Friday, August 1, 2014

Jobs: onward and upward

For over 4 years, the U.S. economy has been creating new private sector jobs at the rate of just over 2% per year, and there is no sign yet of any change to that trend. It's been fairly solid and steady growth, with a few minor blips here and there. It's nothing to get excited about, but it's very reassuring that conditions in the economy continue to improve. This is not an economy that is precarious or tenuous. It's not at risk of sinking or imploding, and it's not by any stretch a bubble. It's very likely to continue growing at the current pace even after the Fed starts raising interest rates early next year.

The U.S. economy could be doing a whole lot better, of course. But it is fighting significant headwinds in the form of high marginal tax rates, a punitively high corporate tax rate, heavy regulatory burdens, an anti-business climate in Washington, and geopolitical instability. Monetary policy has served mainly to supply safe, risk-free assets to a world that is still fighting the last war (the Great Recession and the near-death experience of a coming very close to a global financial collapse). The need for accommodative monetary policy is disappearing, however, as confidence slowly returns.

The private sector has created over 9 million new jobs since the end of 2009. Jobs are now clearly into new high ground. The recovery has been slow, but it's still in the early stages. There are few if any capacity constraints to further growth. Lots of room on the upside.

The rate of private sector jobs creation has been about 200K per month since early 2010, or just over 2% per year. July private sector jobs rose by 198K, dead-square on their 4-year average.

Total jobs growth is likely to be a bit better than private sector jobs growth going forward, since the public sector is once again in an expansion phase after four years of shrinkage. But this is not necessarily a good thing. The public sector has been a burden for the private sector, since public sector workers are much less productive than their private sector counterparts. Overall, it's steady as she goes.


Hans said...

So says Bill Bonner:

As we’ve been pointing out, there are 3.7 million fewer full-time jobs now than there were before the stimulus began. Household incomes for 99% of the population are lower than they were in 2007. And the real rate of growth over the last seven years has been just 0.9% per year.

Factor in even a slight underestimation of inflation and real (inflation-adjusted) economic growth in the US has been negative. Adjust for population growth, too, and the “growth” disappears entirely.

Real hourly wages have not risen a penny. Business investment is still 20% below 2007. And 77 million people have overdue bills in collection. This was bought, we remind you, by the biggest gush of cheap liquidity since The Flood. All that cheap money has washed over the economy… seeped into every transaction… and warped and rotted every price signal.

But hey… GDP is growing at a 4% annual rate! (Subject to later revision, of course!) Janet, you go girl!

Scott Grannis said...

And it's been the weakest recovery ever despite the most massive and costly fiscal stimulus package ever devised.

Moral of the recovery: fiscal "stimulus" doesn't work (and probably hurts), and monetary "stimulus" is very limited in its ability to boost real growth.

Joseph Constable said...

The jobs situation report showed 141,000 jobs lost in the 25-54 age group, the most important age group. Something is wrong here.

William McKibbin said...

I just read over Scott's comments, and my only addition would be that the cost of the stimulus efforts since 2008 is only part of the problem -- the bigger problem is the year on year deficit spending -- what is needed to respond to both is that we the people remove deficit spending authority from Congress and the President except under very specific conditions of duress (e.g., declared war, declared depression, etc.) -- thus, we need future administrations from both parties to be more fiscally conservative with spending, which I define as balancing the budget each year (after year after year) -- until that happens, the US dollar and thus the USA itself will remain on a path to self-destruction -- it's my view nether party can fix this without constitutional constraints -- in the mean time, I believe the situation in the USA is dire, if not hopeless -- the impasses in Congress mean that we the people can have no real hope for fiscal change by any president or Congress, regardless of party affiliation -- but again, the recent stimulus events have only exasperated an already failing fiscal and monetary policy regime -- a balanced budget amendment to the constitution is likely our only hope to save the USA from itself.

William McKibbin said...

PS: I doubt the USA can reform its deficit spending habits -- thus, the replacement of the USA with a new country or perhaps several countries becomes attractive -- in the mean time, any "recovery" that is not accompanied by balanced budgets is simply a false recovery premised on deficit spending (i.e., "stimulus") -- again, I suspect the US deficit spending problem is too hopeless to fix without a new government or governments...