277,000 people leaving the labor force with only 34,000 more Americans finding jobs. In the past year, as the population of potential workers aged 16 and above increased by just under 2.8 million people, the workforce only increased by 726,000. In that same year, the labor participation rate has dropped a full half of a percent to levels not seen since February 1978 when the Bee Gees topped the record charts with the song “Stayin Alive.”
While March’s employment numbers were bad, the previous two months, which had been strong, were revised downward by 13 percent, creating a slightly less vibrant scenario for the first two months of the quarter than had been previously reported.
So what does this mean?
It might not mean anything. The unemployment report has seemed disconnected from the economy at large for a while as presumably tightening labor markets have not generated the kind of upward wage pressure that one would expect.
The Atlanta Federal Reserve tracks and attempts to anticipate future growth in the U.S. economy separate from the Labor Department’s jobs report, and their findings are much more troubling.
Their GDP growth projection models use real time reports that are factored together to make an educated guess on where the economy is going, cratered in February and March from a lukewarm rate of just under 2.5 percent to a zero percent projected growth rate to end the first quarter.
If this modeling is correct and the trend line continues over the months ahead, our nation will be in recession before Christmas of 2015 and the recovery that never seemed to take hold will be over.
However before anyone panics, there are those who attribute the slow down to the West Coast longshoremen who slowed loading ships over the past few months altering import and export activity. Also, the prolonged extremely cold weather that engulfed much of the country is believed to have had an impact.
No matter the excuses though, the past few days have provided ample reason for our nation’s policy makers to be concerned about the direction of the economy. Assumptions of economic growth dictate underlying budgeting decisions. For instance, President Obama’s 2016 budget operates under the presumption that the GDP will grow at a pedestrian 2.3 percent. If it fails to meet that growth rate, it is likely that revenues will fall, widening the budget deficit and adding even further to the national debt.
A first quarter of zero percent growth would require a robust turnaround in the remainder of the year even to make the 2.3 percent initial estimates.
None of us can always actively guess which direction the economy is going, but as you hear economic shaman and talking heads continue the narrative of an improving economy, it might be wise to take it with a grain of salt.
Rick Manning is the President of Americans for Limited Government.
