Did the Jobs Report Kill the Recovery?

Friday's jobs report was a stunner -- and for all the wrong reasons. The consensus was for a decrease of roughly 175,000. This would have been consistent with a slow and gradual decline in the rate of job loss since the beginning of the year and would have been a positive development. Instead the number printed at -263,000. This means that for the last 5 months the economy has not printed a jobs number below a loss of 200,000. Simply put, that number is deeply concerning. However, has that number -- or more specifically has the last 5 months of jobs numbers -- destroyed the recovery?

First, let's look at why economists are talking about a recovery in the first place. The Philadelphia Fed's manufacturing index has been rising since just after the first of the year, as has New York's Empire State Index. The Richmond Fed's Manufacturing Index is now in positive territory as is the
ISM Manufacturing Index. Industrial Production appears to have bottomed, printing two consecutive months of increases, along with two months of increases in capacity utilization.

The housing market appears to have stabilized. The pace of existing home sales has been in a range for the last two years while the pace of new home sales appears to have bottomed this spring. While prices are still decreasing on a year over year basis, the Case Shiller index has printed two months of increases. In addition, decreasing prices increases affordability, which helps to stabilize or possibly increase the rate of sales.

The pace of retail sales bottomed at the beginning of the year as did personal consumption expenditures. While the pollster.com's average of "is the economy getting better/getting worse" still shows more people thing the economy is getting worse, the percentages have been consistently increasing since March of this year.

In other words, there are numerous reasons to argue the economy has bottomed and is on the mend.

Then there is the jobs situation, which is still the one main sticking point to a full-blown recovery. Let's take a look at the data to see where we are:

From December '08 to March '09 the economy lost jobs at a rate of over 600,000. Since that time the rate of job loss has continued to decrease. It is highly unrealistic to think that an economy that went through a period of job losses that severe is going to start creating jobs at a high rate within the next year or so. However, it has yet to move below the 200,000/month level. It has been six months since the end of the 600,000 month period.

While the latest print is not fatal to the recovery, it certainly puts a large dent in the argument. Simply put, by January or February the rate of job losses must fall below 200,000/month and preferably move as close to 100,000/month as possible for the economy to continue moving forward. Otherwise the negative impact on consumer sentiment will probably be so great as to thwart positive economic momentum.

Comments

[therealredstateblues]

Hale - you've got it backwards

without jobs there is no real recovery and there will be no recovery unitl the employment numbers improve

lets give the oxymoronic talk of a "jobless recovery" as rest.

[DuganS1]

Did Bonddad note the upcoming 850,000 downward job revision from March 2008 thru March 2009 because of problems with their birth/death adjustments? It's funny how it took them so long to admit their model was faulty, when we've been saying this on this board for a year now. Even Bonddad was defending the model.

About economic recovery, it still all depends on the Federal Reserve and to a lesser extent the fiscal stimulus. Other than that we have this:

http://www.economagic.com/em-cgi/data.exe/fedstl/day-ciboard

http://www.federalreserve.gov/releases/h8/current/default.htm

Banks aren't lending. They are buying treasuries instead. Commercial, industrial, and personal loans are contracting dramatically. Only the govt is propping the economy up now and this is not sustainable. The contraction in private lending can't continue for long (more than two to four months at this pace) without the US seeing a double dip or possible another downleg.

[research]

Banks aren't lending even after we lent them 24T$ because they would rather gamble on CDS derivatives insured by TARP, who wouldn't.

Outlaw all Derivative­s!!!!!!!!!­!!!!!!!!!!­!!!!!!!!

Take the Banksters game away,

and Leave them no place to invest but Main Street.

[DuganS1]

For industrial and commercial loans, there is also much less demand. For consumers, many households are less creditworthy because of growing unemployment or cuts in working hours; plus, defaults are soaring at accelerating rates.

[TrekBear]

This is why there's a need for a massive jobs-creation bill! Put people to work like the CCC and WPA did in the Great Depression.

[Thucydides Jr.]

Unfortunately in my area (SE Michigan) the vast majority of business owners I talked too have seen a drop off, starting in mid-august and increasing thru september. I think the reports on retail sales will show this is not just a Michigan thing. Christmas sales will be far weaker as well I fear.

I do think the recovery is over, and we have reached a new, lower base. Well, except for the rich. They seem to go ever upward, without creating real wealth or jobs or real growth.

[murphy80]

excuse me, GM and Chrysler are gone......­.........d­on't expect jobs to sprout in the spring.

the manufacturing heart of the US has been ripped out and moved by the bankster capitalists.

and you expect jobs to come back.

its not 1977 anymore toto.

