The sluggish U.S. employment numbers released Friday represent a “clear warning sign” that trouble may loom ahead for the economy, says Joel Naroff, president of Naroff Economic Advisors.
Non-farm payrolls rose only 115,000 in April, trailing the 160,000 gain forecast by analysts. The unemployment rate dropped to a three-year low of 8.1 percent, but the decrease from 8.2 percent was largely the function of a declining labor force.
“To a large extent they [the data] were disappointing,” Naroff tells Newsmax TV in an exclusive interview. “When we look at the job gains, that’s not anywhere near what we need if the unemployment rate is going to continue to drop.”
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To be sure, Naroff sees the improvement in April’s unemployment rate as a positive sign, despite a decline in the labor force participation rate to a 30-year low.
“I don’t worry too much about a drop in labor force,” says Naroff, also a Moneynews.com contributor and columnist. “That goes up and down. We have been seeing the labor force growing at a reasonable pace over last few months.”
Nonetheless, Friday’s report, combined with the modest 154,000 payroll gain in March, is a shot across the bow, Naroff says. “One month we dismiss, but two months is something that has a clear warning sign to it.”
There are seasonal issues to consider, he says. Thanks to the warm winter weather, economic strength in January and February may have stolen growth from March and April. “My caution is that this is a warning, but not clearly a trend yet,” Naroff says.
“Are we looking at seasonal issues here or a fundamental slowdown? Right now, I’m just not certain.”
And what are the political implications of slowing job growth for President Barack Obama? “If in the summer we see this is just a seasonal issue, that may not be of concern to Obama,” Naroff says.
But, “If this is a real slowdown, then weak job growth and maybe even a rise in the unemployment rate would be a major problem. We don’t know yet.”
One thing that is a problem, and not just for Obama, is the 15,000 jobs lost in the government sector last month, Naroff says.
“I thought those numbers were trending down, and we’d be seeing the end of it,” he says. “Austerity hurts. . . If you cut a government job, it means the private sector has to replace it before we get job growth. That’s also a restraint to job gains going forward.”
Naroff has a mixed view of the economy overall. “The economy is growing at a moderate pace but not so strong that we’ll get consistently strong numbers.”
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