Job growth shock, Only 32,000 new jobs in July

[atloldskin]

It is another increase which is good. Still, the spin will be bad for Bush. Wall Street certainly did not like the jobs report today!

[Larry]

Originally posted by Thiebear

Their math is a little funny? 200k + jobs and stay at 5.6%.

It goes up 30k and drops to 5.5%..

So if their original numbers were correct it should have hit 5.1%?

I've heard many things which, if true, make me think there are a lot of funny numbers that go into the employment statistics.

For example, I've heard that people on welfare are counted as 'employed'. (When I first heard that, I thought Clinton was jerking with the numbers, but aparantly it's been that way for decades.)

[Larry]

Originally posted by atlhawksfan

I wonder what everyone would be saying if this happened to say John Kerry a few years from now. Would y'all still give it a positive spin. And If so, would you then attribute it to George W. Bush. Or would you look at the clear negative of this, the nearly 200,000 jobs that weren't crearted.

Actually, what many business leaders were saying when unemployment was this low under Clinton, was that this level of unemployment is dangerous for the economy, because it could lead to inflation.

(Cynical translation: They were worried that, after two straight decades of seeing huge increases in income by the very top of the income levels, they were afraid that the bottom half might actually about to get some 'trickle down'.)

[flashback]

Well, Larry, of course wage/price inflation is very real, and a tight labor market and too much money in the money supply are a bad combination. Thats why Greenspan kept ratcheting up the interest rate back in the 90s. Actually, he only ratcheted it up a few times. It was all the talk about ratcheting it up that caused banks to keep their rates high.

Bush has no economic policy to speak of, which is maybe about the best we could have hoped for. Now if he could stop breaking his own deficit record year after year...

[JimboDaMan]

Some of you guys need to ditch the short skirts and pom-poms. This is from the Washington Times, no less. I cut out a bit of detail that doesn't change the thrust at all. The current recovery seems much weaker than historical patterns, and recent indications of strength were largely a short-term mirage pumped up by mortgage refinancing and tax cuts.

A bad-news report

There's not enough sweet stuff in America to sugarcoat Friday's lousy jobs report. Once again, the employment report clobbered the expectations of economists, whose consensus projection called for a payroll increase of about 225,000 jobs in July. That turnaround would have been double June's very disappointing increase of 112,000.

Although the eight-month 2001 recession, during which 1.64 million jobs were lost, officially ended in November of that year, the economy continued to shed more than 1 million additional jobs over the next 21 months. Nonfarm payrolls hit bottom in August 2003, when employment was more than 2.7 million jobs below the cyclical peak of March 2001. Thus, in a marked departure from previous expansions, payroll growth following the 2001 recession did not begin until 22 months later in September 2003. Second, once job growth did commence — and contrary to the trends following the recessions that ended in 1961, 1970, 1975 and 1982 — payrolls began rising at a very tepid pace. (Job growth did proceed slowly after the 1990-91 recession ended, but the pace was not nearly as slow as it has been following the latest recession.)

The sharp drop-off in job creation is matched by a marked deceleration in the growth rate of the economy. After expanding at the recently revised annual growth rates of 4.1 percent (April-June 2003), 7.4 percent (July-September 2003), 4.2 percent (October-December 2003) and 4.5 percent (January-March 2004), the pace of economic growth recently slowed to 3 percent (April-June 2004). The annualized growth rate of consumer spending, the indispensable ingredient since the economy resumed its expansion in late 2001, had exceeded an average of 3.6 percent over the 10 quarters from 2001's fourth through 2004's first.

During a generally terrible job market, that impressive growth rate in consumer spending was made possible in large part by the mortgage-refinancing boom and the 2001 and 2003 tax cuts. But the stimulus from both of those factors has dissipated recently, partly explaining why the increase in consumer spending slowed to a minuscule 1 percent during the second quarter. With the return of a truly lousy job market during the past two months, suddenly the economy's future has become much more cloudy than it was just a few months ago.

[Thiebear]

Originally posted by JimboDaMan

Some of you guys need to ditch the short skirts and pom-poms.

Tell you what, how bout i keep the pom-poms and the short skirt if i promise to do the same if Kerry has a bad month or 2 in a great recovery...

There is 0 chance of me rooting against people getting jobs and getting ahead...

[The Sir]

Is the recovery really that "great"?

