July 20, AtoZForex – Even though the US created 287k jobs in June, the health of the US job market seems to be remaining in the “work in progress” mode. Due to the lack of confidence in the US employment, the analysts are questioning the job market and have drawn the following 7 reasons why US Job market is declining.
7 reasons why US Job market is declining
Below you will find the 7 reasons why US Job market is declining, which has been compiled by the economist David Rosenberg at wealth management firm Gluskin Sheff and experts:
-Job openings are going down
-Personal income tax receipts are off 11.3 percent over the past year
-Corporate income tax receipts collapsed 16 percent
-Federal excise taxes slashed 0.8 percent
-State sales tax collection went up just 2.5 percent
-Wage growth by one measure is negative
-Federal withholding tax receipts are down by 17 percent in June
David Rosenberg, accompanied by the team of experts pointed out the sector that remains exposed to the disinflation tendency that is pulling on the broader economy. The outcome from an investing perspective is a Federal Reserve that will continue to be patient when it comes to US interest rates. Mr. Rosenberg has commented:
“We were told by all the pundits and media types about how great the payroll number was in June. The veracity of that report is now called into question. I totally understand the temptation to be bullish and constructive on the macroeconomic outlook, and try as I may seek out the good news; all I can really see is a whole lot of downside growth risk and a whole lot of complacency at the same time.”
David Rosenberg additionally highlighted the negative news from the Recent Job Openings and Labor Turnover Survey. Apparently, the Job Openings and Labor Turnover Survey (JOLTS) report indicated that job openings went down by 345,000 in May. It also specified new hirings going down by 474,000 over the last three months, which is the most since the three months before the 2009 recession.
There was also a signal of economic strength, as the figure of people voluntarily leaving their jobs went down by 60,000. Furthermore, the job gains have averaged just 147,000 with the slow-down in improving the rate of wage growth at 2.6 percent.
As it appears, some of the economic analysts believe that the decreasing monthly payroll gains are more of a labor market near full employment than they are signals of crisis.For example, the Federal Reserve of Atlanta says that the US economy currently needs to create only 100,000 a month to keep the unemployment rate stable.
However, from the market view, the most vital number is a wage growth, which currently is improving at a sluggish rate. As an example, the real average hourly earnings went down by 0.2 percent in June with Employment Cost Index rising just by 1.9 in the Q1.
Slight development is anticipated in Q2
Apparently, the labor market will not improve much even with the help of the business investment. Deutsche economists Aditya Bhave and Joseph LaVorgna said:
“Importantly, the recent weakness in capital spending has been broad based and not simply attributable to the energy sector. Moreover, forward-looking surveys of capital spending remain depressed, pointing to the negligible improvement in the back half of the year. The weakness in capital expenditures has not gone unnoticed by monetary policymakers, most notably Fed Chair Yellen, who expressed concern that the deterioration in business investment could signal a desire on the part of firms to expand their operations at a slower pace.”
Fed policymakers have already been experiencing some disturbances due to the Brexit referendum, now with labor market weakness adding some worry to it. Currently, the Fed funds futures market assigns no opportunity of the increase the interest rates at the Federal Open Market Committee meeting this month.
See also: London Brokers’ Brexit preparation
Think we missed something? Let us know in the comments section below.