The horizon is not so far as we can see, but as far as we can imagine

Job Report: Better than expected

As everyone probably knows by now, the job report was better than expected (certainly better than I would have predicted), with the payroll survey showing only 345,000 job losses, which compared to last month’s 506,000 looks pretty good.  Of course, 220,000 of this came from increases in jobs due to the birth/death model.  I haven’t, as a rule, hammered the birth/death model the way some other econobloggers have, but I’ll just point out what should be obvious: there is no way that unreported new businesses are being created in excess of lost businesses right now.  It’s not happening.  So those 220,000 jobs don’t exist except in some statisticians fevered imagination.  That said, the news is still good, because the birth/death model was around in prior months too.

Overall job losses for the duration of the downturn are still horrific, and in particular the manufacturing industry, which lost jobs virtually all through the last “expansion” continues to take it on the chin.  Since these are generally relatively good jobs, and since they also tend more towards being export jobs, this is worrisome.

The only sectors which actually added employees last month were general retail stores, and health and education.  Health and education, of course, means government.  General retail stores is a good sign, but the numbers aren’t all that large, and in the face of continued job losses and tightening credit, I’m less than convinced that consumer spending is not going to drop again.

The primary negative factors I see still operating are twofold.  First, I expect another massive round of mortgage defaults, and second I expect to see municipalities and States start doing some very significant layoffs.  If health and education were to start losing significant jobs, that would be a significant blow.

On the plus side, the majority of the stimulus is still to come, and the massive amounts of money pumped into the financial system are obviously having some mitigating effects.

I’m going to hold steady on my long term prediction that employment will not recover before the next recession, and that median disposable income is going to decline over the length of this economic cycle.


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  1. Ian, before I forget my manners (again), nice job!

    I’m not trying to make like Pollyanna, but are there some powerful dynamics out there (besides the mryiad Govermant programs) that could lead a healthy recovery (i.e., good jobs). High Speed Optical Receivers (HSORs, Dan Nocera’s (MIT) seemingly revolutionary solar energy catalyst, new “smart” search engines (e.g.,Wolfram Alpha), aggressive marketing of U.S. University Health Centers to affluent forigners?

    I realize that millions of Americans were profilgates. But until we allow Americans the same bankruptcy protection that Developers (i.e., Big Contributors) have always had, we will wallow in long term misery!

  2. senecal

    Certainly there will be more layoffs at the state and local levels, including in health and education. California is already leading the way. The banks are still hoarding cash; the credit crunch is hardly over. Credit card defaults are supposedly the next wave, along with not-subprime mortgages. 9.4% official unemployment, or 13-14% real, is not be sneezed at, and will remain a huge drag on consumer spending, the engine of the economy. So, where will the recovery come from? I am more skeptical than you, Ian.

  3. Ian:
    Are the B/D numbers done each month? Each quarter? Once a year? If they are once a year, what will unemployment numbers look like next month? A month or two ago I remember Obama saying something to the effect that he might be compelled to take some action if job losses remained elevated(above the 500,000 level at the time). Does he have any power to forbid companies from laying people off? Would he do some heavy duty twisting of arms? Or was that all bluster?

  4. Not sure how the b/d model works. I would assume it’s monthly. Obama can probably control layoffs, prices etc… through war powers, but I doubt he’d do such a thing.

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