[Thucydides Jr.]

Yep - and Germany, where they kept an industrial base, is ahead of us in coming out of the recession. Looks like "post-industrial" economies are more fragile than folks want to believe.

[therealredstateblues]

exactly - the same germany who has higher avg wages for labor, higher taxes, stricter regulation and higher social costs

imagine that amazing how their indutrial base thrives whiole ours offshores

[FogBelter]

Hale, I think whatever recovery we are seeing is due to massive amounts of Money being dumped into the Economy from the Government. The Government provided a Cotton Candy energy boost to the economy, but as the stimulus sweetness is processed through the system the lack of true economic nutrition will become more and more apparent. I can see the benefit of dumping massive amounts of money from the treasury into the Economy if it is being used to buy time as the Government institutes Wall Street and Banking Regulatory Reforms and rolls out WPA type programs to get the gears greased for a return of jobs and industry, but it doesn't seem that is what was done.

Hale, we need jobs. We need foundational change in our approach to Banking, Investing, and, frankly, Governance of our financial system. That hasn't occurred, so we shouldn't expect much to get better.

[den1953]

You can blame the business owners for unemployment they make there workers work 12 & 16 hour shifts so they don't have to pay benefits to new workers with the corporation operating under these conditions they can eliminate workers also!

[mpc]

Actually this past Sunday, several of the talk shows cited a recent DOL report which showed the average work week for an American was down to 33 hours/week. Employers are actually cutting back on hours, which means before they hire any new workers, they will most likely restore existing workers' work weeks back to something closer to 40 hours/week.

[Overtone]

An ignored Human Investment Tax Credit program was designed to create 3 to 6 million new jobs and encourage between 1 to 4 million men and women to become entrepreneurs.

The 2009 Report can be downloaded at http://www.aesopinstitute.org

The 1977 job tax credit program, which adopted a few of the incentives recommended in an earlier Report, generated almost a million private-sector jobs; twenty percent of all new jobs created that year. It resulted in more jobs in less time than any prior legislation.

The full 52 page document contains a new economic analysis. A shorter version contains the Summary and a total of 15 pages. The tax incentives in the Human Investment Tax Credit program have been updated and can be voted into law.

The House Ways and Means Committee should discuss this important legislation without delay.

Another path to millions of new jobs is described in the article: 5 Steps to Revive the Auto Industry and the Economy. It will be found on the same Aesop Institute website. It reflects little known breakthrough technology that opens paths to cars that need no fossil fuel or recharge.

Later, advanced versions can turn cars into power plants, wirelessly able to sell power to the local utility when parked.

Imagine the impact of cars and trucks that can pay for themselves!

Millions of well paid jobs can be expected to be generated by these new, cost-competitive, emerging technologies.

[DuganS1]

That hiring program won't work. Senators and congressmen acknowledged that companies will just move existing employees around to new positions to get the credit. It would essentially just be another corporate give-away.

[Overtone]

This was what many thought prior to the 1977 Jobs Tax Credit, which included a few of the earlier form of these incentives.

To the surprise of many, that was not what happened. It generated almost 1 million jobs, 20% of all jobs created during the year it existed.

[mtt04]

Rah Rah sis boom bah!!

Why do people paint a pig with lipstick? This depression is real, recordable, and in full flight. There is no recovery, you have to the piper first.

Velocity of money has dropped by 20%/. Mises and Kondratieff are correct and everyone is full of BS. Protect your assets and wait till the green shooters lose their savings, then the recovery will begin.

The only time the economy will grow is when you are told at a party that stocks are the worst investment ever.

Capital preservation overides return. play at your peril.

[Chubbster]

There are no reasons other than lies and distorted feel-good data from the government to indicate the recession is over.

[Thucydides Jr.]

Not all parts of the government. And don't forget Wall street loves that tune too.

[noaxe397]

The conservative media has carefully crafted a message that says working people in America today are akin to welfare receipients. It is a subtle message, but you can see it take hold in people like the teabagers who think the defecit is the bigest problem and spending to help people and create jobs is socialism. Thomas Frank first started reporting on this in his "What's The Matter With Kansas"? in which he describes how working Americans are manipulated ideologically to vote against their own economic self interest. Remember GWB and the "ownership society"? You are responsible for your retirement, your health care. And the conservatives have made it sound like getting this from your employer is welfare. That the EITC for people who apply it against payroll taxes, is welfare ("Tax refunds for people who pay INCOME tax" was the conservative mantra.) What's wrong with $10/hr job? There's a guy in India who will do it for $2, so consider yourself lucky. Paid vacation, paid holidays? Who pays? Health and safety on the job? Companies will self regulate. In over your head on the mortgage, well YOU were too stupid to read the fine print. THIS is why there is no bail out for working people. The conservatives and their pitch perfect message machine have convinced even working class ideologues who don't like a black man in the white house that it's their fault.

