Job Growth Dead in the Water
More bad news on the economic front: job growth seems dead in the fetid economic water in the worst jobs report in many months:
Employment growth ground to a halt in August, as sagging consumer confidence discouraged already skittish U.S. businesses from hiring, keeping pressure on the Federal Reserve to provide more monetary stimulus to aid the struggling economy.
Nonfarm payrolls were unchanged last month, the Labor Department said Friday. It was the first time since 1945 that the government has reported a net monthly job change of zero. The August payrolls report was the worst since September 2010, while nonfarm employment for June and July was revised to show 58,000 fewer jobs.
“The bottom line is this is bad,” Diane Swonk, chief economist with financial services firm Mesirow Financial, told CNBC Friday.
Despite the lack of employment growth, the jobless rate held steady at 9.1 percent in August. The unemployment rate is derived from a separate survey of households, which showed an increase in employment and a tick up in the labor force participation rate.
While the jobs report underscored the frail state of the economy, the hiring slowdown probably will not be seen as a recession signal as layoffs are not rising that much.
Washington Post Columnist E.J. Dionne, Jr (whose column is run on TMV) writes on the Post-Partisan blog:
If anyone doubted that we need a much more aggressive effort to create jobs — and if anyone doubted that our eight-month-long obsession with debt reduction was a giant distraction — today’s jobs numbers should clear away any misapprehensions..
…The Obama administration’s original stimulus plan wasn’t big enough, but it did create and save millions of jobs, and one reason was the assistance it gave to state and local governments to prevent layoffs. That assistance is running out, and if there is one big “job-killer” out there, to use the Republicans’ favorite phase, it is all those government cutbacks in states and counties, cities and towns around the nation.
We don’t know for certain how much debate there still is inside the administration about how big the president’s jobs proposal will be. But those who want to make it bigger are right, and these numbers should bolster their position.
This isn’t just a matter of politics and the next election. For the sake of the country and the jobless, President Obama really needs to change the debate and make clear that it’s not just liberals who think the economy needs a boost right now. The ranks of those who believe in more stimulus include business people, investors and economists of many political stripes. Now more than ever, Obama needs to think and act big.
The bottom line problem in the economic and political worlds (in both parties) is this:
There is a feeling — putting aside any talk radio left and right polemics — that Barack Obama may simply be someone who is too small a leader to propose, push and battle for the policies that may be necessary to get the United States out of the economic ditch he inherited and some say possibly enlarged.
The U.S. labour market is at least as weak as it was four years ago, just before the world’s largest economy shed jobs for 25 consecutive months.
Shockingly, the U.S. payrolls were unchanged in August, according to a preliminary reading released Friday by the Labour Department.
This redefines the economic narrative. The Wall Street consensus was for an increase of 65,000 jobs. That number is weak, but indicative of the notion that the U.S. economy is muddling along. Stagnant jobs growth is something weaker than muddling.
The White House — as it always does — will caution investors and voters to resist making too much of one month’s data. Fair enough. In August, employment in the information industry lost 48,000 positions, reflecting a strike at Verizon Communications Inc. that has since ended.
But that does little to mask the trend. Hiring in July and August was revised lower. The U.S. economy has now failed to create enough positions to keep up with natural changes in the size of the labor force for four consecutive months.
The overall unemployment rate held steady at 9.1 percent as many of the long-term unemployed gave up looking for work and dropped from the rolls, but the trend for the economy looks increasingly negative.
Remember, the economy needs to add some 150,000 jobs per month to keep pace with population growth. To reduce the unemployment rate to the below 8 percent promised by the Obama administration in selling the 2009 stimulus package in time for Election Day, the economy would need to add more than 275,000 jobs a month. Zero jobs means losing lots of ground.
Economists had projected that the economy would add something less than 100,000 jobs, which would have allowed the president to maintain his campaign posture of saying that the economy was growing, but not fast enough.
With that argument wiped out and his own budget office forecasting on Thursday that unemployment would remain at dire levels well into next year, the president finds his long-promised jobs pitch groaning under impossible expectations.
Hiring may also have been held back by the turmoil over the debt-ceiling fight and its effect on Wall Street and public confidence. Even accounting for the Verizon strike, many economists were expecting job growth of around 70,000 for August.
But the report showed little or no job growth across the board, with the exception of healthcare services. Government continued to cut back, and manufacturing payrolls were down slightly. Making matters worse, the government revised down job growth in July from 117,000 to 85,000, and said employers added just 20,000 jobs in June, not 46,000.
