US Q2 Growth Estimates Decline But Still Set To Beat Q1’s Increase

Yesterday’s release of the Labor Department’s estimates of job openings aligns with Mallon’s narrative. The US reported 9.3 million job openings in April, the highest on record (starting in 2000). Meanwhile, workers quitting jobs also reached a record high as layoffs dropped to the lowest since data collection began for the series more than 20 years ago. Meanwhile, almost half of small business report difficulty in hiring workers.

“The rate at which adults are participating in the workforce has been flat since last summer,” observes Michael Strain, director of economic policy studies at the American Enterprise Institute. “This is a significant issue. Workers are not coming back.”

Perhaps, but private nonfarm payrolls grew by a solid 492,000 in May, more than double the gain in the previous month. Economists were expecting a significantly higher increase, but the latest gain still points to a labor market that’s humming and most forecasts see more of the same for the summer.

Production bottlenecks and labor market frictions will remain headwinds for the rebound, but at this point, the odds still appear favorable for expecting a strong acceleration in Q2 GDP growth over Q1’s gain.

“The supply constraints are problematic, but it doesn’t mean that’s going to prevent the economy from continuing to recover,” says Ryan Sweet, senior economist at Moody’s Analytics.

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Disclosures: None.

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