It might a bit early to mention the “R” word, but two more soft data points Wednesday raise concerns that the U.S. economy is slowing down.
Concerns about a potential recession grew Tuesday when the Commerce Department reported a much larger trade deficit than expected. It meant that the advanced estimate for economic growth from January through March of 0.2 percent might actually be negative when revised on May 29. The economy may actually have shrunk in the first quarter.
The U.S. economy has been in a long, albeit slow, expansion since the Great Recession ended in June 2009. Recession is generally defined as two consecutive quarters of negative growth, and most economists are expecting growth from April through June in the range of 2 percent to 2.5 percent.
But Wednesday brought additional signs of softness.
One was the ADP National Employment Report, a private-sector gauge of hiring. It showed that private-sector jobs were up 160,000 in April. This report comes two days before the government releases its broader monthly employment report. The weak ADP number may, or may not, signal a soft report. ADP at times has mirrored the government report and at other times been off by more than 50,000.
“The slowdown is broadly the result of a slowing of hiring by large companies—the pace of hiring at small and medium-size companies shows no slowing pattern,” observed economists at RDQ Economics in New York.
Most economists expect hiring in the 200,000 to 230,000 range in Friday’s report, a snap back from a dismal 129,000 new jobs in March. The poor showing on ADP makes the government report of greater interest.
Also Friday, the Labor Department released its quarterly estimate for productivity – an employee’s per-hour output. It fell for the second consecutive quarter. Non-farm business productivity fell at an annual rate of 1.9 percent in the first quarter, after falling at a rate of 2.1 percent in the final three months of 2014. It was the first back-to-back decline since 2006.
“Even with improvements in productivity growth in the remainder of the year, we don’t expect productivity growth in 2015 to be materially different than what was seen over the past three years,” said Doug Handler, chief U.S. economist for forecaster IHS Global Insight, who is not forecasting recession.