TrimTabs Says May Job Growth Too Weak to Lower Unemployment Rate
Sausalito, CA – May 30, 2012. TrimTabs Investment Research estimates the U.S. economy added 124,000 jobs in May, up only 7% from 116,000 new jobs in April. Meanwhile, the consensus view is that the Bureau of Labor Statistics will report job growth of between 150,000 and 175,000 on Friday.
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 BLS.
TrimTabs says that although the economy has created an average of 133,000 new jobs a month for 20 months, that growth is not nearly strong enough to significantly reduce the unemployment rate. TrimTabs points out that the economy needs to create a minimum of 150,000 jobs per month to absorb all the new people entering the labor force. TrimTabs expects the unemployment rate to remain above 8%.
“Wall Street cheerleaders are ignoring the fact that high unemployment, a depressed housing market, deleveraging consumers, elevated fuel prices, and fallout from the worsening sovereign debt crisis in Europe are keeping the economy mired in slow-growth mode,” says Madeline Schnapp, Director of Macroeconomic Research at TrimTabs.
In a research note, TrimTabs points out several real-time economic indicators that are signaling sluggish economic growth for the foreseeable future:
- According to real-time tax-withholding data, wages and salaries rose 3.2% year-over-year in May, nearly unchanged from 3.4% y-o-y in Q1 2012. When inflation is taken into account, real wage and salary growth is a paltry 0.9% y-o-y. In a moderate economic growth environment, real wage and salary growth should be 2% to 3% y-o-y.
- The TrimTabs Online Job Postings Index has trended sideways for two consecutive months, suggesting that employment demand has reached a plateau.
- Initial unemployment insurance claims have hovered near 370,000 a week for the past three weeks. Since mid-February, claims declined to a low of 362,000 by late-March then climbed to a high of 392,000 by late-April and have returned back to February levels, suggesting the labor market is no longer improving.
“The lack of improvement in employment and economic growth does not surprise us,” warns Schnapp. “Like a drug addict, the economy is dependent upon Federal Reserve monetary stimulus, which is ending June 30. Given the likelihood the economy will slow further without additional Fed intervention, we fully expect the Fed to announce another stimulus program in August.”
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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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