Payrolls
Posted by WARREN MOSLER on August 5th, 2011
The labor force participation rate is falling roughly in line with productivity resulting in what I’ve been describing as an L shaped recovery as we remain grossly overtaxed for the size govt and credit conditions we currently have.
Editors note: this was originally posted without crediting Karim as the author of the comments below.
Karim writes:
Better than feared and most importantly, lending some consistency with other labor market indicators (claims, ADP, ISM).
Much of the details reversing last month’s across the board weakness.
- Payrolls rise 117k: Private payrolls rise 154k
- Net revisions +56k (June report revised from 18k to 46k)
- Unemployment rate drops from 9.2% to 9.1%
- Avg hourly earnings rise 0.4% (prior 2mths 0.0% and 0.4%)
- Hours index rises 0.1% (-0.2% last mth)
- Median duration of unemployment falls from 22.5 weeks to 21.2 weeks
- U6 measure falls from 16.2% to 16.1%
- Part rate falls from 64.1% to 63.9%
- Diffusion index rises from 56.6 to 58.6 with the following industries all showing net change of 10k or more jobs on the month
- Education, Construction, Manufacturing, Retail, Finance, Temp help
Claims in low 400s and ISM employment in low-to-mid 50s consistent with private payrolls in 100-150k/mth range.
Also with consistent with Fed forecast of modestly above trend gwth and slow decline in the unemployment rate.
A risk to the outlook going forward is the ‘financial accelerator’ factor as coined by Bernanke and Mishkin. Growth in H1 was at least associated with supportive financial conditions (basically credit spreads and equities). Too many more days like yesterday will offset whatever comfort they get from reports like today’s.
August 5th, 2011 at 2:26 pm
“resulting in what I’ve been describing as an L shaped recovery”
what does an L shaped recovery mean? I am assuming it’s when things would go up, then crash down again, and then we muddle through at those lows…that’s what the shape of an “L” is doing right?
“Better than feared and most importantly, lending some consistency with other labor market indicators (claims, ADP, ISM).”
that’s the thing that’s hilarious to me. Analysts bring their estimates down alot after the past two months have been horrendous and then when the numbers come out and we beat them, somehow everybody is “happy” again. As if 117,000 is a “good number” or something considering where we are and where we have been. If I’m not mistaken we need something more along the lines of like 300,000-400,000 to consider it a “good number.” Seems to me estimate numbers are as rigged as the market.
Reply
WARREN MOSLER Reply:
August 5th, 2011 at 5:10 pm
Right on L shape, vs V shape.
Agreed it’s a total disaster.
Also, forecasters get paid for being right
Reply
Mario Reply:
August 5th, 2011 at 6:29 pm
@WARREN MOSLER,
okay I see now. Thank you.
If this is an “L” recovery then we have yet to see the drop down and even go through the “muddling” stage if we are looking at equities as a guide that is. If that’s true then big yikes!!!!
Reply
WARREN MOSLER Reply:
August 6th, 2011 at 3:32 am
The down leg of the L was in 2008
August 5th, 2011 at 3:09 pm
“The civilian labor force participation rate edged down in July to 63.9 percent”
To what extent does a participation rate falling from 64.1% to 63.9% offset gains in other areas here?
Reply
WARREN MOSLER Reply:
August 5th, 2011 at 5:07 pm
It doesn’t offset anything. It’s a sign of weakness.
But the reason GDP per capita is up is because productivity is growing.
Reply
Mario Reply:
August 5th, 2011 at 6:15 pm
@WARREN MOSLER,
“But the reason GDP per capita is up is because productivity is growing.”
and that’s likely b/c companies are squeezing (manipulating?) all that they can from their employees keeping variable costs waaaay down and maximizing profits let alone the extra revenues coming from EM’s. And of course employees are freaked out to just lose their job, so they go along for the ride and crank out more productivity. Hiring won’t pick up at least until productivity tops out. If you can’t have slavery, this is probably the next best thing to it…if only we can keep this recession going!!! Woo-hoo!!!
Reply
Tom Hickey Reply:
August 5th, 2011 at 10:51 pm
@WARREN MOSLER,
Productivity is GDP per capita. It goes up with unemployment. Companies are becoming more productive through downsizing. The joke now is waterproof cellphones so you can answer a call from the office while in the shower. 24/7 is really 24/7 now.
Cutting the fat is good, but….
Reply
Mario Reply:
August 5th, 2011 at 11:23 pm
@Tom Hickey,
“Productivity is GDP per capita. It goes up with unemployment.”
yes that’s true…until of course it’s not. There is a breaking point. For various externalities and such we have not hit that point yet and so what you say is true.
