On June 1, the Bureau of Labor Statistics released its May jobs report with an estimate of 69,000 net new jobs created in the month, well below expectations. It also reported a downward revision in its net new jobs estimate for the previous month. Additionally, the US Gross Domestic Product was revised down slightly and consumer confidence has pulled back too.
With these pieces of news being the latest in a string of discouraging economic reports, the Boston Blog caught up with Ben to get some context on what’s happening in the economy—and what it means for our business.
BB: Primarily it’s about the Eurozone and uncertainty. The ongoing debt crisis in Europe—most prominently in Greece and now Spain—continues to fester. The elevated risks of a Greek exit from the Eurozone or a broader break-up are causing uncertainty and fear not just in Europe, but around the world. Add in slowing growth in the BRIC countries—Brazil, Russia, India and China—and some uncertainty around our own fiscal, political, and regulatory future in a U.S. election year, and corporate leaders are thinking twice about ramping up hiring.
Q: How exposed is the U.S. to the Eurozone crisis?
BB: The U.S. is exposed, and if Europe triggers a global financial crisis, no country will be immune, but we have some factors in our favor. Most people don’t realize that 87 percent of the U.S. GDP is from domestic economic activity. Of the remaining portion, only 17 percent is tied to Europe directly.
The U.S. banking system is in much better shape than Europe’s. The system is better capitalized—think back to TARP—less exposed to peripheral Europe, such as Greece, and, as of late, has been increasing lending to businesses and consumers. Along with declining gas prices, this should help keep the U.S. in at least slow growth mode in all but a disorderly Euro break-up scenario.