Apparently, the sheer number of weak to awful economic reports seen during the past month or so finally led Josh Boak at the Associated Press, aka the Administration's Press, to acknowledge that "critical pieces of the economy remain troubled almost six years into the recovery."
Boak's belated timing is interesting, to say the least, given that the Federal Reserve is weighing whether or not to raise interest rates for the first time in six years several months from now.
An economy that was supposedly giving President Barack Obama justification for taunting his opponents just three weeks ago is now suddenly "flashing some signs of weakness." The message to Fed Chair Janet Yellen appears to be: "Don't raise interest rates. Once we know you won't, we can go back to pretending the economy is fine." Boak still downplayed how weak the data has been, which will be seen after the jump (bolds and numbered tags are mine):
AS FED WEIGHS A RATE HIKE, US ECONOMY IS LOOKING A BIT PALER
Just as the Federal Reserve seems to be inching toward an interest rate hike because of the strengthening U.S. job market [1], its task is getting more complicated:
Several key sectors of the economy are flashing some signs of weakness.
Housing, manufacturing and consumer spending - the U.S. economy's main driver - have been tepid of late. [2] The pace of home building plunged in February. Factory output is slowing as a rising dollar makes U.S. goods costlier overseas and weakens exports. And retail sales remain sluggish, with Americans spending less at stores and restaurants last month.
The main engine of strength has been the U.S. job market. Employers have added more than 200,000 jobs for 12 straight months, and unemployment has reached a seven-year low of 5.5 percent, a rate typical of a healthy job market. [3]
Yet annual wage growth remains stuck at 2 percent, a level that can't support robust gains in consumer spending and home purchases. ... It's hardly surprising, then, that critical pieces of the economy remain troubled almost six years into the recovery from the worst financial catastrophe since the Great Depression. [4]
... Many economists blame, in part, snowstorms and freezing temperatures for the economy's lackluster winter. Their theory will be tested as spring arrives. If the economy fails to pick up, it may lack the vigor that Fed officials want to see before raising their key short-term rate from a record low near zero, where it's remained since 2008.
... Recent economic reports have led some analysts to downgrade their outlook for growth in the first three months of 2015. The forecasting firm Macroeconomic Advisers projects growth an annualized rate of just 1.6 percent in the first quarter [5], down sharply from 2.2 percent in the final three months of 2014 and from a galloping 4.8 percent rate over the spring and summer.
... The optimistic view is that continued strong hiring will produce pay increases and broader economic strength in coming months.
The jobs numbers "should be positive factors in terms of security and economic growth," said JPMorgan Chase's Silver. "But we haven't seen it provide a nice boost so far." [6]
Notes:
[1] — As I noted on March 7, the underlying raw data doesn't justify February's 295,000 in seasonally adjusted job additions. The 903,000 jobs actually added in February were less than that seen in February 2012 (954,000) and 2013 (1.038 million). Nobody recalls either time period having a particularly robust economy.
[2] — "Tepid" implies holding steady. All three indicators have been in decline: housing starts (February), retail sales (falling for three straight months), and manufacturing (ditto).
[3] — The 5.5 percent unemployment rate may be "typical" of a healthy job market, but Boak didn't have the nerve to actually call it a healthy job market, because it's not — not with millions of Americans still on the sidelines who have withdrawn from the labor force out of discouragement, and millions of others working part-time who want full-time jobs. By the way, full-time employment is still 1.04 million below its November 2007 peak.
[4] — I would argue that "the worst financial catastrophe since the Great Depression" was the environment of interest rates of over 20% accompanied by double-digit inflation seen during the late-1970s and early 1980s. Non-Keynesian policies enabled the economy to recover in just a few quarters, and to grow in robust fashion for the next seven years. As the AP has acknowledged, despite alltime lows in interest rates, we haven't seen a genuine recovery from the most recent recession for over 5-1/2 years.
[5] — Boak selected a relatively optimistic 1Q15 prediction, and ignored a far more pessimistic one. The Atlanta Fed's forecasting model predicts annualized growth of just 0.3 percent, having fallen by more than one point in just the past week.
[6] — We haven't seen a "nice boost" from the jobs numbers because the jobs being generated have been disproportionately in lower-paying sectors (e.g., "Food services and drinking places") and at temporary help agencies (10 percent of all job additions since June 2009, in a sector which is less than 2 percent of the workforce).
The past eight years have seen the economy grow at the slowest rate in 62 years. It doesn't look like it's getting better. In today's report, the AP's Boak is telegraphing that the economy is so weak that, even after six years of recovery, it can't handle even a tiny hike in interest rates by the Fed. How telling that is.
Cross-posted at BizzyBlog.com.
