Overall, the economic outlook remains one of moderate growth, although there has been a significant recent chill in the pace of job growth. In the past few days we’ve seen reports showing that nonfarm payroll growth, GDP growth, home sales and durable goods orders are all beating the pants off expectations. Yet the labor market’s standstill seems to be due more to supply-side bottlenecks than a weak economy. Yet, as the country tries to thread this needle, an approaching debt limit crisis could add a much darker shadow to the economic picture.
In addition, second-quarter GDP growth was revised upward substantially, underscoring a powerful economic undercurrent. Furthermore, new home sales and orders for durable goods both exceeded expectations — further evidence of strong consumer demand. Numbers on personal income and spending were promising. This continues to support the notion that the economy is on a steady and stable path.
While all of that sure sounds promising, the picture on the ground in the labor market is something else. Meanwhile, job creation has continued to be anemic. Importantly, this trend is less a result of shortcomings in economic performance and much more a result of a shrinking labor supply. A combination of a federal immigration enforcement automobile wrecking crew and other demographic trends have played a big part in this drop. Consequently, companies are reporting that it has never been more difficult to recruit for open roles.
Get ready to get some answers as a wave of labor market reports flood in. That would include the September payroll numbers that are due out Friday. Most notably, analysts are watching this very closely. They want to know what’s happening with the overall job market and what that means for future economic growth.
A cloud of uncertainty hangs over these economic releases with the debt limit debate still hotly contested in Washington, DC. The lack of any bipartisan deal is cause for concern. Lack of a debt ceiling increase could lead to the suspension of key economic data releases and a loss of overall market stability. Our lawmakers are hard at work to solve this problem. What’s most worrisome are the potential long-term impacts on economic growth and job creation.