In all, the economy has added an average of just 35,000 jobs in the last three months –- a figure so small that most analysts would consider it a rounding error. In addition, the government said the August report showed private employers trimmed the work hours of employees a notch, to 34.2 hours. The average weekly earnings for all private workers also dropped, down 3 cents to $23.09.
34 Responses to “Job Growth Dead in the Water”
It is interesting to see people on the left jumping on the “lack of leadership” bandwagon. The debt default crisis wasn’t that long ago. Obama can lead all he wants, but he does not control the House. Much like the Dems in 2008, Reps will sit on their hands and do nothing until the next election.
But, Joe, won’t cutting the government budget at every level save us? The Republicans swear it will. After all, government jobs aren’t real jobs because the government can’t create jobs. So it follows that fired government workers can’t add to unemployment, doesn’t it?
I worked on cars for many years. As a professional mechanic, we spent alot of time diagnosing, and fixing mechanical issues. Diagnosis can sometimes be difficult, and elusive.
We had a 2nd method of fixing cars. It’s an unethical method. I hated using that method, and was almost fired from a job because I was unwilling to play that game. The method is called literally “Throwing Money At It”. It’s like throwing darts at a dart board to fix the right part, and passing the cost to the customer,
The “Stimulus” is just “Throwing Money At It”, and it doesn’t fix the real problems. It’s a ridiculous method for mending a broken situation.
Sure, they didn’t “Throw Enough Money At It”, that’s a true statement. Eventually they may have accidentally fixed things, but it’s an idiot’s method of repair. It’s the method used by one who clearly has no clue what’s broken in the first place.
Since this is a subject, unlike auto repair, that no one can agree on the root causes of, we’re in a heck of a jam, aren’t we?
A moment to point out idiocy:
This is a devastating report. No job growth = big problems for our economy. Double dip is inevitable.
Yet pundits are quibbling over the meaning of the 45,000 jobs impacted by the Verizon strike, and if that didn’t happen, we’d have an increase in jobs.
In a nation of 300 million people, and an effective unemployment rate of about 16% (factoring in folks who’ve given up or settle for part-time), 50,000 jobs is still nothing.
It’s like saying a tablespoon of water is better than a teaspoon when your house is burning down.
The average weekly earnings for all private workers also dropped, down 3 cents to $23.09.
The LA Times needs a proofreader that understands economics.
The government needs to realize the best thing they can do is stay out of the way and not make things worse. Obama’s prediction of how he could influence job growth and the recovery based on the stimulus was foolish. The boom of the last decade was based largely on bad loans and inflated home values, two problems the government can not and should not try to fix other than adequate regulation (yes I used the R-word) to make sure it doesn’t happen again.
Maybe no one can (meaning politicians) can’t AGREE, but the problem is known. The banking system is broken, unstable, and running wild. Businesses are scared not because the jobs numbers look bad, but because everyone expects another major crisis is in the works. Worse yet, it’s not a liquidity crisis, so there’s nothing that the Fed can do (when all you’ve got is a hammer, all the world looks like a nail).
Nothing short of fixing the financial system (either through a real audit, or just waiting for the crash) will get the economy going again.
“The “Stimulus” is just “Throwing Money At It”, and it doesn’t fix the real problems. It’s a ridiculous method for mending a broken situation.”
I’m an engineer, got a degree in combustion engines, so I know where you’re coming from on the whole “fix the real problem” angle. Root cause/corrective action analysis is an interesting and difficult subject; one method of going about the process is called 8D. One extremely important part of 8D is containment. Containment is essentially what you do if you have a problem whose root cause you don’t know yet, but there’s some safety or monetary reason that you need a stop-gap strategy while you figure it out. Most recalls fall into this category — the real problem is that the company did something stupid in the design or materials procurement process for the car, and that needs to be fixed so that next year’s model doesn’t have the same problem, but for right now, individual cars need an upgrade or there will be huge future liability, maybe lives lost, etc.
I consider stimulus to be a containment strategy — and an important one. Giving someone a job through stimulus spending this year only gives that person a job this year; it’s not a permanent solution. This is true, but having a job right now actually makes a huge difference whose repercussions for that individual and the system as a whole will be felt far beyond this year. If the individual has a job this year, s/he is much more likely to have the healthcare to stave off any serious health issues that could last beyond this year if left untreated; their families have the same. Someone who can’t pay their mortgage right now due to lack of a job right now will likely lose their home. Even if the job market were to improve next year, and this person were to be much more able to get a job that would pay the mortgage then, hir house is gone along with any equity in it, credit score in shambles, making it harder to get a job or credit or other housing options. As we all know, one forclosed house doesn’t have a huge impact on housing prices, but many forclosed homes in a particular area certainly does, so stimulus can certainly help quell the bleeding in home prices that are already dramatically dropping. Also, people with jobs right now have dishwashers and phones and tvs that break, and the fact that these people have jobs means they can go buy a new one to replace it. That means that everyone from the dishwasher/phone/tv manufacturers to the stores that sell them to the folks who make the raw materials to make them gets a boost.
