Investors can be forgiven for thinking they hit the trifecta last Friday.
The U.S. Bureau of Labor Statistics reported that unemployment had dropped to 3.9%, the lowest in almost 20 years.
The Federal Reserve Bank of Atlanta reported that its widely followed GDP forecasting tool was showing projected growth for the second quarter of 2018 at 4%, exactly where Trump boosters like Larry Kudlow said it would be.
Finally, the Dow Jones industrial average rallied 332 points (1.39%), partly in response to the other good news. It was almost enough to make a trader sing, “Happy days are here again.”
The fact is that this good news hides more than it reveals. A look behind the numbers discloses a sobering outlook for investors.
Let’s start with the employment report. The U.S. Department of Labor, Bureau of Labor Statistics report dated May 4, 2018, showed the official U.S. unemployment rate for April 2018 at 3.9%, with a separate unemployment rate for adult men of 4.1% and adult women of 3.7%.
The 3.9% unemployment rate is based on a total workforce of 160 million people, of whom 153 million are employed and 6.3 million are unemployed. The 3.9% figure is the lowest unemployment rate since 2001, and before that, the early 1970s.
The average rate of unemployment in the U.S. from 1948 to 2018 is 5.78%. By these superficial measures, unemployment is indeed low and the economy is arguably at full employment.
Still, these statistics don’t tell the whole story.