August 5th, 2011 at 3:36 pm
“would take between 20 million and 30 million net job creations by the 2020s for the economy to return to full employment”
It’s a Mess Out There
“It was only after the Swiss franc climbed near a record high of 1.08 against the euro that it decided to act by consulting something other than Hayek’s Guide for Central Banker Dummies suffering from gold standard nostalgia.”
and:
Beneath Jobs Report Surface Lies Some Ugly Truths
http://www.cnbc.com/id/44033486
“According to a Bureau of Labor Statistics breakdown, there were 139,296,000 people working in July, compared to 139,334,000 the month before, or a drop of 38,000.”
“This is where the numbers showed a really big spike—up from 982,000 to 1.119 million, a difference of 137,000 or a 14 percent increase. These folks are generally not included in the government’s various job measures.
So the drop in the unemployment rate is fairly illusory”
Reply
August 5th, 2011 at 7:32 pm
“BEIJING, Aug. 5 (Xinhua) — China’s banking regulator on Friday urged banks to back the country’s public housing projects by offering loans and discounts on lending rates to alleviate financing difficulties.”
http://news.xinhuanet.com/english2010/china/2011-08/05/c_131031881.htm
This is what the Neoconservative Party of the Congress (Democratic and Republican Branches) should have done in the aftermath of the housing bubble burst. In China the so-called private state owned banks are told to lend to local governments to finance affordable housing. But in the US the finance industry tail (the so-called “markets”) wags the dog of the real economy.
Unemployment in the US mainly affects certain groups of workers – especially the construction workers. It is true that the malaise has already spread widely among other groups since 2007 but an initially oversized construction sector is still at the centre of the crisis.
http://data.bls.gov/timeseries/LNU04032231?data_tool=XGtable
http://www.bls.gov/iag/tgs/iag23.htm
The reduction of the unemployment rate in the construction industry is mainly caused by the workers leaving the industry rather than new jobs creation (the number of employees increased marginally). This is a good thing if these people find new jobs. If they can’t find them it’s very bad.
Another significant difference between China and the US is that in the US there is no shortage of houses, quite the opposite. But the public infrastructure in the US is crumbling, the environment needs care and if these workers are no longer needed – they should be retrained to perform other tasks not just abandoned and given barely enough money to survive.
However I disagree that indiscriminate tax cuts could do the trick by rising the aggregate demand up to a point when unemployment falls to 2%. People will not build more houses in the US even if they have more money. They may binge on iPods, imported clothing and more expensive cars. Before concreters and bricklayers acquire new skills the increasing demand for other good and services can easily trigger an inflationary spiral. Reducing taxes may help to increase employment up to a point.
Free markets are best in increasing efficiency at the micro scale. One Chinese study suggested that privately-owned firms were several times more efficient than old state-owned behemoths. But free market is not good at allocating resources at the macroeconomic scale. The housing bubble, the growth of the cancerous finance industry and the creeping de-industrialisation of the West (losing the competition with China in manufacturing technologically advanced goods) are the best examples. If the car veered off the road into the ditch, pressing the accelerator alone won’t help. You need to use the steering wheel and the accelerator.
You need a Central Planning Committee in your Neoconservative Party of the Congress, not more lobbyists paid by the international corporations already kept captivated by China Inc. and a smart plan how to build the new energy-efficient infrastructure for your country, leading to regaining the global technological superiority (before the others drink all the cheap oil on the Planet).
—
Your main competitor or even – I dare to say – a new cold-war enemy – is planting lies in the consciousness and subconsciousness of the American Nation.
“To eat May’s grain in April, however, will never be a permanent solution to a problem,”
“The United States has long been maintaining economic growth and excessive consumption by means of debt financing, hence masses of economic bubbles, which eventually triggered the financial crisis,”
http://www.france24.com/en/20110805-china-says-debt-financing-unlikely-save-us-eu
It’s time to wake up, throw away the idiotic cult books written by von Hayek and Ayn Rand and muzzle the saboteurs pushing for an assisted suicide in the form of austerity – in the interest of the national security of the US.
Preaching Functional Finance to unemployed and hippy-lefties wanting to establish global social justice is waste of time I think.
Explaining the truth about the monetary system and the dire state of the economy to people involved with the State security apparatus (FBI, CIA and other similar agencies) and the Army is the only viable option I am afraid. The main problem is not the unemployment. The main problem is the decay in the Congress / Presidential Administration and creeping destruction of the American state structures abandoning its purpose. The unemployment is a side-effect.
It’s time to terminate the looming Great American Stagnation caused by private debt-deflation before it saps all the life from your country for another decade or two – until it’s too late to salvage anything.
Warren, please let me know if you don’t like me writing this kind of comments on your blog but I have zero political correctness sense and I think that something needs to be done to save the Western civilisation even if I didn’t love the global American supremacy of the previous era. But is the alternative any better?
Reply