The only remarkable thing about the July jobs report was its consistency. The trends that have been in place for the past several years—2% annual gains in private sector employment, a slow decline in public sector employment, very slow growth in the labor force, and a low labor force participation rate—all remain in place. Thus, we're left with an economy that is likely to continue to grow at a disappointingly slow pace. The Fed's Quantitative Easing strategy has yielded no meaningful change in the economy's ability to create jobs, but that is not surprising since there is
no reason to think that it should. With the economy growing at a steady and unremarkable pace, and with
systemic risk declining, there is little reason for the Fed not to begin to taper its bond purchases within the next several months. Bond purchases only serve to feed the world's appetite for safe-haven assets, and with each month that goes by with no signs of economic deterioration, that appetite is slowly but steadily
ebbing.
Both surveys of the jobs market show the same thing: relatively steady private sector jobs growth for the past three and a half years.
The private sector has been generating new jobs at roughly a 2% annual pace for the past three years. That's almost exactly the rate of jobs growth that we saw in the years leading up to the Great Recession.
The decline in public sector employment has been welcome, since it had become bloated, but that decline shows increasing signs of coming to an end. The private sector is the source of most of the economy's growth, and it has been doing OK, but private sector employment is still below its pre-recession peak.
The labor force is still growing at a relatively slow pace, and it is significantly below its long-term trend. Many millions of workers have "dropped out" for a variety of reasons, and that is the source of the ongoing decline in the unemployment rate.
The public vs private sector jobs graph is one of my all-time favorites. Thanks again for keeping it current.
ReplyDeleteECRI this week
ReplyDeleteInterestingly, ECRI didn't update their Weekly Leading Indicator this week but their graph of it shows a continual climb to what appears to be a new high of 132.
However, Benjamin will love their new article entitled: "Becoming Japan. Japan’s lost decades showed faster GDP growth than in the U.S. and other major economies in the last five years." See this link:
http://www.businesscycle.com/ecri-news-events/news-details/economic-cycle-research-becoming-japan
And Lakshman Achuthan joined Bloomberg TV this morning to discuss their recession call, and how the U.S. economy is now resembling Japan's "lost decades."
For your weekend viewing pleasure, it may be viewed here:
http://www.bloomberg.com/video/u-s-recession-began-in-2012-ecri-s-achuthan-says-y6MLumz_REigD2TyllTDvw.html
Someday Scott Grannis will join the QE-Market Monetarism bandwagon, and welcome he will be. He will join Kudlow, and also Pethokoukis of the AEI, the Cato Institute, and Milton Friedman. Scott Sumner, right-winger-libertarian, is considered a leader of Market Monetarism movement.
ReplyDeleteIt is sad that state and local public sector jobs are declining, but not federal. When I pay local taxes, I actually see some return---fire and police, street sweepers, city lights, parks etc. Maybe I am getting 50 cents of value on the dollar, but I do get something back.
When I send money to a federal agency (that's where your income taxes go), civilian or military, it seems worse than pure waste---we are creating a parasite class. A class that will demand more money with each passing year. And produce nothing but drag.
William: Japan? I think that is the correct frame through which to view the USA today. Once you get to very low interest rates, and there is global gluts of capital, but slow growth, then your central bank is dead in the water---unless they go to aggressive QE.
Structural reforms? All for it---but any period after WWII you could say we need structural reforms.
BTW on structural reforms---don't tell anybody but corporate profits are at all-time record highs in the USA, absolutely, relatively and in every way you look at them.
Running now at $1800 billion a year, up from a peak of $1400 billion under Bush jr., and $600 billion under Clinton.
These are wonderful profit levels! It is a tribute to Obama's stupidity that he never mentions this profit-boom happening on his watch, though he keeps us mired down in Afghanistan for another eight years. Propping up narco-Islamic state. With your tax dollars. Your income tax dollars, btw.
I have been saying Obama is a mediocre president. But maybe he is less than that. He only looks mediocre in comparison to his predecessor.
Side note to Scott Grannis, courtesy of Naked Capitalism: Be very wary and any signals you get from commodities markets. See below.
http://www.nakedcapitalism.com/2013/07/how-goldman-made-5-billion-by-manipulating-aluminum-inventories-and-copper-is-up-next.html
The Labor Force comes from the Household Survey which does not separate responses from documented vs. undocumented workers. Is it possible that the workforce shrinkage is due in part to these workers going back home?
ReplyDeleteThe workforce hasn't actually shrunk, but the growth of the workforce has declined. The labor force participation rate (the percent of the population that works or is looking for work) has fallen significantly relative to pre-recession days, but the return of illegal immigrants to their homeland would not be a significant factor. Returning immigrants would shrink the population (the denominator) while presumably shrinking the numerator as well (assuming those returning were part of the workforce looking for jobs).
ReplyDeleteSince the bottom of employment in 2010 jobs have increased at a 1.5% rate and that's a better number than your 2% over the last 3 years. As you show in your 1% trendline of jobs the US is now 30 million jobs below that trendline. The employment situation sucks, period.
ReplyDelete