Jobs Report Signals Slow Growth: Bankrate.com
The winter winds may have subsided, but that hasn’t warmed the country’s economic chill.
Employment numbers released Friday by the Bureau of Labor Statistics show a steady, but slower-than-anticipated job growth, offering guarded optimism for an eventual economic recovery, according to Mark Hamrick, Washington, D.C., bureau chief for Bankrate.com.
“There have been high hopes coming out of this miserable winter that the economy will improve with the weather,” Hamrick said. “But those looking for an economic sprint may have to realize that it’s going to be more like a trot.”
Nearly flat job growth bears this prediction out, Hamrick said. Total nonfarm payroll employment rose by just 192,000 in March, and the unemployment rate remained unchanged at 6.7 percent with the number of unemployed at 10.5 million, according to the report.
The growth in professional jobs versus low-wage hospitality industry and service workers means the economy, while sluggish, is on the mend, Hamrick said. However, other factors are causing a continued drag on the economy. Increased inventories of non-purchased goods developed in light of previously optimistic predictions have added to the current slowdown, he said.
“There's a growing line of thought that some of the recent softness involves overbuilt supplies on business shelves and back lots,” Hamrick wrote in his April 2 Economics Blog. “In short, businesses have too much stuff.”
The current economic growth rate of 2% during the first quarter 2014 should escalate, albeit slowly, rising above the 2% mark for second quarter and possibly as high as 3% by year-end, Hamrick predicted. Other social issues, including the widening gap between lower, middle and upper class population sector will likely continue to have a negative impact as job growth creeps slowly forward.
“The lower-middle and lower classes are struggling terrifically with the economy and wages themselves are barely rising at little more than 2% over the past year,” Hamrick said. “If we can really reduce the unemployment rate and labor market stops experiencing so much slack, then we might see some wage acceleration, which would be a great help.”
Financial institutions, including credit unions, face their own challenges in light of current economic conditions, Hamrick said. Larger institutions also have been shedding employees as demands for services lags, and new technologies that have added new capabilities also reduced the number of positions needed, he said.
“New efficiencies reduce jobs,” Hamrick said. “The trading floor of the New York Stock Exchange is not a busy place anymore.”
However, the economy appears to be tottering along the right track and the further it distances itself from the financial crisis of 2008 the better, Hamrick said, noting that it will be five years this summer since the 2008 economic crisis began to blossom. Renewed activities on the part of many financial institutions have given a reason for hope, he added.
Credit is beginning to loosen up, but at a slow pace like that of the job rate growth, Hamrick said. Nonetheless, consumers can expect to see increased access to credit in the near term, something that has not gone unnoticed by the Federal Reserve Bank and new Fed Chair Janet Yellen.
“The Fed would be the first to admit that they’ve been engaged in extraordinary measures to stabilize the economy, and that these measures might have unintended consequences that could end up kicking us,” Hamrick explained. “People taking on too much risk could recreate conditions that sent us into the last recession, and Yellen has assured us the Fed is watching more closely given conditions in the recent past.”
With the reduction of interest rates to near zero, the Fed has very few economic tools left at its disposal, Hamrick said. True economic growth will be critical to greater stabilization.
“The Fed is on the right track in its attempts to get back to a normalization policy,” Hamrick said. “I think the sooner things are back to normal, the happier the Fed governors will be.”