Widget Image
Follow PPD Social Media
Follow Us:
People's Pundit Locals Community
Wednesday, June 7, 2023
HomeNewsEconomyLatest GDP And Job Growth Data Conflict With Each Other, But Labor Market Slows

Latest GDP And Job Growth Data Conflict With Each Other, But Labor Market Slows

Small Business Job Growth Trend ADP

Small Business Job Growth Trend (Credit: ADP)

The latest economic data on GDP and job growth contradict each other, with the labor market cooling and gross domestic product showing signs of improvement. According to payroll processor ADP, private-sector employment increased by 218,000 jobs in July from the month prior, missing the 230,000 estimate. Meanwhile, the Commerce Department reported Wednesday that the U.S. economy grew at an annualized pace of 4 percent in the second quarter after contracting by a revised 2.1 percent pace in the first quarter, beating Wall Street expectations for a 3 percent increase.

If the initial reading holds, which is often not the case, then the U.S. economy is on track to grow at an abysmal 1.9 percent pace in 2014, further decreasing the time China will surpass the U.S. as the world’s largest economy. The government has published revisions to GDP data since 1999, which shows the economy historically performs far stronger in the second than previously reported, but also greater than the year as a whole, suggesting the jobs data could spell slowdown going forward.

According to the jobs data, the labor market is continuing its 5-year long trend of fizzling out after experiencing modest gains.

Private sector small business employment increased by 84,000 jobs from June to July, down from 1126,000 the month prior. Small business job creation this month accounted for 39 percent of all the employment gains across all payroll size groups, though historically they represented a far higher percentage. Within small businesses, 41 percent of all the employment growth came from companies that have between 1-19 employees, under the ObamaCare mandate requirement.

But other sectors cooled even further.

“Franchise job growth slowed significantly in July,” said Ahu Yildirmaz, vice president and head of the ADP Research Institute. “Since many franchise businesses fall into the less than 50 employees category, this is consistent with a sharp drop in small business hiring during the month.”

“Although down from June, the July jobs number marks the fourth straight month of employment gains above 200,000,” said Carlos Rodriguez, president and chief executive officer of ADP. Unfortunately, the U.S. economy needs to add at least 250,000 jobs monthly just to keep pace with population growth. And although the labor market has recovered the number of jobs lost during the financial crisis, 70 percent were replaced with part-time, low-paying positions.

Job creation in the goods-producing sector was weighed down by a stall in hiring in the higher-paying manufacturing arena, which was shockingly low at 3,000. Construction, however, added 12,000 private-sector jobs, despite the poor housing market data released this week.

The GDP data was released hours before the Federal Reserve concluded a two-day policy meeting, but it is unlikely they will alter their easy money monetary policy. The U.S. central bank already dismissed the economic contraction in the first quarter as a weather-related anomaly, despite the decrease in consumer spending during the first quarter.

That news doesn’t bode well for Americans who saved more in the second quarter. The saving rate increased to 5.3 percent from 4.9 percent in the first quarter. Yet, as long as the Fed keeps the rates at near zero, then Americans will see little to no return on their savings, while the investor class continues to get rich in inflated stock markets. Of course, the Fed would rather boost future spending rather than see Americans save for the future.

Despite increases in inventories, trade was a drag on GDP for a second consecutive quarter, as some of the increase in domestic demand was countered by an explosion in imports. Domestic demand rose at a 2.8 percent pace, which was the fastest since the third quarter of 2011, while it increased at a 0.7 percent pace in the first quarter.

Americans, however, may start to cut back on saving regardless, as the price index in rose at a 2.3 percent rate in the second quarter, which was the fastest pace in three years. The so-called core measure that excludes food and energy costs still increased at a 2.0 percent pace, or the fastest pace since the first quarter of 2012.

Written by
Staff Writing Group

PPD Business, the economy-reporting arm of People's Pundit Daily, is "making sense of current events." We are a no-holds barred, news reporting pundit of, by, and for the people.

No comments

leave a comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.

People's Pundit Daily
You have %%pigeonMeterAvailable%% free %%pigeonCopyPage%% remaining this month. Get unlimited access and support reader-funded, independent data journalism.

Start a 14-day free trial now. Pay later!

Start Trial