Is the U.S. economy idling in the “slow lane”? This is the question posed on the front of CNBC.com this Monday morning.
“Is this as good as it gets? It increasingly looks that way.”
January’s jobs report was a disappointment. Payrolls added 113,000 jobs in January, which was below the average expected number of 182,000. The rate of unemployment dipped to 6.6%.
Though the headline unemployment number has dropped, the movement comes due to shrinking workforce participation rather than the addition of jobs.
Construction jobs rose by 48,000, recovering from a loss of 22,000 in December. Construction is typically more volatile in the winter season. Housing starts had declined slightly in December, though general construction activity is up from the previous year. Permits issued rose 4.6 percent year-over-year in December.
December’s jobs total was revised slightly up to 75,000 (from 74,000). The report had shocked markets, which had been expecting job growth to reach upward of 180,000 to 200,000 positions.
The CNBC article noted struggles in the manufacturing and housing sectors as additional evidence that the U.S. economy is “stuck” with a slow pace of growth.
The economy needs to add between 90,000 and 125,000 jobs per month just to keep up with population growth. The Hamilton Project estimates that it would take until mid-2018 to make back the jobs lost during the recession at a pace of 208,000 added per month. This current “jobs gap” is 7.7 million.
At the pace of the current three-month average of 154,000 jobs added, it would take over seven years to close the gap.
Winter storms and pockets of economic turmoil around the globe (China, for example) impact U.S. growth, but economists are concerned that the struggles could be structural. One specific issue is that the economy has had to recover while “absorbing the effects of an aging population,” wrote the Associated Press, citing work by Harvard University economist Carmen Reinhart.
The U.S. economy is doing just enough to tread water – and even inch forward – but not enough to fully break out of the slow recovery cycle. Initial projections for the year were optimistic (3.0% GDP growth), but poor news to start the year has economists thinking about downward revisions.
“The report is definitely disappointing, and it shows that the broader economy has lost steam,” said Jason Grote, owner of Central Coast Lending. “I am not concerned yet, but If we don’t figure out how to get better job additions in months coming, the economy is going to have significant issues.
Rates didn’t move as a result of the employment report, though the general trend continues to be downward. Freddie Mac’s national average of the 30-year fixed has dropped each week in 2014, falling from 4.53% to 4.23% for the February 6 reading. This is the lowest level in about three months.
The low rates open up an opportunity for both current and potential homeowners. Affordability is at its best point in the past three months, and we have a loan program to fit any need. Give us a call at 805.543.LOAN for a free pre qualification. Apply online here.
Central Coast Lending is a mortgage broker and direct lender based on the Central Coast of California in San Luis Obispo County. Call us today at 805.543.LOAN or email firstname.lastname@example.org to set up a free pre qualification. We are The Mortgage Experts: ask us anything!