The May Employment Report is out. The figures reported by the government had a lot of good news in them. There were about 280 thousand jobs created during the month. The unemployment rate inched up, but the increase was due to more people entering the job market, a good thing. Wages were up 0.3% which is also a decent number. Despite all these good numbers, however, one has to wonder if this is good news when viewed in the context of all the other statistics put out by the government. In the last two weeks, we learned that the economy contracted during the first quarter. We were also told that labor productivity plunged and labor costs went up rapidly. At the same time, the value of the dollar has risen compared to the other currencies of the world.
If we put all these measures together, what we have is the makings of a recession. American made goods are becoming more expensive compared to those made outside the country. The rise of the dollar makes that so. The increase in US labor costs makes that so. The question now is whether the rising relative cost for American products will reduce sales in favor of foreign made goods to a sufficient point that our economy will continue to contract. Some other statistics seem to say that the answer to that question is yes. In the last week, we also learned that rail shipments fell by a surprisingly high amount during May. Some industries are more dependent on the rails than others, to be sure, but the total amount of rail shipments is usually in line with the economy as a whole. Other indicators told us that retail sales during May were not all that strong. Is this another indication that the economic contraction of the first quarter is continuing?
There are probably enough statistics that get published each month for anyone to find a group that tell us exactly the contrary to what I listed above. We all know that. The problem is that what we have been seeing for a while is schizophrenic statistics. And not only are the stats pointing in different directions, there are also questions about the validity of some of them. So today's employment report was good news....or was it?
If we put all these measures together, what we have is the makings of a recession. American made goods are becoming more expensive compared to those made outside the country. The rise of the dollar makes that so. The increase in US labor costs makes that so. The question now is whether the rising relative cost for American products will reduce sales in favor of foreign made goods to a sufficient point that our economy will continue to contract. Some other statistics seem to say that the answer to that question is yes. In the last week, we also learned that rail shipments fell by a surprisingly high amount during May. Some industries are more dependent on the rails than others, to be sure, but the total amount of rail shipments is usually in line with the economy as a whole. Other indicators told us that retail sales during May were not all that strong. Is this another indication that the economic contraction of the first quarter is continuing?
There are probably enough statistics that get published each month for anyone to find a group that tell us exactly the contrary to what I listed above. We all know that. The problem is that what we have been seeing for a while is schizophrenic statistics. And not only are the stats pointing in different directions, there are also questions about the validity of some of them. So today's employment report was good news....or was it?
No comments:
Post a Comment