Economic data has been mixed and basically stagnant in recent weeks, pointing to an economic recovery which has gone from weak to weaker…and far weaker than we should be seeing at this point in the business cycle, i.e. during a recovery from a deep economic downturn.
On Wednesday morning, the private payrolls firm ADP reported its monthly estimate of private sector employment conditions. The report, for April, came in with a gain of 119,000 jobs, far below the Bloomberg consensus estimate of 183,000 jobs. The prior month was also revised down slightly.
Although the reports do not correlate perfectly, this does not bode well for Friday’s official Labor Department release of the national employment situation. Prior to revisions which may follow the ADP report, the consensus was for 165,000 new jobs to be reported on Friday, including 178,000 new private sector jobs and the loss of 13,000 government jobs.
The unemployment rate is estimated to be unchanged at 8.2 percent, but this is a tricky call because changes in the “participation rate” have had as much impact on changes in the actual number of working Americans in recent months.
The ADP result contrasts with a Gallup survey released minutes after ADP which shows Gallup’s Job Creation Index at its best level since July 2008. Gallup released a separate poll on Thursday which showed a 0.1 percent drop in unemployment from March to April without seasonal adjustments but a substantial rise in the seasonally-adjusted rate.
Also on Thursday, the government’s report on initial jobless claims came in slightly better than expectations, while the prior week’s number was revised upwards (i.e. more unemployed.) For several weeks in a row, new claims for unemployment have come in higher than estimates and most of the revisions have been upward.
And later on Thursday morning, the ISM non-manufacturing report came in below the lowest Bloomberg estimate.
Earlier on the week, on Tuesday, a stronger-than-expected report on manufacturing sent the stock market up to a very strong gain, though more than half of the gain had evaporated by the end of the day. ADP’s weak manufacturing employment number (actually showing a loss of 5,000 jobs) was an odd contrast to the Tuesday report.
On Monday, the Chicago Purchasing Managers Index report was substantially weaker than expected, as was the Dallas Fed’s survey of manufacturing. Personal income and spending data, along with recent inflation data, have been roughly in line with expectations — expectations which are typical of moderate-at-best economic growth.
Last Friday, the important GDP report showed an anemic 2.2 percent year-over-year growth, well below the average estimate of 2.5-2.6 percent. You may recall that the stock market did well on Friday, likely because the weak number perversely gave markets hope that the Fed may come back in with “QE3.” We should all hope not; it is remarkable how little the Fed has learned from its failure thus far.
Beyond showing how useless economists are when it comes to estimating what reports will show, the data — to they extent they are consistent with anything — are consistent with the Obama Non-Recovery.
Many months ago, I had the opportunity to be a guest on Larry Kudlow’s TV show. He asked me if I thought we’d see a “V” recovery or a “W” recovery. I said I thought we’d see a “square root” recovery, i.e. a small bounce followed by stagnancy because Obama’s policies would be somewhere between growth-neutral and anti-growth, but certainly not pro-growth.
I’ve been proven right so far, sadly for America.
But if there is a bright side, it is that many of Barack Obama’s 2008 supporters are actually people who would like to have jobs. And other than tenured university professors and their students, who probably represent a good chunk of his support, they must be disappointed at the lack of improvement in employment opportunity under The One.
As for me, I would gladly forgo some, or even much, of the income I hope to make over the next six months if it would mean the defeat of President Obama in November. I realize that many Americans cannot easily afford having little or no income, even for a few months, and that the Obama economy is a true hardship for many.
But wouldn’t it be better to have a weak economy for six more months, allowing the election of a president and members of Congress who will bring in pro-growth policies, than to have the re-election of Obama and another four years of financial repression, persistently high unemployment, and the tyranny of executive agencies out to “crucify” anybody who disagrees with them?
Although two years ago, when liberals said I wanted the American economy to do relatively badly in order to have the political issue, I said they were wrong. And they were wrong, because nearly three years is too long to want the American people to suffer no matter how beneficial the eventual result. But when we’re talking about a few months instead of a few years, my view has changed. At this point, I do in fact hope that the economy doesn’t improve so that Obama loses.
The bottom line, though, is that what I hope is irrelevant. More important is that the Obama administration’s policies, and those of his henchmen in Congress, are antithetical to economic prosperity. To the extent that there is any job growth, it is a testament to the American spirit, and it is happening in spite of, not because of, Barack Obama.
I may be projecting, but I think Americans are realizing that and may indeed be willing to admit they were wrong in 2008 to elect a man whose economic views were so explicitly redistributionist and unAmerican.
If the economic data persist as disappointing as they’ve been recently, the economy may be Mitt Romney’s strongest selling point — which plays right into his technocrat, businessman wheelhouse.
One important thing to keep in mind is that the stock market and the economy (particularly employment) are related, but not the same. In particular, large corporations can find economies of scale and efficiencies which can lead to increased profits without increased employment. Thus, a strong stock market, especially in the large-cap sectors (the biggest companies), does not imply broader economic prosperity — and certainly does not imply better employment since those efficiencies are often achieved by firing people. The flip side of the coin is that a stagnant economy does not mean that stock prices are “wrong” for being relatively strong. An argument can be made that if a Republican president is elected, the EPA stopped, and Obamacare turned back, stocks may be very cheap here.