Thursday, July 2, 2009
The market is disappointed today, presumably because job losses were reported to be about 100,000 more than expected. But today's jobs number (-467K) was almost exactly what you would have expected given the ADP employment report (-473K) released yesterday. These are all pretty minor things, actually, since the payroll number that everyone focuses on can be and most likely will be changed by hundreds of thousands several times over the next few years, as better data come in. In other words, a "miss" relative to expectations of 100K is nothing to get excited about.
The thing to focus on instead is the context of the number and the trends in other numbers. Unemployment claims haven't risen for the past 5 months, so we know that the job situation is not deteriorating. The Challenger data (see yesterday's post) shows tremendous improvement in one segment of the jobs market. Job losses have clearly decelerated no matter what number you look at—we've seen the worst, and now the issue is how fast things will improve.
As this chart shows, jobs don't usually turn positive until well after the end of a recession. So today's numbers are not at all inconsistent with the end of the recession having been in, say, May. In any event, given the non-stimulating nature of the Obama "stimulus" plan (which explicitly rejected the stimulus most likely to stimulate the economy, i.e., tax cuts), this recovery is likely to be quite modest. It's going to be another "jobless recovery" for awhile. But I still think the economy is on the mend. It will probably take a year or so before we start seeing meaningful gains in employment.
Interesting factoid: based on the household survey, 95.4% of the jobs that existed at the peak of the business cycle in early 2008 are still around today. There's been a lot of shuffling going on beneath the surface, but on net, job losses have been less than 5%.
Posted by Scott Grannis at 8:23 AM