Weak Employment Growth Here to Stay due to Lackluster Demand and a Deleveraging Consumer More Intent on Saving Rather than Spending.
Sausalito, CA – February 1, 2012 – Sausalito, CA – The U.S. economy added only 45,000 jobs in January, nearly unchanged from the 38,000 jobs added in December, reports TrimTabs Investment Research.
“The weak job growth in January has us concerned,” says Madeline Schnapp, Director of Macroeconomic Research at TrimTabs. “It appears that the economy has hit stall speed due to lackluster demand and a deleveraging consumer who would rather save than spend.”
TrimTabs employment estimates are based on an analysis of daily income tax deposits to the U.S. Treasury from all salaried U.S. employees. They are historically more accurate than initial estimates from the Bureau of Labor Statistics.
In a research note, TrimTabs points out that several economic indicators suggest slow economic growth is here to stay:
- Wage and salary growth net of inflation weakened to -2.1% y-o-y in January from -0.5% y-o-y in December.
- The TrimTabs Online Job Postings Index rose 3.7% in January, reversing some of the 9.6% decline in the fourth quarter. If the index breaks above its October 2011 high by mid-February, it would be a clear signal that the labor market is improving. The gains this year have been weak, however, which suggests sluggish employment growth is more likely.
- Weekly initial unemployment insurance claims jumped 21,000 in the latest reporting week, coincident with the decline in seasonal adjustment factors. Last week’s increase suggest recent declines were likely due to seasonal adjustments rather than a significant improvement in the labor market.
- The housing market is likely to remain weak despite near record low mortgage rates because 23.4 million Americans are unemployed or underemployed, 10.1 million mortgage borrowers are underwater, and 6.2 million mortgage borrowers are delinquent.
- Last week’s preliminary Q4 2011 GDP growth estimate of 2.8% was probably overstated. The price deflator for Q4 2011 was just 0.39%, down from 2.56% in Q3 2011. Also, two-thirds of growth in Q4 2011 was due to a swing in inventories from -1.35% in Q3 2011 to +1.94% in Q4 2011, which is likely to be reversed in Q1 2012. We believe the slowdown in GDP growth from 3.03% in 2010 to 1.72% in 2011 provides a better sense of the trend.
“We see nothing on the horizon to knock the economy out of its slow growth mode,” notes Schnapp. “The economy faces substantial headwinds from negative real wage and salary growth, high unemployment, waning government support, expiring tax incentives, contracting state and local governments, elevated fuel prices, and a sluggish housing market.”
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TrimTabs Investment Research is the only independent research service that publishes detailed daily coverage of U.S. stock market liquidity–including mutual fund flows and exchange-traded fund flows–as well as weekly withheld income and employment tax collections. Founded by Charles Biderman, TrimTabs has provided institutional investors with trading strategies since 1990. For more information, please visit www.TrimTabs.com.
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