Friday, September 3, 2010

Private sector adds 1.8 million jobs

I doubt you'll see this headline anywhere else. But that's how many new private sector jobs have been added so far this year, according to the household survey of employment. The household survey has a strong tendency to lead the establishment survey, especially in the years following the end of a recession. That's because it is based on a random telephone survey of households, whereas the establishment survey relies on sending a questionnaire to known businesses. So the household survey is more likely to pick up the newly self-employed and those employed by new startups that have not been recognized by the establishment survey yet.

Note that it took almost two years following the 2001 recession for the establishment survey to show an increase in jobs, whereas the household survey showed new jobs after a little over one year.

In any event, both surveys are now showing clear signs of new jobs. This should lay to rest any lingering concerns about a double-dip recession, but it's not enough to convince anyone that the economy is in good shape. The unemployment rate remains very high at 9.6%, and there are still some 9 million people receiving unemployment insurance.

This news has already jolted the markets, however, because it paints a much rosier picture than the market had been assuming. I see lots more upside potential to both equities and Treasury bond yields. There is no double-dip recession—in fact, we are in the midst of a recovery that is ongoing, albeit relatively modest. I continue to expect the economy to expand at a 3-4% rate for the foreseeable future.

UPDATE: Here's a chart of the six-month annualized growth rate of private sector jobs according to each survey. The 2% growth rate reflected in the household survey equates to a little over 200K jobs per month, which if continued, would be enough to bring down the unemployment rate very gradually. Regardless, it's highly doubtful we'll see any meaningful decline in the unemployment rate prior to the November elections. People are going to be moaning and groaning about the supposed "jobless recovery" for many months I suspect. This is the pattern that tends to follow every recession: the man on the street doesn't feel the recovery until long after it has been obvious in the numbers.


Dr William J McKibbin said...

The US employment to population ratio is perhaps the better measure of the employment picture in the US -- more at:

Employment in the US declined in August 2010 from 59.3 for the same period last year, and from 58.9% in the previous month of July, to an August figure of 58.8%. The US employment to population ratio has been in a general decline since 2000. Follow link above for more.

brodero said...

As a point of perspective....last months stated private payrolls was
107,737,000...with revision and
August increase...this number is now to 107,870,000.....up 143,000
from last month's stated number...
also we had a nice increase in aggregate weekly payrolls which
feeds into personal income numbers

Public Library said...

"For 120 years the dollar, though at times volatile, maintained its value: $1.01 in the year 1912 has the same "purchase power" as $1 in the year 1792."

Having experienced the harmful results of a paper currency manufactured at will, early US statesmen tried to forbid it from ever happening again. Article I, Section 10 of the Constitution specified that no state shall "make any Thing but gold and silver Coin a Tender in Payment of Debts," while the

US Coinage Act of 1792, consistent with the Constitution, provided for a US Mint, which stamped silver and gold coins. One dollar was defined by statute as a specific weight of gold. The Act also invoked the death penalty for anyone found to be debasing money.[2]

Makes you wonder why so many cheer for Fed intervention and the trampling of our Constitution. The Constitution was created by great men who understood the impact of centralized and unchecked power on civil liberties.

Amazing how far we've drifted from what our founding fathers fought so hard to restrain...

Dr William J McKibbin said...

Hi Public Library, in the mean time, I would not be surprised to see "depression scrip" returning on a municipal, county, or even a state level in the near future -- more at:

The more that government and large public corporations including Wall Street hoard money, the more likely that "depression scrip" will return -- ignoring the Main Street Depression now raging across America can only have site effects that may prove difficult for Federalism -- repairing the national economy on the backs of Main Street businesses and workers also risks a populist revolt -- in my view, the US would be better off to send some money to the masses than to have to deal with civil issues across the American countryside, especially when the national economy remains under stress...

Benjamin said...

Excellent commentary from Scott Grannis. I hope this dispels the worst of the scare-mongers' rhetoric.

The only unfortunate aspect of this is that it may strengthen the do-nothing Japan Wing of the Fed.

brodero said...

Way...way offbase....

On 4/23/2010 when the U.S. stock market made its highs..Spanish 10 year government bonds were 3.98%...
today they are 4.03%....

Benjamin said...

BTW I am no fan of zero inflation--see Japan. Think wage stickiness.

Consider real estate and equity investors, or small business start-ups, who have their "animal spirits" comforted if they think that 2 percent inflation is a backdrop.

If you borrow money to run a business or invest, zero inflation--dangerously close to deflation--is a dagger pointed at your financial heart.

