Today, the U. S. Department of Labor reported that the economy only added 39.000 jobs in May, while it reduced the combined total of New Hires, in March and April, by a combined total of 59,000 jobs. At the same time, DOL reported a drop in the Unemployment Rate, from 5.0% to 4.7%, and an increase in private-sector hourly wages of 3.2%.
The lower Labor Participation Rate is believed to have caused the reduction in new jobs, at a time when the overall Unemployment Rated dropped. At the same time, average hourly private sector wages rose by 3.2%. Two possible reasons for the decline in labor participation could be: Older employees, frustrated with their current job, or having trouble finding new ones, might have decided to stop looking–and retire. Additionally, people who had previously worked just to have health benefits, now probably have access to health insurance under the Affordable Care Act (Obamacare). And don’t forget workers who have been displaced by advances in technology.
Most labor economists recommend focusing on longer-term trends in labor statistics, rather than any one or two months. The Verizon strike, with 38,000 workers out (now settled), is just one factor that might have skewed the numbers away from reality. Seasonality and extraordinary weather conditions can also have an impact on employment statistics. And the global economic stagnation, which currently pervades much of the industrialized world, certainly might be a factor, as well.
The U. S. stock markets were down somewhat today, but not by a great margin. Right now, the financial markets seem to be primarily focused on two events, both of which will occur this month. The first, which is of lesser importance, will be the next meeting of the Federal Open Market Committee on June 14-15. The FOMC, which manages the Fed’s monetary policy, is currently expected to delay any interest rate hike for the near future.
The second event will be of much greater importance. On June 24, there will be a National Referendum, to decide whether, or not, the United Kingdom should leave the European Union—the so-called “Brexit”. Here’s why that vote concerns me.
The E. U. represents 23.7% of the total Global Gross Domestic Product—more than the U. S, and more than China. So, if Great Britain were to leave the Union, taking 15.9% of the E. U’s total economic activity, it could weaken the entire global economic structure. World trade might be stifled! And, that’s how the dominoes might begin to fall.
Stay tuned! I’m sure that I will have more to discuss on the Brexit, once we get closer to the Referendum.