The Path to Sustainable Economic Growth
While the year started with some hopeful employment numbers, job creation is trending in the wrong direction. Overall, the Bureau of Labor Statistics jobs report for April is mixed, with softness in the headline numbers for April tempered by upward revisions to previous data.
As was my view after the March report, while the April report is not conclusive, the effect on small business owners’ confidence is apparent. Because small business generally responds to changes in economic conditions more rapidly than larger businesses do, these numbers serve as a leading indicator of the economy. Further, we are seeing lending to small business decline recently after a bottoming around 2009.
Looking closely at the numbers, we see that non-farm payrolls increased by 115,000 in April, compared with an upwardly revised 154,000 in March (previous: 120,000). The April print was below the consensus (160,000). Private payrolls increased by 130,000, with the bulk coming from private services at 116,000. Gains were strongest in business services (62,000), retail trade (29,000), education and health (23,000), and trade and transport (22,000).
The rebound in retail trade in the wake of the 21,000 decline last month is an encouraging sign, but strength in this category was offset by the deceleration in hiring seen in leisure and hospitality, which showed a 12,000 increase in payrolls this month, versus 52,000 last month.
On the goods-producing side of the ledger, construction payrolls fell by 2,000 and are suggestive of weather effects. Construction payrolls grew by 44,000 in the December to January time period and have been flat since. Manufacturing payrolls have also slowed somewhat, increasing by only 16,000 in April after four months of strong gains. The public sector shed 15,000 jobs.
Average hourly earnings were flat on the month and now stand at 1.8 percent y/y. Average hourly earnings remained steady at 34.5 hours while aggregate hours worked increased at a 3.3 percent 3m/3m (saar) pace in April, compared with 3.8 percent in March and 4.1 percent in February. The household survey took on a soft tone with employment falling by 169,000. The unemployment rate fell one-tenth to 8.1 percent (8.098 percent unrounded), reflecting a two-tenths drop in the participation rate to 63.6. While I have frequently stated that I believe an aging population will put downward pressure on the participation rate, we do not expect it to fall indefinitely. Recent trends in the participation rate clearly suggest that it has yet to bottom.
Policymakers at every level need to put politics aside and put their focus on growing the economy and creating jobs, which means we need to create a better economic climate for small businesses in America. Small businesses must have confidence that their investments and expansions — which mean new jobs — will yield returns. Small businesses are the primary source of the majority of new jobs in America, yet they are fettered by burdensome regulations. In fact, there are lessons to be learned from a new survey of small business owners by Thumbtack.com and the Kauffman Foundation, ranking the best and worst states and cities on overall small business friendliness. For example, as important as taxes are to would-be job creators, even more important are easy-to-understand regulations surrounding licensing. Is it any surprise that Idaho, Texas and Oklahoma were at the top of the list? Federal lawmakers should take note.
Job Creators Alliance, an organization comprised of some of the most well-known CEOS and brands, has the solution to jumpstart this economy. Our policy plan calls for such actions as reforming our tax code, removing the regulatory uncertainty small businesses face, and bringing a rational approach to government fiscal policy and entitlement reform. The Job Creators Alliance’s policy recommendations are a roadmap of how we can lead our nation back to sustainable, stable economic growth.