It’s Friday November 8, 2013 as I write this and the stock market is basking in all-time highs-which were driven by based on an employment report of 204,000 jobs added vs. the 120,000 median forecast of 91 economists surveyed by Bloomberg. In addition, the third quarter gross domestic product (GDP) grew at an annualized rate of 2.8% vs. 2.5% for the prior quarter. Happy days are here again, right? Well, as broadcaster Paul Harvey used to say, there’s always “the rest of the story.”
Employment– the unemployment rate increased slightly (from 7.2% to 7.3%); however, there are some calculation “quirks” that influence that number. Any person who drops out of the labor force (i.e. not actively looking for a job) is not counted as “unemployed.” An elimination of such persons thus reduces the unemployment rate. The number of people not in the labor force increased in October by 923,000 bringing the total number to 91.5 million Americans. This increase was the third highest monthly increase in Americans leaving the labor force in U.S. history. Perhaps a better employment indicator is the labor force participation rate which measures the proportion of Americans actually working. In October, the labor force participation rate declined to 62.8% from 63.2 % in September; making this is the lowest participation rate since March 1978.
GDP– the GDP (sum of all goods and services produced in the U.S.) annualized growth of 2.8% appears to have been heavily influence by a one-time buildup of business inventory. That growth rate will subside if demand for that inventory doesn’t materialize. Excluding inventory gains, the growth rate for the third quarter was 2%; dropping below the 2.1% second quarter rate. Meanwhile, consumer spending (which makes up about two thirds of spending) rose at the slowest rate since 2011 while corporate investment fell.
All of this brings to mind the old Chinese proverb or in this case a curse: “may you live in interesting times.” Times are interesting, aren’t they?
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