There are currently about 15.1 million Americans unemployed and looking for jobs while struggling to make ends meet. We are seeing record numbers at food banks across the nation. The government is positive that jobs are being generated, but tell that to those who are barely holding on. The problem is that there are only about 2.9 million available jobs. That is five unemployed workers competing for one job. You don’t have to do any complex economic analysis to figure out that there is something wrong and, unless it improves, times will be hard.
The ADP Employment Change for March saw the creation of 201,000 jobs, just below the consensus estimate of 210,000 and the downwardly revised 208,000 in February. The reading is not that bad; it does point to jobs being created.
The Challenger Jobs Cuts for March were encouraging, with a 38.6% decline in planned jobs cuts, an improvement over the 20% increase in February.
The weekly initial claims have been improving, below the key 400,000 level. We saw 382,000 for the week to March 19 and estimates call for 383,000 for the week to March 26. The readings are clearly on the right path to recovery. Economists believe that the weekly claims would need to fall below 375,000 to drive down the unemployment rate.
All eyes will be on the non-farm payrolls on Friday, with estimates calling for the creation of 185,000 jobs in March, below the 192,000 jobs generated in February. Again, while the jobs creation is positive, we need to see the number increase significantly more. Some economists argue that the country needs to add 500,000 jobs to make a dent in the unemployment rate and get it to move towards full employment. The current unemployment of 8.9% is high. I do not expect a decline until more jobs are created.
Quite simply, jobs are not being created as fast as the government had hoped, despite spending hundreds of billions on infrastructure and incentives and, in the process, building a massive deficit and adding to the over $14.0 trillion in national debt.
You’ve got to worry about this.
The problem is that jobs drive confidence and this gives consumers a reason to spend, especially on non-essential goods and services.
The Durable Goods Orders for February fell a disappointing 0.9%, short of the 1.1% growth expected and much lower than the 3.6% reading in January. The reading excluding transportation fell 0.6%, also well below the 1.8% estimate, but better than the negative three percent in January. The readings suggest that consumers are not yet comfortable spending on non-essential goods and services.
And when consumers do not spend, there is a domino effect down the line. In economics, this is known as the “multiplier effect,” where a dollar spent results in more spending. For instance, you spend a dollar at the store. That dollar is used to pay workers who in turn spend. This cycle continues and is a major driver of total spending in the economy.
This is why jobs are so important for increasing consumer spending and driving the economy. And this is why the jobs readings, while encouraging, have a ways to go.