Friday, August 6, 2010

July Job Numbers

From the latest Bureau of Labor Statistics (BLS) report on employment:

Total nonfarm payroll employment declined by 131,000 in July, and the unemployment rate was unchanged at 9.5 percent, the U.S. Bureau of Labor Statistics reported today. Federal government employment fell, as 143,000 temporary workers hired for the decennial census completed their work. Private-sector payroll employment edged up by 71,000.

The Employment Situation – July 2010

Even the private sector increase is less than is needed to keep up with population growth, and now there are 143,000 fewer federal jobs. And those private sector job increases may be coming to an end, too, as portfolio strategist Marshall Auerback notes:

The US economy is showing signs of slowing, as the fiscal stimulus is dissipating and spending contractions at the state and local government level increasingly undermine the injections from the federal sphere. Worse, it appears that much of the growth has resulted largely from a replenishment of inventories, a process which largely seems to have run its course. Excluding this inventory re-stocking, underlying growth was a very tepid 1.5% annualised. Fiscal drag from state spending contraction could well reduce overall consumption even further in the quarters ahead, an ominous trend for future growth and employment prospects. While we may not experience a “double dip” in purely technical terms, it will certainly feel like a return to recession for most Americans if Geithner’s assessment is anywhere close to being accurate.

Auerback: The Real Reason Banks Aren’t Lending

[emphasis mine]

All that being true, there won't be much expansion in the private sector without something else happening, and I don't see a "something else" that qualifies. Increasing exports isn't too likely, because with the exception of China and a few other countries, the world economy isn't in terribly good shape. China doesn't have enough consumer spending yet, and Japan is still recovering from its own austerity madness. Europe is a mess.

This is one of the reasons the government's current flirtation with austerity is crazy. Sadly, it doesn't seem like it's going to change.

There's more bad news in the BLS report regarding long term unemployment:

About 2.6 million persons were marginally attached to the labor force in July, an increase of 340,000 from a year earlier. (The data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. (See table A-16.)

Among the marginally attached, there were 1.2 million discouraged workers in July, up by 389,000 from a year earlier. (The data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.4 million persons marginally attached to the labor force had not searched for work in the 4 weeks preceding the survey for reasons such as school attendance or family responsibilities. (See table A-16.)

The Employment Situation – July 2010

Total unemployment, the so-called U-6 number, is 16.8 percent, essentially unchanged from June, and from a year ago. What that means to me is that one potential worker in six is either unemployed or underemployed through circumstances not of his own choosing.

As for the political aspects, Ian Welsh has a good handle on those. The one person on President Obama's financial team who didn't think their current course is wrong has quit, reportedly because she feels like no one listens to her.

Join the club, I say.

UPDATE: A bit more on how Elizabeth Romer wasn't being listened to, from Ryan Lizza via Paul Krugman:

The best estimate for the output gap was some two trillion dollars over 2009 and 2010. Because of the multiplier effect, filling that gap didn’t require two trillion dollars of government spending, but Romer’s analysis, deeply informed by her work on the Depression, suggested that the package should probably be more than $1.2 trillion. The memo to Obama, however, detailed only two packages: a five-hundred-and-fifty-billion-dollar stimulus and an eight-hundred-and-ninety-billion-dollar stimulus. Summers did not include Romer’s $1.2-trillion projection.

The Defining Moment

Depending who you asked, back then economists were saying that the stimulus bill was anywhere from a half to a tenth the size it needed to be to have a lasting effect. It's probably worth it to take a look at that link for an idea how the thinking went in DC, and I use the word "thinking" liberally, of course.

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