I feel like I'd been hearing vague news that the news jobs report was going to have good news. Instead, terrible news as the number of jobs actually shrinks. Normally in a bad jobs report you see slow growth that fails to keep up with the rate of population growth. More interest rate cuts to look forward too.
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Jobs
01 Feb 2008 09:53 am
Comments (19)
Remember that really bad jobs report from August? You know, the one that also "terrible news as the number of jobs actually shrank"? Probably not, because the initial decline (of 4,000) was revised to an increase of 89,000.
I'm not saying this one also will be revised upward; I'm saying we don't really have a clue and that initial jobs data is barely better than worthless.
in the inside baseball type of analysis: The BLS adjusts their business birth/death assumptions in January (culmination of new data and seasonal adjustments). This has the effect of resetting the bar on jobs created by new businesses over the prior year. This bad report was predicted by many that watch this stuff carefully. The net effect is that it took away a fair number of jobs that it assumed over the past year.
I get the feeling the chain has come off of the bicycle, and I'm being to to simply pedal faster, in order to get going.
"More interest rate cuts to look forward too."
ZIRP here we come.
We are barely a quarter of the way through this, and the Fed has already used up much of its ammo. The end of this year and the beginning of 2009 are going to be brutal.
Whoever wins the presidency needs to take care that they do not become Hoover to Bush's Coolidge.
Could someone with more economics background than I have please persuade me that the Fed's rate cuts are not the equivalent of a losing bettor going double or nothing over and over again in an effort to make up for a series of bad bets?
Pesto -- I'm not an expert, but Robert Reich had an interesting Marketplace commentary on the stimulus package which may touch on what you said. He noted that one of the elements of the bill was a credit for businesses to invest in new machinery, a classic supply-side tactic. But as Reich notes, it makes no sense to invest in new machinery when demand for the product that would make it is dropping off. So the government would pay businesses to buy machines to do nothing. That's not going to stimulate the economy.
These economic troubles are related to massive debt and overspending. The rate cuts may help for a time, but they don't address those problems. I'm not an expert, but it seems we need to make it harder (or at least less attractive) for people to get into debt, and harder for companies to trap people in loans they can't pay off so we avoid future meltdowns like the ones we're in. The Fed doesn't seem to agree.
I'm not saying this one also will be revised upward; I'm saying we don't really have a clue and that initial jobs data is barely better than worthless.
Attaway to cherry-pick your revisions Amber. Didn't you see the benchmark revision for the birth/death model in this month's report? Job growth for 2007 was revised downward by a total of 190,000 jobs. This makes it clear that a marked slowdown in job growth occurred from 2006 to 2007, and now things appear to be getting worse.
You're right that no one individual data point tells the whole story, but post-revision 2007 job growth now averages 95,000 per month, which is very weak (about 150 K needed to keep up with population growth). Now this month we see the first monthly decline in four years. Unemployment is up significantly over the past year, and GDP growth is under 1 percent. By any objective measure it looks bad.
pesto, let's go a little further: the problem that the fed is most concerned about right now is a contraction of capital that is squeezing and freezing the credit markets (i.e., when you read about all those companies writing off billions - and the estimates are that it could easily run to $200 - $300 billion - you're reading about a contraction of the capital stock, and with less capital there is less money to loan and credit availability will decline).
the fed's fear is that if the credit markets are frozen up, economic activity will fall off a cliff.
as a result, the fed is basically saying - virtually explicity - for the time being, we've given up worrying about inflation in the hopes of staving off a major long-term economic collapse comparable to japan in the '90s.
it is entirely possible that this won't work, of course (you can read a good discussion here:
http://www.thomaspalley.com/?p=96).
i've long said that the logical outgrowth of bush-league economics was stagflation lite: slow to no growth combined with modest but rising inflation. i'm hating to be proven correct.
the bottom line: Amber is right that the "actually shrinks" part of Matt's post is subject to revision. But the "terrible news" part is becoming pretty clear at this point.
mq, just as a small point: there is some debate over the number of jobs that are necessary to keep up with population growth. although the fed had long used the 150K number, apparently there are those around the fed who think the number is more like 100K on the grounds that the absorption of women into the labor force has now peaked....
Brian and Howard,
Thanks. I guess the answer to my question is, "No," which is kinda what I suspected anyway. It looks like the Fed can't/won't deal with real issues in our economy, so they just want to reinflate the recently-burst bubble. Not that fixing the whole economy is their job -- they're there to make Capital happy, as far as I can tell -- but they're treated by the public as looking our for the general interest.