[Chubbster]

>The conservative media has carefully crafted a message that says working people in America today are akin to welfare receipients.

Please give a few citations of this that can be independently verified.

Spending, by the way, to create jobs only creates temporary jobs. Businesses create jobs.

Working people in this country are not used to financial limitations. The average Chinese auto worker makes $2.50/hour. Draw your own conclusions about where the USA standard of living is headed.

[noaxe397]

There are a few people you might have heard of who promote this view:

Rush Limbaugh
Joe Scarborough
Sean Hannity

I don't know if you listen to them but they are very popular on the talk radio circuit. I cannot tell you how many times I've heard Republican congressmen on Meet The Press, Face The Nation, CNN, say EITC should only go to people who pay income taxes, otherwise it is just like welfare.

I cited Thomas Frank's book.

You are correct on one point, the stimulus will only create temporary jobs. There's a reason for that. The reason is:

That's what it is designed to create. Again, the conservative media tries to frame the stimulus as an economic development program. It is not.
When business can't or won't create jobs, people must still survive, hence the TEMPORARY jobs created by the stimulus.

"Working people in this country are not used to financial limitations"

Wages in this country have been stagnent for 30 years. Current generations for the first time accept they will have a lower standard of living than previous ones. College education (a true wealth generator) is increasingly out of reach. Working people in this country are WELL AWARE of financial limitations.

When the top 1% control as much wealth as the bottom 90%, then we know where the limitations really need to be placed.

Don't link, think!

[murphy80]

reading the book quoted might help you.

but, then again.....­..........­..........­..........­..

[JayDDrew]

You make a lotf great points.
I recommend Thomas Frank's book more than any other to conservatives whom I find completely ignorant of actual facts. (I've even had the "Obama is a socialist" argument with someone who couldn't define socialism or even had a clue it was an economic/political theory. She just knew it was being used as a negative connotation by conservatives.) Of course, none take me up on it. They get the majority of news from the Fox News channel, which explains their ignorance.
If there's one thing conservatives in this country have over liberals or independents, it's that they are all on the same page. The wrong-headed messages are beat into their heads constantly. Meanwhile, even with filibuster-proof majorities, the Dems can't get anything done.
To others, remember the definition of a recession is two or more consecutive quarters of negative GDP. This has nothing to do with employment figures, home sales, consumer sentiment indices, or a host of other economic data. So even in the recession is found to be "officially" over, the millions who have lost jobs and homes would certainly beg to differ.

[noaxe397]

One reason the conservative message machine is so good is that it is mostly Republican and the GOP is 80% white and christian, so when an organization is that monolithic , group think is easy.
How many black Republican congressman are there. Hint: It's a round number.
How many latino Republican congressman are there? 3, all from Florida where the Cuban population traditionally supports the GOPs hard line on Castro.
How many liberal Republican congressman are there? I don't know because that is a more subjective interpretation, but you get the idea.

Republicans like to harp on the unemployment number because it is the #1 indicator that concerns working people.
When Clinton left office the unemployment rate was 3.9%. When Bush left it was 7.6%, almost double. Under Obama, and before the stimulus it went from 7.6 to 9.4, about a 25% increase, but since stimulus started flowing it has been between 9.4 and 9.8, an increase of only 4%. But EVERY Republican on earth will tell you the stimulus doesn't work. The unemployment rate ALWAYS fluctuate a few tenths, even in boom times, but because this president is black, suddenly a few tenths of a point is proof of failure.
Remember when Limbaugh said he wants the president to fail? Message machine.

[RandVictims]

Most Americans would be happy to see Wallstreet collapse so that economic reality that we are a 3rd world country can't so easily be swept under the rug.

[Chubbster]

We had a Wall Street collapse last year. Another would seal the Greatest Depression. Americans I know wouldn't be happy about this at all.

[research]

We gave the banksters who caused the crash 24 T$, 1/3 of the WORLD GDP.

They control where that money goes.

Main street is not on their radar.

The would rather gamble with CDS's backed by TARP funds. Who Wouldn't?

Outlaw ALL Derivatives,

FORCE investment in Man Street,

[FreedomCorpse]

S&P500 P/E ratio 130 to 1. There was no 'recovery', it was all the green shoots that economists saw after eating some kind of mushroom.

[truthforme]

Da mn, I blinked and missed the recovery :(