DALLAS—The latest employment news is not encouraging for the nation's economic outlook, which is another sign that CUs should be cautious with lending, according to one analyst.
“January's growth in payrolls (a modest 151,000 increase) is considered to be a sharp slowdown in the pace of hiring as employment gains over the last two months were little changed,” said Brian Turner, executive director with Meridian Alliance, who last month stated that Q4 economic data suggests possible economic trouble is on the horizon. “The smaller-than-expected increase in January could add to growing worries about a weakening U.S. economy and even raise the possibility of recession.”
Turner explained that big banks like Morgan Stanley and Citicorp estimate a 20% chance of recession this year.
“Economic growth, and member demand for products and services, depends on shoppers. Consumer spending makes up two-thirds of GDP and data reflects mixed signals with retail sales declining in December and monthly declines were experienced in seven months last year,” said Turner.
Turner encouraged credit unions to be very cautious against overextending credit exposure over the next few months, especially in oil-dominated regions, as
the decline in crude prices is threatening industry revenue streams and future employment.
“Short-term funding duration is recommended until market conditions stabilize,” he said.
Reacting to the Labor Department’s January employment report, NAFCU Chief Economist Curt Long said the data reflects a labor market that is slowing.
“While the addition of 151,000 jobs was enough to reduce the unemployment rate slightly, it is a marked decline from the payroll gains of the fourth quarter,” said Long. “Turbulence in the stock market and fears for the prospects of global growth are likely taking a toll, but the overall picture is one of a labor market that is drawing near to full employment. While nominal wage growth is still slightly below historical norms, it is still outpacing inflation by a decent margin.
“Moreover, we have seen meaningful improvements in the participation rate over the past six months which suggests that more sidelined workers are being brought back into the labor pool,” continued Long. “This report is neither strong enough nor weak enough to materially impact the Fed’s rate decision in March, which at this point still looks like a decision to hold.”