Modest and Uncertain Economic Growth

Thisweek’s economic data reaffirms the recent trend of modest and uncertain economic growth.  Initial jobless claims 4-week moving average hit its lowest level in nearly six year at just 308,000.  Looking back, these initial jobless claims levels follow growth periods in 1988, 2000 and 2006.  But unlike those times we continue to see an elevated unemployment rate of 7.3%.  August saw the fourth consecutive month of mild income growth with 0.4% rise which met expectation.  Consumer spending, which represents 70% of the U.S. economy, also met expectation with a rise of 0.3%.  When added together the data would portend job growth, but where are the jobs?  We have rising home values and stock market gains which is good for those American’s with assets.  We have an economy that is seemingly sloughing off increased payroll taxes.  Disposable incomes are up 0.3% after adjusting for inflation.  Vehicle sales are up to levels not seen since 2007 as consumer replace cars and truck that average 11 years old.  These are all good economic signs; however, the labor participation rate continues to fall from a high of 67.3% in 2000 to a current read of 63.2%.   The last time the labor participation rate was this low was 1978.  Personal saving rates on average continue to rise with a 5-year moving average up 5.5% from an absolute low of 2.8%, still far below the 50 year average.  While good in the long run increased personal saving does not help spur near term consumption.  So for every positive economic indicator there seem to be a negative indicator.  The conflicting economic signs indicate the economy is working through structural issues such as long-term unemployed, demographic shifts and elevated household debt levels.  In all, recent data suggest modest near term growth will continue but the longer term outcomes are far from certain.