[Thiebear]

Heres an unbiased looking article to answer that question..

http://www.epinet.org/content.cfm/webfeatures_econindicators_jobspict_20040702

Employment growth disappoints, and unemployment stuck at 5.6%

The nation's employment rolls grew by 112,000 in June, well below the pace of job growth in recent months, according to today's employment report from the Bureau of Labor Statistics. The unemployment rate held steady at 5.6% after fluctuating between 5.6% and 5.7% since last December. Note that 5.6% is the same unemployment rate as in November 2001, the official end of the recession.

The relatively low growth rate in jobs took analysts by surprise, as employment was expected to grow in the neighborhood of 250,000. While most industries—with the exception of manufacturing—continued to add jobs, hiring was far more subdued in June than in the previous three months, when job growth averaged about 300,000 per month (revisions shaved 35,000 jobs off April and May's growth).

Employment growth was much stronger in the household survey, which in earlier months had fallen behind the establishment survey, the widely preferred source for gauging employment growth. The labor force continued to grow more quickly, however, as formerly discouraged job seekers returned to the labor market. Over the past three months, the labor force has expanded by 629,000, compared to a decline of 228,000 over the prior three months. This trend means that more jobs must be created simply to keep the unemployment rate from going up.

In fact, there is some evidence that the ranks of the unemployed are increasingly dominated by those entering the workforce. The share of the jobless who are new entrants or re-entrants to the labor force was 38% last month, compared to 34% when the recovery began in November 2001.

Regarding the quality of the net new jobs, some higher-wage sectors came in particularly weak this month. Manufacturing employment, after expanding since February, contracted by 11,000 (the average wage in manufacturing is $16.12, compared to the overall average of $15.65). These losses mostly occurred in the lower-paying non-durable part of the industry (-14,000 jobs), but durable manufacturing only added 3,000 jobs after averaging 21,000 per month over the past three months. Hiring in information services—which has an average hourly wage of $21.34—remains weak, and the sector added only 1,000 jobs in June. Financial services (with an average hourly wage of $17.58) also added fewer jobs than in recent months.

On the other hand, professional and educational/health services were large contributors to June's payroll gains, adding 39,000 and 37,000, respectively. While prior monthly gains in professional services were largely in temporary work, a sub-sector with below-average wages, last month's jobs were added in higher-end sub-sectors, including computer systems design and management.

Netting out these various industry shifts reveals that over the past year (between the second quarter of 2003 and the second quarter of 2004) industries growing faster than average pay wages that are 16% lower than those of slower-growing industries.

While these net job changes affect wage growth at the margin, a larger factor dampening wage growth is the continued slack in the job market, which persists despite the fact that the jobless recovery is now behind us. Last month, hourly wages rose only slightly, by 0.1%, and are 2% above their level of one year ago, before adjusting for inflation. Annual inflation was about 3% in May (June inflation figures are not yet available), so unless price growth slowed significantly in June, real hourly earnings will be down in real terms over the past year, and will have fallen in six of the past seven months.

Another sign of weak demand by employers in June was the two-tenths-of-an-hour decline in weekly hours worked. The very slight increase in hourly wages and this drop in weekly hours caused weekly earnings to fall in nominal terms, from $528 in May to $526 in June. The relatively low number of jobs added this month in tandem with the decline in weekly hours led the index of aggregate hours, a broad measure of labor market demand, to fall for the first time since last July.

While the recovery that began last fall remains in place, June's report reveals far slower job growth than expected and provides evidence of continued weakness in the labor market. The unemployment rate is stuck at 5.6%, as more workers flood the job market and compete for the new jobs. This dynamic, along with the diminished quality of the net new jobs and the recent increase in consumer inflation, is generating a new problem: stagnant real hourly wage growth for most workers.

Employment is growing again, and the economy continues on a path of solid expansion. Yet there is nothing in today's report that would lend support to the view of the Federal Reserve Board and many in the business community that the economy is overheating and needs the restraint of higher interest rates. The growth in the average hourly wage has fallen behind the rate of inflation in recent months, and this trend will likely continue in June as well. Thus, any growth in family incomes is coming from more family members working, not from higher wages (or from non-labor sources). In this regard, the benefits of the economic recovery are likely still eluding many working families.

Solid steady growth is o.k. by me.

Its not unbridled fury and fire but then the interest rates would be soaring then also...

[flashback]

Very interesting, what the unbiased source had to say last month, Thiebear. Here's their take on the economy this month.

Job Picture

August 6, 2004

Job growth falls far short of expectations

Job growth came in well below expectations in July, as the nation's payrolls expanded by only 32,000 according to today's report from the Bureau of Labor Statistics (BLS). This was the worst month for job growth since last December. In addition, BLS revisions show that firms added 34,000 fewer jobs in June than had earlier been reported. Thus, over the last two months, job growth averaged 55,000 per month, way off the growth pace earlier this year, when monthly employment growth averaged 225,000.