There are 4 houses on our 2-block street for sale. I'm sure the sellers are happy that prospective buyers once again have access to easy money, which will allow them to buy houses at inflated prices. But our new neighbors won't be so happy if they're still paying the mortgage when prices crash again.
I'm not saying this one also will be revised upward; I'm saying we don't really have a clue and that initial jobs data is barely better than worthless.
Yes and no. These data may not be very meaningful, but we definitely have a 'clue' about the trend. Anecdotal evidence can be misleading of course, particularly when it's extrapolated sloppily (whether on purpose or not). But general bad feelings about the economy are not the fault of stats or newspaper articles. Most Americans make mini-deals continuously all day, everyday (it's our National Hobby) - deals for their labor, their money, etc. Working people (most people) feel every little turn of the screw, because their margin is so thin. You know when things tighten up, labor-wise, because everyone you know has anxiety or actual bad news. You see lots of underemployed people (and/or are one of them). The power arrangement subtly shifts at work. You just know things aren't looking good because you are in the actual, vaunted 'market' academics are so in love with. You are very much in the swirl, as opposed to having some absolutely secure job or sinecure.
Remember the last invasion of Panama - Noriega? I distinctly recall commentators on the news repeatedly hastening to add that Panama is not just some crappy little banana republic - that they have a middle class and everything [therefore it was too bad we had to bomb them]. You know, a somewhat civilized country. What about *our* middle class? I hate to use cliches, but 'hollowing out' is an appropriate one in this context. Slowly killing the goose... Not what I would call 'conservative', but rather just plain old stupid.
Useful data are only as good as their interpretation. In other words, data don't replace judgement, they are a *test* of judgement.
pesto, let's go one step further: the alternate is to let the market clear through bankruptcy, foreclosure, and simply walking away.
do you honestly think that that's a better outcome? because that's what's going through the fed's mind: if we don't cut rates, and if we just let the market clear, the damage will be awful.
now, what they're trying may not work, but i can hardly see why they shouldn't give it a shot....
Howard,
Given the Fed's tools, I suppose there's not much else they can do. As I said, it's my impression that their job is to help Capital. Depressions rightfully make people very, very angry at Capital, so the Fed would like to avoid one.
I don't think the Fed gives two shits about homeowners as individuals. What they want is stability -- for Capital's sake, not for the ordinary person's.
But if Congress could appropriate untold billions to bail out S&Ls and hedge funds, and could bail out Chrysler when it was bankrupt, why can't the Federal government bail out regular Americans?
Any direct reaction to foreclosures is going to be something of a band-aid, of course. The real issue is the maldistribution of power in the US, and that really needs to be rectified by mass action by the less powerful and powerless. Needless to say, that's not only not the Fed's job, and not Congress's job -- but, in fact, it's the job of both institutions to prevent that kind of action from ever taking place.
It's very odd that good job numbers somehow were being transmitted to the general public. Which is the conclusion I am jumping to on Matt's vague feeling. It's odd because there is no possible way that the job numbers can be good now or the forseeable future. None, Nada. Zilch.
There is not a single portion of the economy showing growth and huge parts of it, the parts the lead the job growth for the entire Bush era, real estate from mortgage shills to construction and the financial sphere are a disaster.
How could anyone miss this? I am not sure the source of Matt's vague feelings. If he can track down the sources I suggest that from now on he recognizes those sources as disseminators of disinformation and propoganda.
mq, just as a small point: there is some debate over the number of jobs that are necessary to keep up with population growth. although the fed had long used the 150K number, apparently there are those around the fed who think the number is more like 100K on the grounds that the absorption of women into the labor force has now peaked....
I can see that argument in the abstract. But the unemployment rate did edge up from 4.6 to 5 percent over 2007 as job growth averaged almost 100,000, so it does seem like you still need something over 100K to keep a steady unemployment rate.
It's very odd that good job numbers somehow were being transmitted to the general public.
Matt is probably referring to the ADP jobs report, which is a report from a private sector payroll management company. They don't have complete coverage so they are much less accurate than BLS, and don't move markets. Their estimate has been much too high the last couple of months.
http://www.adpemploymentreport.com/
Re: It's odd because there is no possible way that the job numbers can be good now or the forseeable future
If by "foreseeable" future you mean this year, you're absolutely right. But if your window of clairvoyance stretches out four years or longer than I don't think I'd agree.
Comments closed February 15, 2008.
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Heads in the Sand
"More interest rate cuts to look forward too."
And exactly the wrong thing to do with inflation creeping up. Hey Bernanke -- if we're going to lose jobs, at least let our savings be worth something.
Posted by Brian | February 1, 2008 10:05 AM