The decline in the jobless rate is a breather for the United States of America (USA), feels M Cary Laehey, senior advisor, Decision Economics. Talking to CNBC-TV18, he said the average pace of hiring on a 12-month basis has been steady in the last year at about 175,000 workers.
But he cautioned that some of the details such as the decline in the workweek do take an edge off the report. He added that the manufacturing sector in the USA is doing better than its so-called industrialised counterparts, but it isn’t terribly strong.
Below is the edited transcript of his interview with CNBC-TV18
Q: This is unexpected, the kind of rise that we have seen in the April numbers, the revisions to the March and February numbers and the decline in the jobless rate. Were you expecting this at all?
A: I would not have been surprised if you have got an April increase of 150,000 or better. But you are correct in pointing out that the revisions are what are particularly striking, because now you no longer have this disappointing if not scary slowdown in hiring in May. That was well below 100,000, and now it has been a rise up to 130,000 or so. So believe it or not, the average pace of hiring on a 12-month basis has been very steady in the last year at about 175,000 workers.
So the report on the headlines was much better than expected, but I would just caution our viewers that some of the details such as the decline in the workweek do take an edge off the report.
So, the report is not telling anybody to revise up their gross domestic product (GDP) forecast for Q2. People are still worried about the inventory correcting keeping growth perhaps much lower than 2 percent. So we are getting bounced around still a bit by the inventory story.
Q: We have been seeing weak to negative data that in almost the last month to a month and a half. For instance, the manufacturing numbers have been very disappointing and then you have got the solid jobs numbers coming in.
A: It is always hard to say that indicator A should be completely consistent every month with indicator B, but I think it is an indicative of the fact that the economy is growing and when it is only growing below trend, you are going to have the numbers a little bit better than some that are not.
The other point to be made about manufacturing is that the manufacturing sector in the United States of America (USA) is doing better than it’s so called industrialised counterparts but it isn’t terribly strong.
Ironically, this is the sector that is shrinking not because it is inefficient but because it is very efficient and firms are making a lot of money in manufacturing where they just need fewer and fewer workers to do it.