Unemployment, on the other hand, ticked down in June, from 5.6% to 5.5%, driven by very strong employment gains in the household survey. However, as underscored by the BLS commissioner in a statement this morning (August 6), the household survey is a less reliable indicator of monthly employment changes and is widely considered to provide a less accurate “signal” of short-term changes in job growth (the household survey is discussed in more detail below).

The weak job market continues to place downward pressure on wage growth. Compared to last year, hourly wages of blue-collar workers in manufacturing and non-managers in services were up 1.9% in July. Since April, this indicator has fallen by 0.1% per month, from 2.2% to 1.9%. Moreover, while nominal wage growth has decelerated, inflation has been accelerating, growing from about 2% to 3% thus far this year (e.g., on an annual basis, inflation grew 2% in January and 3.2% in June; July's inflation rate will be released later this month). Unless inflation falls sharply in July—and rising oil prices make this highly unlikely—real wages will continue to decline on an annual basis.

These job and wage dynamics erode workers' buying power, and this has negative implications for the strength of the recovery. As monetary and fiscal stimuli leave the system, a "three-cylinder" approach is needed to replace the lost stimulus with labor market income: jobs, hours, and real wages. That is, in order to replace the stimulative boost from low interest rates and tax cuts, the economy needs to generate more jobs, more hours per week, and higher hourly pay. If any one of these factors is weak, the others need to be that much stronger. For example, rising hourly wages can help boost incomes, even if a less-than-desirable number of jobs are added.

In the past two months, however, job and wage growth have both been weakening, and weekly hours remain well below their pre-recession levels (weekly hours of private-sector production, non-supervisory workers averaged 34.3 in 2000 compared to 33.7 so far this year). With all cylinders faltering, consumption growth was predictably diminished in the second quarter of 2004, up 1% as opposed to 4.1% in the first quarter. Retailers are also reporting weaker than expected sales in July, and retail employment fell 19,000 for its first loss this year.

Services added only 14,000 jobs in July, the worst month for this broad sector since last August. Within services, the only sectors with significant growth were health (up 20,000) and professional services (up 42,000). Unlike prior months, growth in professional services was not driven largely by temporary hires, although two-thirds of the growth was in lower-end (i.e., administrative) services within the professional category.

Manufacturing, however, was a bright spot this month, with employment up 10,000. Since January, the nation's factories have added 91,000 jobs, with most of these additions in the higher-wage durable manufacturing sector.

The household survey revealed lower unemployment rates for most groups in July, with the notable exception of African Americans, whose rate went up 0.8 percentage points, from 10.1% to 10.9%, the highest level since October of last year. Most other indicators showed improvement in the household survey, including fewer involuntary part-time workers and a smaller share of long-term unemployed (though, at 20.4%, the share of those jobless for at least six months remains at recessionary levels).

Especially given the political season underway, the fact that employment grew by over 600,000 in the household survey will surely be touted by those seeking to quell concerns about the weak job market. Today's statement by the BLS commissioner cautions against this approach. She notes that the "household survey is not designed to optimize the measurement of month-to-month employment change" and stresses the advantages of the payroll survey for such estimates.

One of the key advantages of the payroll survey for monthly changes is its large sample size relative to the household survey, which leads to less volatile monthly swings. Certainly, the household survey's job gain of over 600,000 is an outlier likely related to the inherent volatility of this survey. In fact, the BLS points out that, over the past ten years, there have been 15 months (including this July) when the monthly change was "nearly 600,000 or more." The payroll survey, however, showed only one month with job gains greater than 500,000 during that period, a unique change which the BLS ascribes to "an unusual weather event."

While partisans may cherry-pick their preferred data source, the fact remains that the labor market has yet to settle into an employment trend strong enough to absorb the substantial labor slack left over from the recession and its aftermath. Under these conditions, the growth that has occurred is less likely to flow to working families, as noted above in the discussion of recent wage trends. This, in turn, prevents a return to the "wage-led demand growth" that prevailed in the latter 1990s, when employers hired aggressively to meet broad-based consumption growth. This dynamic helped spur full-employment conditions, ensuring that growth was broadly shared throughout the income scale and generating a uniquely strong and sustainable recovery. Such a recovery remains elusive thus far.

By EPI senior economist Jared Bernstein

with research assistance by Yulia Fungard.

Looks like "slow" and "steady" has given way to "weak" and "faltering". Does that sound good?

