One Step Forward, Two Steps Back

The nation appears trapped in a one-step-forward, two-steps-back economy… an economy of false starts… and false dawns.

We were told last month the economy added 211,000 jobs in April, crushing all expectations.

Unemployment fell to its lowest level since May 2007.

One step forward.

But May’s unemployment numbers came out today.

Economists expected 185,000 new additions to the national payrolls. The lowest estimate was 140,000.

The actual number?

Just 138,000 new jobs… undershooting the lowest projection.

In all, the American economy shed 367,000 full-time jobs last month… while adding 133,000 part-time positions.

“Clearly, we’re seeing some slowdown in job growth,” says Stuart Hoffman, senior economic adviser at PNC Financial Services.

The noble souls of the Bureau of Labor Statistics further report that hourly wages grew at the slowest rate since last March.

Two steps back.

Which naturally meant the stock market took one step forward today…

The Dow ended trading today 64 points to the good. The S&P was up seven. And the Nasdaq bulldozed its way to a 46-point gain.

That’s the way things work now, isn’t it?

But do the lackluster job numbers mean the Federal Reserve delays its expected rate hike on June 14?

Not according to Jim Rickards:

The report won’t matter… The Fed will raise interest rates 0.25% at that meeting. It would have taken a truly spectacular collapse in job creation, possibly as low as 50,000 jobs, to throw the Fed off course.

Michael Feroli, chief U.S. economist at JPMorgan Chase, agrees with Jim:

“This keeps the Fed on track.”

Just so.

Meanwhile, every time we’re told the economy’s taking a step forward, we’re later told it was a false step.

Earlier this year, for example, the Atlanta Fed projected first-quarter growth would take a lumbering 3.4% stride.

In reality, first-quarter GDP came in practically motionless at 0.7%.

If not quite a step back… a baby step forward.

We further discovered some sour news about the U.S. economy today…

Analyst Michael Snyder of The Economic Collapse blog tallied some numbers.

He reports that U.S. GDP grew an average of 1.33% from 1930–1939.

He then crunched GDP between 2007 and 2016.

The result?

U.S. GDP grew an average of 1.33% — the same precise number.

We’re loathe to exaggerate, or exaggerate much… but it appears economic growth is no better than it was in the 1930s.

History has a term for the 1930s — the Great Depression.

True, the 1930s witnessed greater swings — 1932 GDP was negative 12.9%, while 1936 GDP was positive 12.9%.

By way of comparison, 2009 turned in the lowest GDP number in the 2007–2016 period — negative 2.8%.

2015 saw the highest number — positive 2.6%

But both decades averaged 1.33% growth.

Snyder reminds us that Barack Obama was the only president in history who couldn’t swing a single year of at least 3% growth.

In terms of American history… two steps back.

Perhaps the economy will take that step forward under Donald Trump.

But until those tax cuts, deregulation and the rest of the “Trump stimulus” come to light, the nation could spend the next few years standing in place…

About where it’s been for the past 10 years…


Brian Maher
Managing editor, The Daily Reckoning

The Daily Reckoning