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.