I am not even sure what inflation means in world with rapidly evolving products and services, or rising incomes but fixed choice residential parcels. It may be that choice real estate has to increase in nominal and real value if incomes are rising, but that is reported as "inflation."

And what is health care, or a cell phone, computer etc worth in 1950 dollars?

I have come to the conclusion that zero inflation is a dangerous utopian pipe dream.

Public Library said...


You prescribe to the debasement theory in hopes you do not live long enough to witness the final outcome. Pull out your history book and flip to the section on Rome.

John said...

All my life I have heard people compare the US to ancient Rome with the connotation of burning cities and invading armies. Rome existed for nearly a thousand years as a stable, prosperous empire before it fell. And there was more to its fall than currency debasement (although it doubtless contributed).

Just because we have a Federal Reserve does not make us a burning Rome.

I am for a strong, stable currency. Unless our political class gets some economic education I agree with Pub that we will have more volatility than in the past. We have politicians in both parties who are clueless concerning the long term consequences of runamok fiscal policies.

I do not agree with him that the Federal Reserve is an agent of monetary evil as he suggests. If our elected government removed the full employment mandate and left the price stability mandate unchanged, and undertook sound fiscal policies utilizing incentives for productive output I believe a sound and stable currency could be achieved. Unfortunately there is little evidence our ruling class 'gets it' and there is no constituency for abolishing the Federal Reserve that I know of, to satisfy an economic principle, however noble.

So...from my perspective it is rather pointless to argue the abolishment of the Fed as a practical possibility. Its sorta like saying if the darn sun wouldn't set it would stay bright and sunny ALL the time.

Benjamin said...


I understand concerns about hyperinflation, But jeez, the worst we have ever seen in the USA was the 1970s, and that was 13 percent a year or so, during the worst years.

I just don't think this is an awful record--in fact, it has been a good record.

Real incomes are well up. We prospered for nearly three decades straight.

Ironically, what we are suffering now is not inflation, but possible deflation. Who will borrow money to start a business in a deflationary environment? Who will rehab housing? The stock market in a deflation could start sinking--and once people get turned off on stocks, it may take a generation for them to jump back in.

If we have deflation, and stock sink, that will mean the Dow is down from 1999 and maybe never getting back.

Japan, Japan, Japan, Japan. the BoJ experimented with tight money and and zero inflation for the last 20 years. Ugly.

France has had greater GDP growth than Japan for the last 20 years. France!

A strong yen and zero inflation turns out to have been a utopian pipe dream for the Japanese. In the real world, central bankers may crave those results, but investors, small businesses, real estate guys, the results are poison.

Benjamin said...

this is interesting.

Which state had the most bank failures during 2008-10?
No, it’s not centers of sub-prime madness like Arizona or Nevada. Nor is it big states like California or Florida. It’s Georgia. And Illinois is second. Check out the graph in this link:

There is a good reason why most bank failures in 2009 did not occur in the sub-prime states; sub-prime loans were not the main problem. Indeed mortgages of all types were not the main problem. What was? According to McNewspaper USA Today it was construction loans, often for commercial real estate:

The biggest bank killer around isn’t some exotic derivative investment concocted by Wall Street’s financial alchemists. It’s the plain old construction loan, Main Street banks’ bread and butter for decades.

Deutsche Bank has called them “without doubt, the riskiest commercial real estate loan product.” The Congressional Oversight Panel, a financial watchdog, has warned that construction loans have deteriorated faster and inflicted bigger losses on banks than any other real estate loans.

Webruary said...

My friend,

I would suggest you look at multiple data streams which provides a more sobering picture than he paints instead of this one BLS figure.

For example, using the birth-death model adjustment, 849K “assumed” jobs have been added to the unemployment figures since Feb.

Also, Gallup does a telephone survey every month, and the underemployment rate ticked up in Aug..

ADP’s payroll data suggested a decline in private sector jobs in August.

Weekly claims remain stubbornly high and WAY above a level showing job growth. Labor participation rates are quite low by historical standards, suggesting the real unemployment rate is probably worse than reported.

Not a good picture anyway you look at it.

newjava456 said...

And then there's my friend who took a job making $66K whereas he used to earn $100K+ before being laid off 1.5 years ago. So much for 25 years of experience in programming! All of us programmers have been in wage stagnation since 2000 or so. I guess the rest of America is now joining us in the death march to poverty. Thanks to the continued inflation caused by the FED and the over-burden of income tax which has replaced tarriffs.

Miami Glamour said...

hello, this article its really nice maybe you can help me leaving comment about mine...
thank you..