Weekly Economic Summary: Growth Is Slowing

For the week of June 4, 2012 a summary of key indicators shows that the economy is weakening. The pace of the weaknesses very slow, but it is rather broad.

As we survey the main indicators there are very few signs of economic strength. Fortunately, many of the indicators are either stationary or decreasing at a very slow pace.

The economic recovery has been characterized by a cyclical pattern of growth, rather than a smooth upward trend. For the last three months the economy has been on the downward slope of the growth trend.

This is reflected in the fact that fewer new jobs have been created over the last three months and the decline in the unemployment rate has been stagnant.

Economists are searching for signs that the current weakness is temporary – similar to the slowdown which occurred last year. For that to be true, we should see the bottom of the slide and signs of renewed growth.

However, the search for the bottom continues and the signs indicate that the economy is still weakening, but doing so at a very slow pace.

Listed below are the major trends in key economic indicators

New Monthly Payroll Employment

May              69,000

April             77,000

March          143,000

Notice how the number of new jobs continues to decline each month. February was the last month of strong job creation, 259,000. The number of jobs created in May was particularly disappointing since the market expected twice as many.

Civilian Unemployment Rate

May             8.2%

April            8.1%

March         8.2%

The unemployment rate reflects the slowing pace of economic activity. Unemployment declined from an average of 8.6% over the last 12 months, but the decline has stalled and last month the rate increased by .1 percentage point.

Black Unemployment Rate

May            13.6%

April          13.0%

March       14.0%

Improvements in black unemployment lag the progress in unemployment among whites. After declining notably from above 16%, black unemployment declined to 13% in April but then increased significantly to 13.6% in May.

Latino unemployment rate

May            11.0%

April          10.3%

March       10.3%

Latino unemployment is significantly higher than unemployment among whites, but lower than black unemployment. Notable progress was made over the last several months. However, during May, Latino unemployment increased significantly from 10.3% to 11%.

White Unemployment Rate

May           7.4%

April         7.4%

March      7.3%

Improvements in unemployment are experienced first by whites and secondarily by other race and ethnic groups. Improvements in white unemployment have stalled over the last few months.

Initial Claims for Unemployment Insurance

June       377,000

May       376,000

April       384,000

New claims for unemployment compensation are an important indicator of job creation. That is, when the economy is growing fewer people will be laid off and fewer unemployment compensation claims will be filed. New claims have declined since April, but between May and June the level remain constant. During the fourth quarter of 2011, new claims were approaching 350,000. I

Domestic Oil Prices, per Barrel

June       $84.30

May       $94.70

April       $103.30

Oil prices are important because they are ultimately reflected in the price consumers pay for gas at the pump. The costly is a gallon of gas, the less consumers have remaining to spend on retail goods. Declining oil prices have been one of the brightest spots in the economy over the last several months.

Personal Savings Rate

April       3.4%

March   3.5%

Feb         3.7%

Consumer spending accounts for about 70% of GDP. If consumers are saving less, that means they are spending more. While lower savings is bad from an individual standpoint, it is good for the economy. Lately, consumers have been spending more and saving less.

Auto and Truck Sales

May         13.7 million

April        14.4 million

March     14.3 million

This has been one of the brightest spots in the economy over the last several months. Unfortunately, the pace of auto sales tapered off between April and May.

Total Housing Starts

April             717,000

March           699,000

February     718,000

The increase in housing starts between March and April was a bright spot in the economy. The housing market has a long way to go to fully recover, but it is beginning to show signs of life.

New-Home Sales

April               343,000

March            332,000

February       358,000

Over the last three months, new home sales have declined.

Consumer Confidence

May                79.3

April              76.4

March           76.2

Consumers will spend in accordance with their confidence in the economy. Fortunately, they have remained confident despite the slowdown in economic activity.

Durable Goods Orders

April                 -.6%

March              -2.1%

February          1.5%

One of the best indicators of the strength of the recovery is durable goods orders. When consumers purchase durable goods, businesses must build up inventories. Durable goods expenditures are a sign that consumers feel secure about their income. Lately, durable goods orders have declined.

Index of Leading Economic Indicators

April                   -.1%

March                 .3%

February             .7%

The index of leading indicators is a comprehensive sign of things to come. Based on that sign, the economy is clearly slowing down.

Gross Domestic Product (GDP)

First Quarter 2012            1.9%

Fourth Quarter 2011        3.0%

Third Quarter 2011           1.8%

GDP is the best gauge of economic growth. Estimates are provided on a quarterly basis. The latest revised estimate for the first quarter of 2012 was released at the end of May. It shows an economy that is experiencing slowing growth.

Key Indicators to Watch over the Coming Week with predictions from Yahoo

Retail Sales: Wednesday, June 13 (expected to decline by -3%)

Initial Claims for Unemployment Compensation, Thursday, June 14 (Expect Extremely Small Change, 375,000)

Consumer Confidence, Friday, June 15 (expected decline twos 77.0)