Monday, March 12, 2012

Job growth numbers: a good story?

Credit: Calculated Risk
So if you've been following the Bureau of Labor Statistics' job growth numbers, they've been looking pretty good. The unemployment rate has been been falling (8.3% in February, U6 at 14.9%) and the payroll numbers look pretty positive. That said, the economists are getting nervous, because predictions for 2012 are for the economy to slow down a little (excerpts by Ezra Klein):
LEONHARDT'S TAKE: (Washington bureau chief of the New York Times)  The gap means job growth is likely to slow. "If you looked only at the monthly jobs report, you could start getting pretty optimistic about the American economy. The largest, broadest survey of employment — a survey of businesses — shows the best job growth in more than five years over the last 12 months, with the pace mostly accelerating in recent months. The other survey that the Labor Department does — of households — shows even faster job growth, suggesting that the business survey may be understating the economy’s strength. But the jobs report isn’t the only measure of economic activity, and another major measure — of gross domestic product — doesn’t look quite so cheerful. The most likely situation is that job growth will slow in coming months, economists say, which will make President Obama’s economic narrative a bit more complicated than it now is...Based solely on the gross domestic product numbers, the obvious conclusion is that job growth will slow in coming months." 
SUROWIECKI DISAGREES: (economics writer for The New Yorker.)  The recovery is here to stay. "The story of America’s recovery from the recession has been one of dashed hopes. In early 2010, and again early last year, the economy looked as if it might be starting to grow under its own power, only to slow markedly in the months that followed. So what should we make of the current signs of rebound? The employment report for February, which came out last week, was solid, meaning that businesses have created more than two hundred thousand jobs a month for three months in a row. Economic data show that the economy, and real incomes, grew at a fine clip at the end of 2011. And unemployment, while still painfully high, has fallen a full two points from its peak. Bitter experience might suggest that we regard these numbers with a jaundiced eye. But there are at least a couple of reasons to think that, this time, we aren’t looking at a false spring." 
CJ's take: I really have no idea what's going on out there. If I had a guess, it would be that we kept being told in 2009 that job growth was a lagging indicator of the economy (6 months slow is the round number that I remember.) If the current economy is being slowed down by trouble in Europe and the relatively high price of oil, it makes sense that we're going to see this reflected in the jobs numbers in September or so. Hopefully I'm wrong.

Best wishes to all of us. 


  1. I know this is horribly unscientific, but how about indirect indicators? For instance, the shopping plazas and malls have been full to capacity for the last two weekends...and it's not a major holiday! Add to that many new cars on the road, crowded restaurants, and many new first-time homebuyers...feels like people are beginning to have $$ again.

    1. Hard to say. A couple of minutes of scrolling on Calculated Risk show generally rising trends for retail sales and falling-to-flat home prices.

      That said, I think I heard that overall credit usage is up recently.

    2. I'll add support to the indirect indicators. My wife and I took a trip to the Wrentham Outlets this past weekend. At around 1 pm on Saturday, The parking lot was absolutely packed, with a handful a spaces on the outer edges of the lot, very similar to how it was when we went a week before Christmas. If anyone else has been there, you know that it's an amply-sized lot.
      A reasonable conclusion is that people are spending more money... The only question is: are people spending money they have or are they just putting it on credit because they are anticipating a brighter future and more income in the future?

  2. Well, this whole recession has been unlike any other so we shouldn't be surprised that the recovery is different, too.

  3. Too many US based companies have bet the bank on China's consumer growth. The numbers are not there to indicate that this will end well based current economic indicators. CEOs should not bet copmanies on false hope that growth seen in the past will continue. China's growth is slowing, and will continue to slow. This is as more US companies rush to layoff in the US to free funds to expand in China. Companies that have the potential to grow in China will be outmanuvered by Chinese reverse engineering, manufacturing capabilities, and small respect for foreign intellectual property rights.

    GDP incorporates mall shopping. Many stores are barely hanging on. Macy's is struggling, and continues to slash price to move inventory at low (or no) profit.