The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents.
I am back in the saddle after a wonderful (and much needed) Spring Break trip down to Amelia Island, Florida. As you know, for the first time since last August, I didn’t put out a post on Friday. And it was very hard to resist the urge as the employment number came out Friday morning and it was a whopper. But the sun, sand, and surf won out and I just let it ride. I’m glad I did.
My plan was to wait until this Friday to report on both this week’s data, as well as what we got last week. But then, I realized….there is a solar eclipse this afternoon and if it signals the apocalypse (as many online seem to believe), we may not even get to Friday, and then I would never have had an opportunity to report on last week’s employment data!! So, today you get a rare, Monday economic update.
Employment
According to the Bureau of Labor Statistics, the U.S. economy added 303K jobs in March. That was a mind-blowing number of jobs. The consensus was for only 200K and the highest estimate of any forecasting group on Wall Street was 290K. So, 303K was astounding. And that is what the media has been saying all weekend.
But, if you are a regular reader of mine, you know that there is a lot going on below the headline number. First and foremost, you know that for the past year or more, they ALWAYS revised the previous month DOWN. And the trend held as the February number was, in fact, revised lower. Bet you didn’t hear that on the news. And guess what….next month, March will be revised lower as well.
Second, regular readers know that there are two surveys….the establishment/payroll survey and the household survey. For only the second time in four months, both surveys moved in the same direction. In fact, the household survey showed even more job growth than did the payroll survey!
But regular readers also know that not all “jobs” are the same. Some are part-time, and some are full-time. And sure enough, according to the household survey, ALL the job growth in March was in part-time work. For the fourth consecutive month, we LOST full-time jobs. Over the past 12 months, the economy as LOST 1.3 million full-time jobs, and GAINED 1.9 million part-time jobs! So, the half million net new household jobs that have been created over the past year are ALL part-time jobs. Again…bet you didn’t hear that on the news.
And where are all these new jobs? Once again, more than half of the monthly job growth was in either healthcare, or government. In fact, with respect to job growth, the single best performing sector under the current administration is….government.
So, the bottom line here is this….at first glance, this appears to be a strong jobs report, until you look under the surface. And that has the Fed in a pickle. The current administration will, as they have all year, tout these numbers as the result of their miraculous economic policy. The problem is, if the economy is performing so well, the Fed has no reason to cut interest rates. And no interest rate cuts mean continued sluggishness in the housing market, and higher debt service costs for individuals, corporations, and the government.
Consumer Credit
Speaking of debt service…revolving credit jumped another $11.3 billion in February to $1.34 TRILLION. As you can see, revolving debt is growing much faster than the pre-COVID trend, due in large part to high inflation.
Unfortunately, as consumers pile on more debt, but are forced to take part-time jobs for economic reasons, delinquent accounts start to rise. Both the number of credit card accounts, and auto loans, that are moving into delinquent status are well above pre-COVID levels, and are on the rise with no sign of slowing down.
As that happens, banks are starting to see higher levels of charge-offs. The credit card charge-off rate for small commercial banks is now 9.5%…the highest it has been since 2003.
ISM Manufacturing Index
The last piece of data from last week that I will mention here is the ISM manufacturing index. It is worth noting because, for the first time in 17 months, the manufacturing sector posted an expansion, albeit, a very small one. The index came in at 50.3. Any reading above 50 indicates that the sector is expanding.
The manufacturing sector has been stuck in a recession for more than a year due to rising prices and consumers shifting to services such as travel and recreation after the long COVID lockdowns. But what is more concerning is that the pricing index rose to 55.8 – the highest it has been since late 2022 when inflation was running at 9%. This is a concerning development and suggests (as I have been saying) that rather than being “beaten,” inflation is still very much with us. Later this week, we will get the latest CPI numbers and for the first time this year, they won’t be able to blame the reading on “seasonality”. Should be interesting.
Enjoy the eclipse. Until Friday…..(assuming the world doesn’t end…..)
