Certainly, this past week was one to get a good assessment of where the economy stands coming into the new year and a new Presidency. In the past week or so, we have had reports on overall economic growth for 2016; personal income and spending for December; the jobs report for January; and a meeting of the Federal Reserve Board’s Open Market Committee. That is a lot of information to assess. Let’s start with the economic growth. Our rate of economic growth for 2016 was 1.6%, which was the slowest since 2011. The fourth quarter came in at 1.9% and is subject to revision, but even a significant upward revision will not affect the overall 2016 growth results by that much.
The next release measured personal income and spending for December, which was another report which shows how we finished out the year. December personal spending numbers are especially important because they reflect spending through the holiday season. These numbers came in moderately robust, and met expectations. We then had the meeting of the Federal Reserve mid-last week. The markets were not expecting the Fed to increase rates since they did so in December. And this prediction was right on the mark. However, the markets were watching the Fed’s statement closely. This statement indicated that economic growth remains moderate and the economy was balanced as of right now–with no more risks on the upside vs. the downside.
Finally, on Friday we had the all-important jobs report, which is the first economic reading for January. The report was a real mixed bag with strong employment growth of 227,000 jobs added, but an up-tick in the unemployment rate to 4.8% and lower wage growth than forecasted. The increase in the unemployment rate is not necessarily bad news because it indicates that more long-term unemployed are re-entering the workforce. Indeed, the labor participation rate did increase as well, but remains near all-time lows.