Friday, April 5, 2013

March Unemployment Report Due Out This Morning ... More Private Sector Jobs = More Consumer Spending = More Economic Growth = More Income = More Government Tax Receipts = Lower Deficits and So Forth

We're awaiting the March unemployment numbers which will be released at 8:30 am Eastern time this morning.

The unemployment rate is expected to remain at 7.7% and expectations are that new jobs created during the month just ended were approximately 200,000. See Job Market Remains a Wild Card in Recovery Picture.

Meanwhile, the consumer has certainly come through in 'winning fashion' by spending at a strong pace throughout the first quarter. That's a hopeful sign of more good things to come for the remainder of 2013.

In a reference to basketball's March Madness and the surprising performance of Wichita State in the NCAA tournament thus far, Consumers Are Wichita State of U.S. Economy discusses consumer spending growth in Q1:

"The consumer sector has become the Wichita State of the first-quarter economy. Against all odds, they keep playing on.

Maintaining that momentum into the spring, however, may be difficult unless businesses add jobs at a faster pace.

Consumers were supposed to slow their spending in the first quarter under the burdens of rising tax rates, higher gasoline prices and general uncertainty about government finances.

Instead, households increased their purchases at healthy clips in January and February. After adjusting for prices, real consumer spending grew at a 3.0% or so annual rate so far in the first quarter. . . .

Since the consumer sector accounts for the bulk of demand in the U.S. economy, the first-quarter strength has busted the forecasts of most economists, along with assists from faster inventory building and stronger construction spending. . . .

J.P. Morgan Chase said they now estimate real gross domestic product grew 3.8% last quarter, up from their previous 2.7% estimate and far above the 0.4% gain in fourth-quarter GDP.

While some of the revision reflects faster construction spending, the JPM group writes, “most of this revision is due to stronger-than-expected consumer spending data reported last Friday.”

The first-quarter spending spree, however, isn’t the first step in a new trend. Consumers will have to adjust eventually to lower take-home pay. The Washington sequester is cutting government outlays and jobs. Even an earlier-than-usual Easter may add strength to March retail sales but at the expense of April.

What could be a game-changer to the consumer outlook? Faster job growth.

The next read on the U.S. economy will come Friday with the release of the employment report. Economists think nonfarm payrolls grew 200,000 in March. That is a solid number, but it may not shift the outlook since the increase would be less than the 236,000 new jobs created in February."

Summing Up

So far, so good.

And lower gasoline prices should lift consumer spirits during the spring and summer, along with a better housing market.

If the private sector jobs number this morning comes in surprisingly favorable (over 200,000 new jobs) or at least not disappointingly poor, that could add further impetus to consumer spending as well.

In any event, if the government knows best gang just doesn't screw things up too much, we seem to have entered a slow but lasting period of stable economic growth.

And while we're at it, let's hope too that Wichita State doesn't disappoint its upset minded fans tomorrow.

Stay tuned.

Thanks. Bob.


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