This time around I’m going to focus less on the headline numbers and more on the details of the March employment report. (Link provided above.) Although the headline numbers appear strong – 215,000 jobs added with the unemployment rate up slightly at 5.0% – there are troubling signs in the details which hint at a looming economic slowdown.
First of all, the job gains are concentrated in retail, health care and food services. Among the higher-paying categories of jobs that really drive the economy – manufacturing, mining (largely oil drilling), construction and business – only construction saw gains in jobs. Manufacturing and mining employment fell yet again and business jobs were flat. The latter is an especially troubling sign, as it was one of the sectors that had been propping up employment for some time, averaging gains of 52,000 per month during 2015. This year, however, there have been virtually no gains in business employment at all.
Secondly, the large gain in retail jobs – 48,000 in March – is inconsistent with other data on retail sales and consumer spending, both of which have been hovering around an annual rate of gain of 1-2%, barely enough to keep pace with inflation and population growth. In other words, there appears to be no justification for such gains in retail employment. I’m looking for this trend to reverse soon when company executives wake up to the fact that their sales forces have grown out-of-proportion to sales volumes. I also expect employment in the food services industry to soon reverse course as the explosion in fast-food establishments that always happens at the tail end of a recovery goes bust.
Beyond the employment report, there are other red flags waving, like heavy advertising for easy mortgages and “title loans,” where you bring in the title to your car and they’ll loan you money with the promise that you get to keep driving your car as long as you make the loan payments. Already, auto sales were being propped up with sub-prime loans. So now, not only are people who can’t afford them getting new cars, but they’re then using those cars as collateral for loans that they also can’t afford. And it’s a fact that when people have their cars repossessed (the “title loan” people and the dealerships will have to fight over who actually gets the car), they also tend to lose their jobs.
This economy’s been running on fumes for quite a while, as the federal budget has been lagging the rate at which the trade deficit is sucking money out of the economy. Something’s going to give soon.