Anyway, hopefully you get my point. Perhaps it goes without saying that I think the focus on stimulus should be (and should have been in the first place) jobs, since that’s really what the argument rests on. And heaven knows there’s lots of work to be done.
This mess is global right now, even if the US fixed it’s unemployment, it wouldn’t fix a Western worldwide jobs problem. Nearly all industrial EU countries have unemployment rates over 7.5%. THE STATEMENT LISted above doesn’t explain the US problem, but we aren’t alone in a bad jobs number. I wonder how Germany, France and Italy are addressing their problems and how their media explains and passes out blame.
DG-I grant the housing bubble is a causal piece….and certainly the one most people have access to see, but that is indeed the reason “job stimulus” is and was akin to bring a musket to a nuclear war.
The problem the Keynesian accolates all suffer from is they’re making their guy from the 30s solve a problem created from transactions and interrelationships that didn’t even begin to exist until the 90′s. If they would at least bring their economics readings up through Hayek, they would at least begin understanding some of the other drivers that need to be addressed.
Hayek postulated that during the artificial boom leverage increases, people take on bigger debt loads, there is a pyramid effect of expanding credit, expanding leverage, expanding money (relative to productivity cost declines and output gains), and expanding paper profits……..and consumption beyond means.
The economy then inevitably becomes mal-coordinated across time (heterogeneous production / interest theory). In the case of 07-08, over consumption collides with malinvestment collides with evaporated profits collides with rising unemployment collides with de-leveraging collides with domino-effect insolvency.
The collapse of housing beginning in 07 was merely a bellwether of a much larger faltering artificial boom. The fetish like focus on employment and unemployment is as much an artifact of the Keynesian toy model as it is anything in today’s reality — Keynesians think of little besides labor and money because, well, there isn’t much else in their toy box — and aggregate “K” doesn’t even exist in the real world…….in short, we haven’t yet discovered the economic antidotes to the economic processes and interrelationships we just invented in the last 15 years.
Roro:
But what if the critical factor to reviving the economy isn’t transaction volume (ie, demand) but confidence? Suppose consumers, businesses and banks aren’t simply waiting for the next paycheck or X more customers to come in the door. Suppose what they’re waiting for is a feeling of confidence, and they won’t start buying or hiring or lending in a big way until they’re comfortable we’re at a steady state, the bottom is not on the verge of falling out, and the rules aren’t about to change?
Then temporary programs would seem the worst possible treatment, because they prevent achieving a steady state. A year-or-two “temporary” program changes the rules now and promises another change in a year or two–until we change the rules again at that point by renewing the program.
Either we should do nothing, or we should do long-term things that tend to restore confidence–such as entitlement reform or more convincing financial sector reform. Even long-term infrastructure spending programs might be a good idea, as long as they are well-targeted and properly funded.
[...] Job Growth Dead in the Water (themoderatevoice.com) [...]
@ CO
Great comments!
LOL CO
Hayek and Krugman are(were) both economists and Nobel Prize winners in their fields. Can both be right?
Tnx, dg…..Doc, B will happen automatically if you can get everyone who has dough to believe A is happening
I’ll give you infrastructure on the basis of other sound reasons, but the people who will do the work already have work
On second thought, Selma Hayek looks alot better than Krugman. But how does Selma connect with Austrain economic thought?
http://www.google.com/search?q=salma+hayek&hl=en&client=firefox-a&rls=org.mozilla:en-US:official&biw=971&bih=530&prmd=ivnsol&tbm=isch&tbo=u&source=univ&sa=X&ei=8jphTpC8LorBtgf3q4z9Dw&sqi=2&ved=0CDoQsAQ
“But what if the critical factor to reviving the economy isn’t transaction volume (ie, demand) but confidence? Suppose consumers, businesses and banks aren’t simply waiting for the next paycheck or X more customers to come in the door. Suppose what they’re waiting for is a feeling of confidence, and they won’t start buying or hiring or lending in a big way until they’re comfortable we’re at a steady state, the bottom is not on the verge of falling out, and the rules aren’t about to change?”
Dr J, again, it’s containment. It should be understood as such. It should be understood as something to stem the bleeding while we figure out the cause and fix it. I disagree that temporary containment is the “worst possible” thing. If “steady state” is very high unemployment and continually worsening numbers in the middle class, then steady state is not where we want to be. This is not like an addict who needs to hit rock bottom.
