Weak Jobs, Consumer Activity Hint at Weakening American Economy

A disappointing increase in job openings and a poor increase in consumer credit indicate Americans are increasingly struggling to make ends meet.  In April, consumer credit rose just $13.4 billion, far below the $18 billion expected and less than half of March’s $28.4 billion, according to new data released by the Federal Reserve.

Analyst expectations of sharply increasing consumer credit usage were based on previous data that showed strong retail sales, which is often financed by credit cards.

A disappointing increase in job openings and a poor increase in consumer credit indicate Americans are increasingly struggling to make ends meet.  In April, consumer credit rose just $13.4 billion, far below the $18 billion expected and less than half of March’s $28.4 billion, according to new data released by the Federal Reserve.

Analyst expectations of sharply increasing consumer credit usage were based on previous data that showed strong retail sales, which is often financed by credit cards.

However, it appears that the sharp increases of consumer activity in the 1st quarter may have reached a plateau, and in fact, Americans are feeling less confident about their financial future. That, in turn, is making them pause before using more credit, which could take a toll on both retail sales and the broader American economy.

Analysts at several investment banks have already released notes on the data, noting that the slowdown coincided with the beginning of spring, when consumer spending typically picks up. If the trend continues, it could be another drag on GDP growth, which is expected to sharply increase in the 2nd quarter from the anemic 0.5% increase that America saw in the 1st quarter of the year.

Limited Job Options

In addition to a decline in consumer credit utilization, a separate study saw less job openings than expected in a sign that the labor market may be weakening further.

A new study by the Bureau of Labor Statistics saw job openings “little changed” in April, with only 5.8 million jobs and a job openings rate of 3.9%. A few industries saw strong growth, such as wholesale trade, transportation and warehousing, durable goods manufacturing, and real estate.

However, those gains were almost entirely offset by a decline of professional and business services jobs, which fell 274,000. With those jobs offering better pay and working condition, the weakness in the professional job market may be another indicator of weakening purchasing power for working Americans.

In addition to weak demand for workers, the economy saw a decline in hires to 5.1 million with a 3.5% hire rate. The decline was led by a loss of 31,000 government jobs, with the Midwest seeing the biggest decline in hiring overall.

Total job separations, including quits, layoffs, discharges, and firings, were steady at 5 million in April, suggesting a net increase of 100,000 jobs for the month. That is weaker than the 2.7 million job gains total that the economy saw over the last twelve months ending in April, suggesting that job growth is seeing a significant decline in America.

This study confirmed an earlier report that saw just 38,000 new jobs added in May, suggesting that job increases are worsening significantly throughout the 2nd quarter of 2016.