The US unemployment rate ticked up to 8.2% (from 8.1%), the first increase since last summer; the broader underutilization rate also increased to 14.8% (from 14.5%).
• A net +69k jobs were created in May, far below consensus estimates of +150k; April and March jobs figures were also revised downwards (-49k in total), the first time this has happened in five months.
• The total number of unemployed (12.7M) held steady while the long-term unemployed - those out of work for 6+ months increased (to 42.8% from 42.6%).
• A net +69k jobs were created in May, far below consensus estimates of +150k; April and March jobs figures were also revised downwards (-49k in total), the first time this has happened in five months.
• The total number of unemployed (12.7M) held steady while the long-term unemployed - those out of work for 6+ months increased (to 42.8% from 42.6%).
• One glimmer of hope: The labor participation rate increased to 63.8% (from 63.6%) - the result of 642k additional workers re-entering the workforce. This underscores the improving sentiment among the unemployed.
A weakening labor market...
• Job growth remained widespread albeit muted: health care (+33k), transportation and warehousing (+36k), wholesale trade (+16k) and manufacturing (+12k) all experienced gains.
• Job growth remained widespread albeit muted: health care (+33k), transportation and warehousing (+36k), wholesale trade (+16k) and manufacturing (+12k) all experienced gains.
• Construction and government continued to pare payrolls (-28k and -13k, respectively); professional and business services remained flat (-1k), however, temporary help services did increase (+9.2k).
• Noteworthy: The average workweek for all employees edged downward to 34.4 hours (-0.1) which is equivalent to losing around 200k jobs in terms of total earned income for the economy (source: Standard Chartered Bank).
What’s in store? Key watch items…
On the bearish side:
• Europe. The sovereign debt crises plaguing the "PIIGS" countries (namely Portugal, Ireland, Italy, Greece and Spain) is well chronicled. Greece's exit from the EU may inflict even more pain for these similarly challenged countries as borrowing rates skyrocket. While the US has taken steps to insulate itself from the EU's ongoing struggles, it is not free from risk. After all, the EU are huge importers, accounting for 5% of the rest of the world's GDP (but only 1.2% of the US's). They are also huge lenders, having lent more than $6T globally (twice as much as as US banks and 10% of our GDP). A pull back by EU banks would limit access to credit, potentially staving economic development in developed and emerging economies alike.
• Consumer confidence. The Conference Board's consumer confidence index fell to 64.9, its lowest reading in four months - largely attributable to the softening labor market. The impact of this can be seen in the slowdown in Q1 12 GDP (1.9% annualized vs. 3.0% in Q4 11) as companies were less aggressive about restocking their inventories. However, on the brighter side of things, consumer spending did increase 2.7% in Q1 12, the largest gain in consumption since Q4 10.
On the bullish side:• Less pain at the pump. With Memorial Day kicking off the unofficial start of the driving season, consumers may be in line for a respite from high gasoline prices that have pressured their wallets in years past. According to the Energy Information Administration, a surplus of crude coupled with less global demand should keep prices in check during the Summer months. Of course, this is barring any major geo-political surprises…including hurricanes.
• China. While much attention has been paid to China's "slowing" economy (2012 GDP is expected to be around 8.2%, the lowest growth figure since 1999), much of this phenomenon is attributable to Beijing's efforts to cool its overheating economy, protect against asset bubbles and shift their economic model from one reliant on exports to domestic consumption (aka rebalancing). While this shift is begrudgingly taking longer than expected, China's concerted "Go West" development strategy (they've significantly increased investment to urbanize western provinces to meet its pledge of raising incomes for the poor and achieving social stability) may help raise the overall standard of living and fuel long-term consumption. We'll see if the "rising tide truly lifts all boats."