Roro, if the “confidence” hypothesis is true, temporary stimulus spending doesn’t contain the economic problems any more than gasoline contains a fire.
What if we don’t like the steady state, you ask? A legitimate concern, but to have an informed discussion about it we’d first have to do nothing long enough to get a sense of it. I’m not sure what middle class numbers you’re talking about, but anything that’s continually worsening is not in a steady state.
“It should be understood as something to stem the bleeding while we figure out the cause and fix it.”
The maddening thing is, no one is trying to fix it. Even the investigations into the cause, while impressive, were biased. Maybe if congress had more engineers and fewer lawyers, we’d get more solutions and less < < CENSORED >>.
“temporary stimulus spending doesn’t contain the economic problems any more than gasoline contains a fire.”
No, it doesn’t FIX the long-term economic problems. It can certainly contain some of the immediate ones, most definitely for the individuals who get that money or get the jobs that money helps fund. Want to know how? I wrote about some examples in this very thread.
“The maddening thing is, no one is trying to fix it.”
I wouldn’t say “no one”, but certainly those who are trying are either being shouted down or were never in a position powerful enough such that “try” means anything but “fail”. (A particular Yoda quote comes to mind…) In any case, your point is well taken nonetheless.
Solution: Get an army of new workers to put in a new Johnson rod in every car, truck, go cart, etc, just like the guy did in my 1972 Dodge Dart Swinger (although it didn’t help, we felt like at least we did something).
Yes, Roro, it may help the individuals at the expense of prolonging the macroeconomic problems.
Banks are loaning cautiously because they don’t know how many mortgages will yet default. If we’re, say, propping up string quartet jobs through a temporary stimulus, the banks need to imagine that more cellists will start defaulting when the stimulus ends. So they need to keep being cautious until that point, and some time beyond.
“Banks are loaning cautiously because they don’t know how many mortgages will yet default.”
Liquidity was a big problem for a while, but that’s not the main driver of the macroeconomic problems now. Yes, it’s pretty rough to get a new mortgage with no money down and a credit score of 550, whereas it was extremely easy to do so a few years ago, but that should be the case anyway. In either case, cellists able to pay for their existing mortgages would likely be more advantageous to the banks carrying those loans than ones who cannot. Well, except that the current administration is contemplating a law that will end up as a massive land-grab by banks, but that’s another story. Or, perhaps, the same story, but certainly contrary to your hypothesis that banks are loaning cautiously because they are uncertain about defaults…
Interestingly enough I haven’t heard of one economist outside of partisan think tanks that thinks uncertainty because of government actions is the problem. They especially don’t think that consumer confidence problems come from worries about government.
That has certainly been the case for the past couple years. Banks have been sitting on large amounts of capital but haven’t been lending it out because they’re not sure what defaults await them. If they’re relenting recently, great.
I meant that if they’re waiting for that proposal to go through, it might be a more nefarious reason they’re lending cautiously.
Prof-
I understand your frustration and sense that it is deeper than you care to share with us.
However, in my never to be construed as humble opinion, seeking an expert on theft management requires retaining lawyers, but not necessarily engineers.
@Allen
Lawyers are taught to win, regardless of reality. Their art is in the psychology of getting a point across, and finding the minutia in the rules. Managers and business leaders are motivators and manipulators. Engineers are problem-solvers.
Engineers can be irritatingly thorough, have to balance a variety of conflicting factors (like heat, cost, legal compliance, efficiency, safety, availability, …) at the same time, and are generally more honest than other professions (let the sales reps tell the lies).
In other words, we see a problem as something to be solved, not something to be milked.
Oh I understand Prof, and I agree.
Unfortunately in this country, money is The God we trust in. Money earned, money saved, money taken by deception is the norm. Those that acquire by the latter fair better than the rest, though they sell there souls to do it and that is part of the plan. As long as money is God, we will trust in that rather than our fellow man.
Sorry to say, Allen’s last comment is all too true. I remember a time in this country when values existed that were widely considered to be more important than gaining material riches. Hard to believe eh?
Yey, Gates and Buffet and the signers of the pledge to give half their fortunes away haven’t fooled any of you. The mom and pop businesses making $251k, you know the millionaires, don’t fool you either, you are too smart. Rip their phony masks off and they are as Allen describes them.
Why, I remember back in Boss Tweed’s day and latter how few crooks and sleazy politicians there were.
[...] Job Growth Dead in the Water (themoderatevoice.com) [...]
duck-
You missed that one.
I’ve already expressed my admiration for Buffet. Buffet may actually be redeamable. Gates? uh, not so much.