Economy is Creating Jobs, But It’s A Tepid Recovery

You can’t squeeze blood out of a stone and apparently you’ll grow old waiting for initial jobless claims to fall far enough, fast enough to inspire something more than fleeting confidence about the prospects for job creation. Ok, we’re exaggerating, but anyone who’s been watching the labor market these last several years understands the sentiment.

Today’s update on weekly claims for new unemployment benefits sets us up once again for thinking that better days are just around the corner for payrolls. New claims dropped by a hefty 42,000 last week on a seasonally adjusted basis, according to the Labor Department. That’s one of the biggest weekly declines in recent history, but it’s not likely to bring many cheers from the crowd. One reason is that it comes directly after the previous week’s huge gain. Even worse, the progress that was evident for a time in jobless claims late last year seems to have stalled.

The trend, of course, is far more important for this volatile series than any one data point, but there’s not much meat on this bone. As the chart below shows, the four-week moving average of new claims (red line) has ticked up recently. That’s discouraging, and for more than the obvious reason.

The last several months have witnessed an acceleration in the broad economy, the labor market and real estate excluded. As we observe in the latest issue of The Beta Investment Report, the economy closed last year on a strong note. In fact, our in-house measure of the broad economic trend rose in December (the last month with all major economic reports published) by a strong 2.1%. That’s the best month since the recession formally ended in June 2009 and the highest monthly increase in over a decade. Our benchmark of leading indicators performed even better in December, gaining over 3%.

Another way to measure the general drift in the economic trend is to monitor monthly changes in a broad sweep of economic indicators. By that standard, it’s also clear that the forces of growth prevailed in the final months of 2010. As the second chart below shows, more than 80% of the economic stats regularly analyzed in The Beta Investment Report posted a gain in December—the highest ratio in four years.

There are signs that the recovery momentum has spilled over into 2011, as the thaw in commercial lending and the surge in manufacturing activity last month suggest. But the conspicuous missing link to what would almost surely be a far stronger and more convincing recovery: jobs.

Yes, today’s drop in jobless claims is welcome news. But the absence of improvement in the level of new claims in late-2010 is troubling. If progress in the labor market can suck wind in the face of potent revival elsewhere in the broad economic trend, that’s a sign that payrolls growth will remain sluggish, even as the second anniversary of the recession’s formal end approaches.

Will tomorrow’s jobs report for January tell us different? Not really, or so yesterday’s ADP Employment Report implies. The ADP numbers don’t paint a terribly strong picture for January private payrolls. Ditto for the consensus forecast that private payrolls will post a modest net increase of 163,000 in tomorrow’s update from the government, according to

Yes, the economy is creating jobs. Payrolls rose in each and every month last year. But it’s a tepid recovery, which raises the question of whether it threatens the expansion in the non-employment corners of the economy? For the moment, it’s a theoretical question, since the non-employment profile of the economy (housing excepted) appears to be making headway. Therein lies the hope that better days lie ahead for employment.

Jobs, after all, are usually among the last points of revival after a recession. That standard is alive and well this time around. Meantime, hope continues to spring eternal. Challenger, Gray & Christmas, reports that job cuts last month fell to the lowest level since the firm began tracking this data in 1993. “It is not unusual to see job cuts increase in January,” says the firm’s CEO, John Challenger, in a press release. “In fact, 2011 marks the fifth consecutive year and the tenth out of the last twelve in which January job cuts surpassed the December total.” He goes on to note that “what made this January figure so unusual is that it was so low.”

Does that give us courage to expect brighter days for job growth in the months ahead? Perhaps tomorrow’s employment report for January will provide some fresh perspective on an answer. Stay tuned…

About James Picerno 894 Articles

James Picerno is a financial journalist who has been writing about finance and investment theory for more than twenty years. He writes for trade magazines read by financial professionals and financial advisers.

Over the years, he’s written for the Wall Street Journal, Barron’s, Bloomberg, Dow Jones, Reuters.

Visit: The Capital Spectator

1 Comment on Economy is Creating Jobs, But It’s A Tepid Recovery

  1. Since we’re currently stuck with a form of government that needs taxation to operate, doesn’t it make sense that its revenue and expenses should be balanced? Only one source of revenue has the possibility of paying off the national debt. No, it’s not INCOME tax we need to look at raising so much, as the average American (the masses) have no more blood to give. Look toward the pile of money, where the top 5% only EARN 19% as income. We need to raise the Capital Gains tax rate, where the elites make and hide their wealth. By means of “trickle down” economics the Capital Gains tax rate went from 70% to only 15% almost overnight! Now don’t get me wrong, I believe that the ultimate system of Government would have NO taxation, but since we’re stuck with one that does for now… WHY IN THE WORLD DID THE GOVERNMENT SHOOT ITS OWN FOOT BY GIVING AWAY ITS PRIMARY SOURCE OF REVENUE USED TO PAY ITS OBLIGATIONS? Duh, the laws were purchased! Consider this analogy:

    Let’s say I have some property that has oil, and the revenue from that oil is exactly enough to pay all my bills and has done so for many years. Now the oil is distributed unequally on the property and 95% of the land requires a lot of work to extract it. The other 5% of the land just bursts with oil that is easy to extract and it produces as much oil as the 95%. One day the president of Big Oil Company drops by and asks me to sign over the rights (in written contract) to 60% of the oil I’m extracting from the most productive land. In exchange, Big Oil Company promised (with no written contract) to increase the productivity of the 95% to make up the difference. Guess what… we took that deal! Of course Big Oil Company had not only broken their promise to increase the productivity of the 95% but they actually reduced it by re-investing their newly found profits into extracting more oil, but in other countries where it was much cheaper. Our debts were piling up because we never changed our budget to accommodate the loss in revenue, so we decided to get a Big Oil Company Credit card to pay the bills. We’ve been using that credit card for 30 years now. Essentially the Republicans are to blame for giving away the revenue and the Democrats are to blame for using the credit card. Neither is necessarily worse, but both are extremely flawed.

    Here’s a few disturbing facts:

    In 1980 5% of the population owned 8 trillion dollars
    Today that same group owns 40 trillion dollars
    That’s more wealth than the entire human race had created prior to 1980
    1/3 of their wealth could pay off the entire national debt
    The top 1/2 of 1% own more wealth than the bottom 50% combined
    The interest alone on the national debt was $110.50 per month for every person in your house

    At this point there is NOTHING we can do to avoid the explosion of the dollar except take back the “oil from Big Oil Company” (IE remove the Trickle Down tax breaks). When the debt is paid and the slate is clean we can look at things like getting rid of the Fed or the IRS, and reducing the size and scope of government, but until then we’ll continue to dig this bottomless pit, better known as our own grave.


    – If you want change vote for anyone you want to, just not a Democrat or a Republican

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