April jobs report decent, but economic growth lags

Consumer confidence chart via Bloomberg.com

 

Last Friday's jobs report didn't reveal anything too terrible. An additional 223,000 jobs were added to U.S. payrolls and the national unemployment rate dropped to 5.4 percent, but it wasn't good enough to suggest any big changes are coming soon.

Part of the problem is that average wage growth barely budged, rising 0.1 percent in April. Despite the steadily falling unemployment rates, salaries have remained fairly flat - this is the opposite of the inflationary trends Federal Reserve officials want to see before making any policy changes.

The huge drop in oil prices in late 2014 and early 2015 has taken a hit on one of the fastest-growing U.S. industries in recent years. In April alone, domestic oil and gas well drilling dropped 14.5 percent, helping pull down overall U.S. industrial output 0.3 percent.

Even though gas prices are relatively low, consumer confidence is also lagging. A University of Michigan report shows consumer confidence dropped in the past month to its lowest point since last October (see chart above).

With all of these economic trends showing lackluster growth, and therefore pushing back a move by the Fed to raise interest rates, the S&P 500 index soared Friday to another all-time high. Low interest rates promote a positive growth environment for homeowners, car owners and business owners to build savings, invest more money into the market or pump back into the retail economy.