The Federal Reserve Bank of Atlanta has a new chart to explain the complexities of the U.S. labor market and it’s perfect for the Halloween season for two reasons: It looks like a spider’s web and it helps to understand why this economic recovery has been more trick than treat for the average American.
The graph, called the Labor Market Spider Chart, tracks 13 indicators of the labor market’s recovery — everything from unemployment and underemployment to payroll and hiring plans. If you look at only one or two indicators of the jobs market you’ll get a false impression about the recovery and miss how consumer spending has been entangled by labor market weakness said Sean Snaith, a University of Central Florida economist and director of the Institute for Economic Competitiveness.
“The headline unemployment rate and changes in payroll employment are the two data points that get the lion’s share of attention when the Bureau of Labor Statistics releases its monthly report on the U.S. labor market,” Snaith said. “Looking only at these indicators, you could think the U.S. economy is operating near full employment. But that would be a trick – a broader view shows the economy is still recovering slowly and significant slack remains in the labor market.”
That’s the bottom line in Snaith’s quarterly national economic forecast released today.
“The recovery continues, but it is disappointingly slow for a variety of reasons,” Snaith said. “While the holiday-shopping season promises to be better than last year, it likely will be followed by a slowing down of consumer spending growth yet again. And we’re not likely to see that change for a while. The labor market is going to keep consumers tangled up and blue.”
Snaith’s forecast predicts that real consumer spending won’t hit 3 percent growth until late 2016.
Highlights from the forecast include:
But many variables remain. With home-equity loans still being difficult to obtain and the housing market still primarily the area of investors and not the average Joe, it doesn’t appear the economy will speed up for the majority of the population anytime soon, Snaith added.
The Federal Bank also will likely start increasing interest rates by the end of the third quarter 2015, which means a little more money for those who save their money. But it also will put an end to the double-digit gains in the stock market.
The housing market remains a bright part of the forecast, albeit with some caveats. Housing prices continue to rise, but the pace of these increases has slowed. Declining levels of investor purchases are taking some wind out the housing market’s sails.
Snaith said housing finance must become available to an expanded pool of borrowers if the market is going to make a smooth transition from investor-led purchases to more traditional mortgage-financed consumer purchases. If mortgage availability does not improve over the next few years, the likelihood of such a transition will be greatly diminished.
And then there’s the wild card – U.S. anti-terrorism activity in Iraq and Syria. What’s done there and how long it takes will have an impact on the economy, Snaith said.
“The economy doesn’t like uncertainty,” he said. “It really doesn’t.”
Snaith is a national expert in economics, forecasting, market sizing and economic analysis who authors quarterly reports about the state of the economy. Bloomberg News has named Snaith as one of the country’s most accurate forecasters for his predictions about the Federal Reserve’s benchmark interest rate, the Federal Funds rate.
Snaith also is a member of several national forecasting panels, including The Wall Street Journal Economic Forecasting Survey, CNNMoney.com’s survey of leading economists, the Associated Press Economy Survey, the National Association of Business Economics Quarterly Outlook Survey Panel, the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters, the Livingston Survey, Bloomberg U.S. Economic Indicator Survey, Reuters U.S. Economy Survey, and USA Today Economic Survey Panel.
The Institute for Economic Competitiveness strives to provide complete, accurate and timely national, state and regional forecasts and economic analyses. Through these analyses, the institute provides valuable resources to the public and private sectors for informed decision-making.