Wednesday, March 3, 2010

Labor market conditions gradually improve

The ADP calculation of job losses in February was 20,000, right in line with expectations. If the payroll numbers released this Friday don't show something close to zero or a small positive, then it will most likely be due to all the snowstorms in the East, not because of any deterioration in the economy. The labor market continues to gradually improve. Net job gains are at hand or just around the corner. Of course, we're still a long way from returning to conditions that might be considered healthy or robust. The economy is going to be "weak" for most people for at least the balance of this year even if we do see job gains starting this month.

From the market's perspective, however, this is good news. The market has been worried about a lot of things of late, particularly the prospect of a "double-dip" recession. There is no sign in the numbers released today that this is likely. On the contrary, the numbers keep pointing to a recovery that is spreading throughout the economy. Not a great recovery, but a broad and gradual recovery.


septizoniom said...

what will be the payback for our "engineered" recovery?

Scott Grannis said...

I don't accept the proposition that this is an "engineered recovery." I've been arguing for a long time that the recovery has proceeded in spite of the government's stimulus efforts; that we would be much better off today without the stimulus. The stimulus spending has been very deceptive, mainly because most of it hasn't involved anything that might be stimulative. It's mostly just transfer payments. How can you create growth by taking money from one person and giving it to another?

Transfer payments only weaken the economy, because the person that is given the money is not going to spend it as wisely as the person who earned it in the first place. Furthermore, the stimulus has created such a huge deficit that the market, and many businesses, are deeply fearful of a massive future increase in tax burdens. People are afraid to hire and expand because they don't know how this is all going to end.

If we cancelled the remaining stimulus, I'm confident the economy would take off like a rocket.

septizoniom said...

i don't disagree with you on the stimulus, but i am not completely convinced keynes was entirely wrong, or that supply side is particularly right. i do however firmly believe that intervention creates unknowns and unintended consequences, amplified here by size and persistence.