[chomerics]

My take on the economy, it is stable, but not growing as much as we're led to believe by the right and it's a little better than the left. THere are a few things that have happened over these past 4 years which should be noted.

1. The tax cuts added 1.6 Trillion to the economy.

2. The interest rate was at an all time low.

3. The re-mortgage market put astronomical cash flow into the economy.

4. The increase in government spending put another $600 Billion increase into our economy (well, only $480 if you count the $120 going to Iraq and Afghanistan)

5. We will have a net jobs loss over the 4 years of Bush, first time since Hoover.

6. We are replacing jobs with lower paying ones, not good for technological growth.

7. %57 of Americans are making less then they were making before a layoff

8. CEO's of corporations got an average of a %15 increase in pay during the past year.

9. Oil is at an all time high.

10. Milk is at an all time high.

11. State funding has decreased substantially and we are closing and denying social services to communtites, ie. school, police and firefighters.

12. There is nothing else we can do, other than increasing government spending to help out the economy, we've played all of our cards. If it turns back down, there isn't much Greenspan can do to thwart off inflation anymore.

Now, some good things about the economy.

1. The increase in spending, along with the tax cuts and re-financing boon of the early 00's helped rebound the economy after 9-11.

2. We did manage job growth for the past three months, even if it is slowing down.

3. If you're upper management, you're salaries increased dramatically during the past 4 years.

4. If your government of military, your salaries increased the past 4 years.

Other that those, that's about all I can find which is good. Is it turning around? I don't know, but I do know that we've done just about all we can to help "stimulate" the economy. Maybe cutting all these social programs by decreasing federal funding to states really does hurt the economy.

[aREDSKIN]

Another View:

A Problem with Payrolls?

by Tim Kane, Ph.D., and Rea Hederman

WebMemo #550

August 6, 2004 |

printer-friendly format

|

Here. We. Go. Again. The Department of Labor's July Employment Situation Report is out this morning, and the news is good. And not good. The unemployment rate stands at 5.5 percent in July, compared with 6.3 percent a year ago and an average of 5.8 percent in the 1990s. Fundamentally, the employment situation in America is solid, but the sluggishness of payroll job growth is stunning and out of line with a host of positive indicators. The strength of today?s labor market is yet another sign that the President?s 2001 and 2003 tax cuts were effective policies and must be extended.

Employment growth is not a problem in America, but the establishment survey of payrolls has a clear problem. According to the official statement from the commissioner of the Bureau of Labor Statistics, which publishes the monthly figures, ?As measured by the household survey, employment rose by 629,000 over the month, compared with a change of 32,000, as measured by the establishment survey.? Since 1948, there have been 62 instances where household data reported 500,000 new jobs or more, coinciding with a payroll average of 240,000. July?s net gain in payroll jobs marks the 11th straight month of rising payroll employment but still came in well below analysts' expectation of 247,000. What's going on?

The key, once again, is the difference between the two employment surveys. The payroll survey measures employment at established firms but does not count self-employed consultants, contractors, farmers, and the like. Worse, the payroll survey is highly susceptible to changing rates of turnover. When job-changing dips due to higher uncertainty, the payroll survey artificially deflates. So the gap between the two surveys, which had narrowed a bit in recent months, is now at 3 million (see Chart 1). Since March 2001, the payroll survey suggests there are 1.24 million fewer jobs, in contrast to the household survey?s measure of 1.81 million more working Americans?more than ever before.

And today of all days, the Labor Department published its very first, preliminary assessment of the impact of job-changing on the payroll survey (see "Effects of Job Changing on Payroll Survey Employment Trends"). It acknowledges the Heritage Foundation's analysis from March 2004 (see ?Diverging Employment Data: A Critical View of the Payroll Survey? by Tim Kane, Ph.D.) that worker turnover has a significant effect on the payroll survey, inflating the total count by over a million jobs, but also by over-emphasizing job losses during business cycles when turnover declines. Since March 2001, BLS estimates that the "job-changing effect" has led to an overstatement of 251,000 job losses in currently published data.

Which Survey to Believe?

It is important to understand the methodological problems of the payroll survey, but it is more important still to consider both surveys in light of all the other labor market indicators, which are generally positive. The ISM manufacturing and non-manufacturing employment indices, for example, have been at 50 or above?indicating improvement?for 14 and 10 straight months respectively, including several all-time highs. Consumer confidence is rising.

One of the best independent indicators is the weekly report of initial jobless claims, which have been dropping for the past twelve months and are now steady in the range of 340,000 a week. Levels below 400,000 are widely perceived to reflect a healthy, growing workforce. Further, real GDP growth averaged 3.75 percent annually during the first half of 2004, a period of strong job creation.

