Friday, February 4, 2011

No Happy Face: Anemic Job Growth

The Lehmann Letter (SM)

There's no way to paint a happy face on the January employment report released this morning by the Bureau of Labor Statistics:

Job growth, at 36,000, was essentially flat. The unemployment rate fell to 9.0% from 9.4%, repeating December's large drop. Yet that begs the unanswered question: Is the decline in the unemployment rate due to an improvement in the employment picture, or is it due to discouraged workers dropping out of the labor force? Since these numbers are based on surveys that are subject to large subsequent revisions, we will have to wait for the answer. But the fact remains: Today's job-growth report is week.

Take a look at the chart and you'll see that an expanding economy, such as the one we enjoyed from 2003 to 2007, generates 200,000 new jobs a month. That indicates how far we have to go before we can say that we have a strong and healthy economy.

Job Growth

(Click on chart to enlarge.)

Recessions shaded

And that's not all. The average workweek fell slightly. A longer workweek typically precedes employment gains because employers usually ask their current employees to work longer hours before hiring new workers. We need to see a longer workweek, not a stagnant work week.

The stock market is up because corporate earnings are strong. But employment has not kept pace.

(The chart was taken from [Click on Seminars and then Charts.] Go there for additional charts on the economy and a list of economic indicators.)

© 2011 Michael B. Lehmann

1 comment:

zhonglin said...

First of all, while stock markets have been celebrating the economy's "green shoots,” the fact is that unemployment is very high. The fresh data on unemployment claims also suggested that there was no respite in the rapidly deteriorating jobs market. Even though we can start to see signs of recovery, the I. M. F and others expect that unemployment will continue to go up and it’s going to be slow in coming down. Second, housing recoveries usually follow employment recoveries, but now there is no clear sign suggests that the housing market is going better, so the prospects of employment is not optimistic.