According to Tom Porcelli, Chief US Economist at RBC Capital Markets, this job number alone is unlikely push the Fed to the edge. Ben Bernanke has made it clear that the Fed would prefer not to initiate another round of assets purchase, especially for an economy that’s not gaining momentum.
Post FOMC meeting, Bernanke had said he would expect the economy to add 150,000-200,000 jobs; a pretty modest range. After Friday’s release, the average comes to 135,000, failing to cross an already low barrier.
The manufacturing jobs came in at 16,000, lower than the estimated 22,000. However, manufacturing, which contributes 10 percent to the economy, is unlikely to slow down the recovery alone.
Consumer spending contributes 70 percent to the economy. Therefore, it’s important that people started spending, or so the theory goes. Unfortunately, wages remained flat in April while they had turned negative in the prior month. Factoring in inflation, wages have actually gone down year-on-year in real terms.
There’s little the government can do to kick-start the economy now, with borrowings going through the roof. To boost employment, the government should encourage the small business sector. There are two issues right now plaguing the small businesses; government regulations and lack of sales.
The government may ease regulations to encourage the SME sector, but in the current heated political scenario, a sensible idea like that seems a tall order. You can watch the video here.