Fewer Long-Term Unemployed

The last few months have brought needed relief to long-term unemployed workers. The number of long-term unemployed has declined by over 300,000 workers since March (see Chart 2). In July alone, the number of workers unemployed for more than 27 weeks declined by almost 100,000. Workers who have been unemployed for less than 5 weeks have grown as a percentage of the unemployed.

Furthermore, the length of unemployment spells dropped sharply in July from 10.8 weeks in June to 8.9 weeks. And the average length of unemployment dropped from 19.9 weeks in June to 18.6 weeks because of the decline in long-term unemployed workers. It is good news for unemployed workers that the duration of the period of unemployment has declined since the summer of 2003.

Summary

Today?s employment report is significant for two reasons. First, it underscores the positive trends in the economy with the 11th consecutive month of improvement. Second, it is the largest divergence in measures of total employment between the two BLS surveys in years, which means that economists must finally reckon with the problems of the payroll survey. The household survey has been under attack by pessimists for a variety of reasons, but today?s report shows that it to be more in line with other indicators of a strengthening economy. Jobless claims are down, unemployment durations are falling, and average pay is rising.

Finally, it is important to remember what the report does not show. The President?s economic policies are keeping the unemployment rate low, and predictions of rising claims for unemployment insurance have not materialized. Maintaining free trade in the face of the outsourcing scare has not resulted in lower worker earnings or weak employment, but the opposite. Most importantly, the tax cuts of 2003 have been followed by 11 straight months of payroll job growth and millions of entrants to the labor force.

Tim Kane, Ph.D., is Research Fellow in Macroeconomics and Rea Hederman is a Senior Policy Analyst, in the Center for Data Analysis at The Heritage Foundation.

http://www.heritage.org/Research/Economy/wm550.cfm

[Stu]

Originally posted by aREDSKIN

Another View:

A Problem with Payrolls?

by Tim Kane, Ph.D., and Rea Hederman

WebMemo #550

August 6, 2004 |

printer-friendly format

Here. We. Go. Again. The Department of Labor's July Employment Situation Report is out this morning, and the news is good. And not good. The unemployment rate stands at 5.5 percent in July, compared with 6.3 percent a year ago and an average of 5.8 percent in the 1990s. Fundamentally, the employment situation in America is solid, but the sluggishness of payroll job growth is stunning and out of line with a host of positive indicators. The strength of today?s labor market is yet another sign that the President?s 2001 and 2003 tax cuts were effective policies and must be extended...etc.

BOHICA. Stand by for the "he's a biased HACK" charges. I remain optimistic about the economy.

Clearly though there needs to be some reconciliation between the two methods of measuring unemployment. However, that looks like a tough nut to crack.

[Thiebear]

Like it was stated earlier.. We had terrorists and CEO's try and knock our economy into the middle ages..

Both failed and we got lucky. If things go as they are now we will have to start upping interest rates and find the normalcy to judge things by...

[JimboDaMan]

Originally posted by Thiebear

Tell you what, how bout i keep the pom-poms and the short skirt if i promise to do the same if Kerry has a bad month or 2 in a great recovery...

There is 0 chance of me rooting against people getting jobs and getting ahead...

I can't see how you could possibly have thought that was directed at you. You had said nothing remotely cheerleaderish. It was for those who will trumpet that good-news Bush recovery when there's a shortage of good news to be had. There is zero chance of anybody on this board rooting for the economy to tank. Did you think the Washington Times was happy about the faltering recovery?

[Larry]

Originally posted by JimboDaMan

Some of you guys need to ditch the short skirts and pom-poms.

Now, you weren't, by any chance, refering to folks who would, say, post an entire article that's full of, shall we say, "skeptical?" comments about the "recovery", while highlighting the only positive sentance in the article, and claiming it's good news?

And, BTW, thanks for the really great image.

[Thiebear]

Originally posted by Larry

Now, you weren't, by any chance, refering to folks who would, say, post an entire article that's full of, shall we say, "skeptical?" comments about the "recovery", while highlighting the only positive sentance in the article, and claiming it's good news?

And, BTW, thanks for the really great image.

That same person that posted an article that wasnt trying to blow sunshine up your arse ...

Jimbo, i didnt think you were talking about *anyone* in particular. Was just pointing out the obvious other side...

Next time i'll not highlight the 1 line so larry can pull his eyes away from the pretty shiny line and see it was a bit harsh but overall it can be good...