A bi-weekly publication from Consultiva Internacional, Inc. (Registered Investment Adviser)
The U.S. labor market stumbled in April as the Bureau of Labor Statistics (BLS) reported that the economy produced 160,000 new jobs last month. While positive, this is well below the market’s expectations, which had seen an average of 232,000 jobs added per month over the past year. Total unemployment held at 5%, while job gains occurred in the services, health care, and financial services sectors. Hourly earnings increased by 2.5% over the past 12 months, which provides a positive sign to those concerned with stagnant wages. But overall, the jobs data raises concerns when taken in combination with the 0.5% GDP growth estimate for the first quarter of 2016, reported by the Bureau of Economic Analysis (BEA) on Thursday April 28th. Looking into the details, the BLS report indicates that employment in major industries, including construction, manufacturing, wholesale and retail trade, leisure and hospitality, among others, showed little or no change over the month. The BEA report points to a larger than expected decrease in nonresidential fixed investment, a downturn in federal government spending, an upturn in imports, among other factors that hurt or offset gains in other areas such as increased state and local government spending, and an acceleration in residential fixed investment.
The data on the U.S. economy shows several contradictions. While the private sector is adding jobs and consumers are becoming more confident, persistently low inflation has muted growth expectations, and as a whole the economy barely moved in the last quarter. This caused the Federal Reserve to hold off raising rates in their April meeting, maintaining the target range for the federal funds rate at ¼ to ½ percent, an accommodative stance that seeks to further improvements in the labor market and a return to 2% inflation. At Consultiva we find this trend in economic growth consistent with our expectations for 2016 and are reflected in our current asset allocation recommendations.
by Myrna Rivera, CIMA®
Founder & Chief Executive Officer
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