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November 7, 2007 (you may need to refresh your browser to view the latest issue)
Twice as Many
Written by Jeff Thredgold, CSP, President, Thredgold Economic Associates
Score two more for the beleaguered and oft-criticized American economy. Even as much of the national media bemoans U.S. housing market weakness and the economy’s inevitable move toward recession, the overall economy just keeps pluggin’ along.
Solid Growth
As noted in last week’s Tea Leaf issue, the American economy grew at a 3.9% real (after inflation) annual rate in the July-September quarter, the strongest performance in more than a year. Such growth followed a similar 3.8% real annual growth pace in 2007’s second quarter and the anemic 0.6% growth pace during the first quarter.
Weakness in the nation’s housing sector did obviously have a negative impact on third quarter performance, as in numerous prior quarters. However, rising U.S. exports to a strong global economy, combined with improved consumer spending and rising business investment, more than offset the housing weakness.
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Impressive Overall Job Gains…
The latest U.S. employment data also provided evidence of continuing growth. The U.S. Department of Labor reported a net rise of 166,000 jobs in October 2007, twice the consensus forecast, and the largest gain in five months. Previously reported employment gains for August and September were revised lower by a total of 10,000 jobs.
The U.S. unemployment rate was 4.7% in October, matching September’s rate, and the highest level since July 2006. March’s 4.4% jobless rate matched that of October 2006 as the lowest in more than five years.
The average hourly wage rose 0.2% (three cents) to $17.58 hourly, a rise of 3.8% over the past 12 months. The 3.8% rise exceeds the 2.8% rise in the Consumer Price Index for the 12 months ending in September, providing real wage growth.
 …with Weakness in Goods Production
Goods-producing employment continued to decline in September, with a net loss of 24,000 jobs. Construction employment fell overall by 5,000 positions, with continuing losses in residential construction largely offset by strength in commercial real estate and public works spending. Even so, the overall construction sector has lost a painful 124,000 jobs over the past year.
Manufacturing employment continued to be weak with the loss of another 21,000 jobs, even as U.S. exports of manufactured goods to a strong global economy continue to set new records.
…and Strength in Services
Service-providing employment led the way in September with a rise of 190,000 net new jobs. The professional & business services sector added 65,000 net new jobs during October, while the leisure & hospitality sector added 56,000 jobs.
The education & health services sector added 43,000 net new positions, while the government sector added 36,000 jobs. Health care employers have added 400,000 net new jobs in 2007 alone.
This latest data now suggests that the U.S. economy added an average of 112,000 net new jobs monthly during the past four months, down 16% from the 134,000 average monthly gain in 2007’s first half, and down 41% from the 189,000 average monthly gain in 2006.
Slower Growth
Most forecasts for U.S. GDP growth in the current quarter are near a 1.5%-2.2% real annual rate. The consensus view has the economy also avoiding recession in 2008, with modest growth near a 2.0% real annual rate during the first quarter approaching a 2.8%-3.0% real growth pace by the end of 2008.
We continue to suggest only a 25% chance of a U.S. recession during the next 12 months, with housing’s nationwide turnaround still perhaps a year away. And as a constant, much of the national media will continue to badmouth the economy at every opportunity…
…stay tuned
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