Friday, January 6, 2012

Yes, the Employment Report is Very Good

The report out today from the Bureau of Labor Statistics is excellent.  200,000 net new jobs is not just a good number but a great number.  As a rule of thumb, you need at least 100,000 new jobs a month to keep up with population growth, so double that is great given the economy we are in.  Why do I say great?  Remember that state and local governments are still in crisis mode: severely cutting services, to the tune of 280,000 job losses in 2011.  Thus 200,000 with government on the sidelines is very healthy private sector job growth.

The unemployment rate is less important fundamentally, but important psychologically, and it fell to 8.5%.  In this day and age that qualifies as good news (anyone even remember the days of 4% unemployment?). [That was 2000, by the way, when we last had a annual average unemployment rate of 4% but 2006 and 2007 had 4.6% annual rates]

It is good to keep in mind that this is an ocean liner we need to turn around and start building up speed.  First come private sector employment and consumption, fueled in part by folks starting to make the purchases they have been putting off on things like cars that wear out and where we have seen a strong sales bump recently.  Then with tax revenues increasing governments can stop the bloodletting and even start to restore services.  Investment starts to pick up as the economy gains steam and so forth.  In other words we are still in the early days of a process that will take a few years, but this is how it begins.

The big storm cloud continues to be Europe and the Euro zone.  Let's hope they can prevent crisis there.


GeoGeek said...

As has been out in a number of places, even at this 'very good' rate it's going to take 8-9 years to return to the employment we had before the crisis hit. That's 12-13 of dismal employment – a true catastrophe.

We may be climbing, but we're still in a really deep hole, and I think it does a disservice to the millions of unemployed to forget that.

Patrick Emerson said...

As I said the whole ship has to get turned around and start building up steam. This ship does not go from zero to sixty (or 30 say, if we are talking ocean liners and knots) instantaneously.

What I am looking for in these reports are signs that the private sector is beginning to ramp up production due to increased demand and I think that's exactly what the numbers show. Now, if next month we are back under or near 100,000 it'll be back to hand wringing.

R said...

Oh Really?

Also we're Just forgetting about all the national debt and just focusing on jobs numbers for economic prosperity?

I appreciate the optimistic post but I still find it hard to believe the ship is turning.

Cameron Mulder said...

R, yes we are forgetting about the debt right now becuase 10year Treasury bond are at 2% and 30 year are at 3%. Right not the important number is employment.

Although labor market participation is an important metric I dont think you can say that the last jobs report wasn't pretty great. We have had positive job growth for the last 15 months! If you head to pretty much any downtown in Oregon you can tell see how many shops are open WITH people shopping. I'm pretty sure the ship is turning.

Jeff Alworth said...

Patrick, a question has been floating just out of focus at the back of my brain lately, and your post and these comments has sharpened it. I've been wondering about what a healthy recovery would look like. Let's say you took the circumstances from about June 09 and went from there.

We cratered so deeply that it will take, as R points out, a long, long time to get back up to ground zero. But should we fear a very speedy spike even though we'd love to get back up quickly? Should we fear an overheated economy? I guess I just look at the bubbles of the past fifteen years and have lost my appetite for roaring success. But maybe this is psychological, not real.

Patrick Emerson said...


Well, everyone has their own definition of healthy. We would need to see month after month of 300,000 to 350,000 job growth to return to 2006 unemployment levels in a reasonable time frame. So in that light, 200,000 is nothing to crow about. But you have to crawl before you can walk and even in the best of times 350,000 is a huge number. So I would be satisfied if we can sustain 200,000 to 250,000 numbers this year.

But, even though this is an optimistic post, I am skeptical we can do it.