I'm always amazed how shocked economists are when the real numbers substantially miss their projections. Last month's job's report was no different. The estimate for job creation was 250,000. The economists at Briefing.com had theirs even higher at 260,000. The actual number came in at 126,000. A monumental miss.
Why did the economic community get it so wrong? Well, all too often, economists work in a vacuum. First, they were fooled into believing that the jobs number would be strong because of February's 295,000 total. This after another strong number in January.
In doing so, economists were ignoring a simple economic principal: Job creation is a direct a result of increased business activity.
Primarily, this means that jobs are created if consumers are buying and spending more than they had in the past. Usually, because their incomes are rising. Also, any increased business activity means job creation as a result of new businesses being formed. A new beauty shop with 5 new employees. A new fast food restaurant could add as many as 52 new jobs to the economy.
There were several indicators that none of these things were happening.
In the three months of December 2014, and January and February of 2015, retail sales fell. The reason for this is simple. People haven't received enough of an increase in wages to drive retail sales. For example, in the December jobs report, the average hourly wage for all employees in the labor market actually decreased by 7 cents. Weekly earnings only increased by a whopping $21 from $829.03 to $850.12. That's just two one-hundreds of a percent increase in income in a year's time. Hardly enough to drive the economy and create jobs. Then in a recent poll by Deutsche Bank, it was determined that 47% of Americans save nothing and, as such, are probably living paycheck to paycheck. The lack of retail sales is why businesses like Target are laying off 3,100 workers and why an untold number may be laid off as a result of the Radio Shack bankruptcy and store closures.
Additionally, business creation is in decline due to the lack of small business lending. Newer and younger companies create more jobs than older companies, and much of this decline is a direct result of policies from the Obama Administration.
Simply, we are in a period of economic decline. Without good wages, there won't be enough people buying things to drive the economy. Proof of this comes from the Atlanta Federal Reserve's GDPnow computer algorithm projecting that the first quarter economic output will be near zero growth. No growth equals no jobs.
March 2015 Nonfarm Payrolls: http://www.briefing.com/investor/calendars/economic/2015/4/3
THE EMPLOYMENT SITUATION—MARCH 2015: http://www.bls.gov/news.release/pdf/empsit.pdf
The Employment Situation - February 2015: http://www.bls.gov/news.release/archives/empsit_03062015.pdf
the employment situation—january 2015: http://www.bls.gov/news.release/archives/empsit_02062015.pdf
The Employment Situation - December 2014: http://www.bls.gov/news.release/archives/empsit_01092015.pdf
Retail Sales Down for Third Straight Month, Automobiles Put Brakes On: http://www.industryweek.com/finance/retail-sales-down-third-straight-month-automobiles-put-brakes
Target eliminates 3100 jobs - MPR News: http://www.mprnews.org/story/2015/03/10/target-layoffs
Target layoffs will hit 1,700 today, with another 1,400 jobs going unfilled: http://www.startribune.com/lifestyle/295752841.html
These are the stores RadioShack is closing - CNNMoney: http://money.cnn.com/interactive/technology/radio-shack-closings-map/
Half America Doesn't Save: http://www.businessinsider.com/half-of-america-doesnt-save-any-money-2015-3
GOP presidential contenders need to start talking about ways to reverse the decline of entrepreneurship: http://www.usnews.com/opinion/blogs/opinion-blog/2015/02/19/decline-of-small-business-hurts-economic-recovery-jobs-growth
Who Creates Jobs?: http://www.nber.org/digest/feb11/w16300.html
The consequences of the anti-business Obama administration: http://www.washingtonpost.com/blogs/post-partisan/wp/2015/04/06/the-insiders-the-consequences-of-the-anti-business-obama-administration/
GDPNow - Federal Reserve Bank of Atlanta: https://www.frbatlanta.org/cqer/researchcq/gdpnow.cfm