Wednesday, July 07, 2004

Dept. of Scoops: Businessweek agrees with Oldman

The oldman has been writing about the jobs situation being less than rosy for some time, and backing it up. Businessweek-Online now has no less than two articles discussing the weak jobs market. It has the distinction of introducing readers to the benefits of understand in the "hours worked" workweek figure and its importance in understanding labor force market demand.

Obviously, the small rise in the payrolls figure was a disappointment. But the biggest surprise was the 0.2 hour drop in the average workweek, to 33.6 hours. This was well below the consensus forecast of 33.8, and left the workweek back at its all-time low. This figure tends to be underappreciated relative to the change in payrolls, but each 0.1 hour drop is the hours-worked equivalent of about 400,000 workers. As such, the June workweek drop was the equivalent of about an 800,000 drop in payrolls, which was softened by the 112,000 gain in actual payrolls...

Looking at the rest of the data in the establishment portion of the survey, weakness was widespread. Hourly earnings posted a small 0.1% gain in June, also removing the momentum of prior monthly increases. The year-over-year wage-growth figure fell from 2.4% in May to only 1.7% in June, hence leaving wage growth in a sideways pattern once again. The employment report releases a real earnings series with a one-month lag. This may account for the recent moderation in growth. The spike in inflation in May left real earnings dropping a hefty 0.5% on the month.

June also marks the fourth out of the last six months that real earnings have fallen. This leaves real hourly earnings declining at a 0.9% rate over the year, which marks the worst year-over-year decline since July, 1991 -- during the previous recession.

PAST THE PEAK? Job growth in June was at a notably slower pace than what occurred in March, April, and May. The biggest surprise was the 11,000 drop in manufacturing employment, despite signals from another key labor-market indicator -- the Institute for Supply Management's employment gauge in its factory-sector survey -- suggesting factory payroll growth of over 50,000. Construction employment was unchanged following the robust strength in March through May. Overall, the data support the view that the peak in job growth for the year likely occurred in this March-May period.

That may be a little bit technical for some of my lay readers out there, so BusinessWeek gives a very succint summary of what all that means for people out in the real world through an interview with a very blunt beginning assessment! I approve of Zandi and Gailbraith's clear headed assessment. Despite their distressing tendency to use publicly government figures without questioning them openly (what they think privately is a different issue) they have threaded their way through the bullshit to come to very solid conclusions.
"If You're Unemployed, You're Stuck"
Mark Zandi of on the disappointing June jobs report and what it might mean for President Bush's job-creation hopes

June's disappointing jobs report comes just in time for the upcoming Presidential nominating conventions. After the U.S. economy added just 112,000 jobs in the month, less than half what economists were expecting, President George W. Bush can write off hopes of restoring the 1.8 million private-sector jobs lost during his term before he faces the voters, says Chief Economist Mark M. Zandi. On July 2, Zandi spoke with BusinessWeek E-Business Editor Timothy J. Mullaney about the June jobs report and what it portends. Edited excerpts of their conversation follow:

Q: How good is the jobs number?
A: June was a weak month for U.S. workers. It wasn't only the disappointing job gain -- it was also the cutback in hours worked and the paltry growth in earnings (see BW Online, 7/2/04, "June's Many Disappointments for Jobs"). Taken together, it was a difficult month for workers, particularly in the context of the last several months, when we had been getting much better numbers.

Q: What was so weak about it?
A: The manufacturing and construction industries were notably weak, which was disappointing because they had been creating lots of jobs earlier in the year. The quality of the jobs being created is still poor. The preponderance are in lower-wage industries where workers get very few benefits -- temporary help, restaurants, retailing, and certain kinds of health-care services.

Average hourly earnings rose 0.1%, and year-over-year they're up 2%, which is particularly weak given stronger inflation. Real [adjusted for inflation] average hourly earnings are falling.

The problem is that the long term picture for the economy doesn't look much better. As Brad Delong has noted, the current Administration's policies have put the nation on a growth-depressing binge of debt based on false expectations from a very historically-unusual period of exceptionally cheap debt financing created by exploitive foreign debt purchasers, a compliant Federal Reserve, and movement politics in the Republican party. Based on the false expectations created by the Reagan period (note that I liked Reagan and approved of the Iran-Contra affair) in fiscal policy we are headed toward a brick wall because the politicians and public believe that they can keep on borrowing this way without penalty. I'm afraid that simply isn't true.


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