Friday, May 8, 2009

Great News! The Economy Sucks A Little Less. Maybe!

Image credit: New York Times

It's almost funny that the press seems determined to spin this as good news:

WASHINGTON - The pace of job losses eased in April, with employers shedding a fewer-than-expected 539,000 jobs, the Labor Department reported Friday, in another sign that the sagging U.S. economy appears to be turning toward recovery.

Job losses slow, But Is It From Government Hiring?

This is McClatchy's take on the announcement. They're usually one of the more skeptical news organizations. I don't know if this demonstrates a desperation to feel positive, or an inability to comprehend statistics. It could be both, I suppose.

Here's what I get out of this: Slightly fewer jobs were lost in April than in the previous few months. Calling unemployment a lagging indicator doesn't get you off the hook. As Paul Krugman explained toward the end of March:

I’m detecting a trend in commentary that I find slightly ominous. Some of the economic news lately has been slightly better than expected, which was bound to happen at some point (on average, after all, half the news should be better than expected). Mostly this is in the form of things getting worse more slowly, but it wouldn’t be surprising if we see, say, an uptick in industrial production in a few months, as the inventory cycle runs its course.

If so, that doesn’t mean the worst is over. There was a pause in the plunge in early 1931, and many people started to breathe easier. They were wrong.

Partying like it’s 1931

The graph he's referring to is at the top of this article. Recessions, depressions, and booms all have their little ups and downs. Until the good news goes on for several months, and actually contains real good news like "lots of people who have been unemployed for many months are able to find work", I'm going to continue to be a pessimist.

By way of illustration, here's another quote from that McClatchy article:

Employment in manufacturing fell by 149,000 jobs in April, while construction companies shed another 110,000 jobs. The professional and services industry saw employment fall by 122,000 posts last month and retailers rid themselves of 47,000 positions. Transportation and warehousing fell by 38,000 positions.

Among the few gainers were health care, adding another 17,000 jobs, and federal government jobs, which rose by 66,000 in April, mostly because of census hiring.

"The hiring of census workers is obscuring a continued steep decline in private-sector jobs. I think we have to start facing up to the fact we're headed for an unemployment rate above 10 percent that will stay high for quite a while," said Lawrence Mishel, the president of the liberal Economic Policy Institute.

Job losses slow, But Is It From Government Hiring?

Subtract that 66,000 we're hiring for the census, which will last only through the summer, and the number is about 605,000 jobs lost, which is pretty much last month's total. Let's also recall that March's unemployment numbers included some massive layoffs:

A total of 299,388 American workers lost their jobs through mass layoffs in March, up 1.3% from February, according to the US Bureau of Labor Statistics.

The government counts a “mass layoff” as anything affecting 50 or more workers. By that silly definition, there were 2,933 mass layoffs in March, up from 2,769 in February.

Nation Lost 300,000 Jobs Through Mass Layoffs in March

What's worse, many of the March and April layoffs are in the manufacturing sector. this is a sector that isn't likely to bounce back quickly, thanks to increasing competition from overseas.

I wouldn't be pulling out that champagne bottle quite yet.

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