Some Views on the Jobs Report and the Recession

You didn’t have to look far today to find varying takes on the yesterday’s employment news. They varied from the jubilous to tempered caution to a review that explains away all of the positive data.

The usually David Leonhardt writing in The New York Times used the report as a jumping off point to paint a picture of a recession fading in the rearview mirror. His piece seeks to paint the Obama economic policies as the impetus for leading us to sunlight. Along the way he uses the much discredited concept of “saving” jobs and the bank stress tests to bolster his arguments. To his credit, he does concede that circumstances are still extraordinarily difficult and there may yet be challenges to face.

Paul Krugman explains well the dichotomy of a falling unemployment rate and a continuing loss of jobs. He ends his post by noting that we are not out of the woods just yet:

Basically, though, what you need to bear in mind is that these are imperfect measures, subject to a fair bit of noise. When the trend in the labor market is very strong in either direction, the measures move together. But when you have the kind of scene we have now — the employment situation is drifting down, but not plunging — occasional mixed signals are likely. No big deal.

The basic story is that things are sort of stabilizing — but they’re definitely not improving yet.

James Pethokoukis at Reuters is the bear of the group. He cites four reasons that the report was worse than it appeared. In his view, the auto sector screwed up the seasonal adjustments, the federal government was on a hiring binge, weekly earnings popped up because of a lot of auto workers coming back to work and the increase in the minimum wage and the decline in the unemployment rate was a statistical fluke. Here’s what he says about the unemployment rate:

To be sure, the drop in the unemployment rate was a surprise, but it was all due to the slide in the labour force — the employment-to-population ratio gives a more accurate picture of the slack in the labour market and the hidden secret in today’s report was that this metric slid to a 25-year low of 59.4% from 59.5% in June and 61.0% at the turn of the year. Of those unemployed, 33.8% of them have been unemployed now for over 27 weeks — a record amount (was at29.0% in June and was at 17.5% at the start of this recession).

Take your pick. For me, I think that one month’s worth of data is just too skinny. If there were some discernible trends that would make a difference but the monthly number of jobs lost keeps jumping around and Pethokoukis makes some good points about the noise in those numbers.

The cliff dive may be over but I think it’s far from clear that we are even not getting worse.

About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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