Summary

When using GDP components as our proxies for patterns and predictions in the employment market it is hard to find reasons to be optimistic about the upcoming September Employment Situation Report. For example:

  • Real federal government consumption expenditures and gross investment – flat to negative;
  • Real personal consumption expenditures has been low and trending down generally;
  • Home construction is up, but still barely has a pulse;
  • Private businesses increased inventories are up;
  • Exports have been surprisingly robust in 2012, but the headwinds are blowing harder every day given the European recession and the slowing Chinese economy.

Given that the United States is a consumer-based economy, what does this data tell us about the consumer. Consumer behavior drives many of the industries our economy depends on, especially the housing market, and the economic data is showing that consumers are still uncertain about the recovery. It appears the consumer is keeping us out of the red from a GDP perspective but they are doing so despite troubling economic times for the middle and lower classes and not because of optimism of wealth. The question is but for how long…


On Friday, October 5, the Bureau of Labor Statistics will release the Employment Situation Report for September. The report will likely reinforce the notion that the economy is loosing steam, or at least still low on steam.

The ADP National Employment Report showed a decrease in the number of new jobs added in September compared to August.  In August the private sector added 201,000 jobs, and in September it only added 162,000 jobs.  Prior month increases in July and August were also revised downward.  Job increases in the critical manufacturing and construction industries remained low at 4,000 and 10,000 respectively.

Construction industry employment reflects the industry’s confidence in the future of the housing market and represents a drop in the bucket compared to the one million jobs the industry needs to add to reach healthy levels. Even though construction jobs are up nearly 20 percent year-over-year, they are down almost 75 percent from 2005 peaks.

Retail sales gains are also only expected to see mild increases in September of less than two percent. While some may argue that any increase is good news, a one to two percent increase pales in comparison to pre-crisis levels and even recent levels.  In September 2011, retail sales rose over five percent, and in August 2012, retail sales rose over six percent.

Jobless claims are also up. For the last week of September, weekly unemployment claims rose. Seasonally adjusted initial claims rose by 4,000 from the prior week.

All of these issues contribute to additional consumer anxiety and our consumption-based economy requires people to spend in order maintain economic growth while keeping up with population expansion and financial obligations.  And in addition to these reports the rhetoric around the jobs market remains tense with political dysfunction, the fiscal cliff debate, an impending expiration of the Bush tax cuts, and the continued recession.  The economy still offers a disappointing big picture and consumers appear to be acting accordingly.