Friday, March 07, 2008

Jobs reports today is bad news

Contradicting the predictions of the economic happy-talk specialists, the U.S. lost jobs in February. CNBC:
U.S. employers cut payrolls for a second straight month during February, slashing 63,000 jobs for the biggest monthly decline in nearly five years as the nation's labor markets weakened steadily, a government report on Friday showed.

The Labor Department said last month's cut followed an upwardly revised loss of 22,000 jobs in January rather than the 17,000 reported a month ago. It also said only 41,000 jobs were created in December, half the 82,000 originally reported.
Let's put that into perspective. Every month there are approximately 100,000 new entrants into the job market that need to be accommodated with new jobs. That's not as hard as it might seem, since those new potential employees themselves create new jobs if they have money to spend. Any number less that 100,000 net new jobs means the economy is shedding jobs.

The economists don't know officially if we are in a Recession until after the fact, when they can measure total gross domestic product which has occurred and determine if it actually declined over two quarters. Until that figure comes in, the net jobs gained or lost is the best proxy we have for what the results of the gross domestic product surveys is likely to say.

If I were an incumbent politician who wanted to hold on to power in an election year and I was facing the current set of facts I would be in the media emphasizing that right now we don't know that we are in a recession. Then I would emphasize all the potentially positive news I could find, and low-ball estimates of how long the current set of reported difficulties (see also here)are likely to last. I would do that same thing if I were selling investments or trying to borrow money to set up deals. In those cases, economic happy talk would be in my best interest, and I'd spend money to see it spread in the media.

The result is going to be that the media will report a lot more happy talk (being pushed by people who want to sell is something) than either negative or objective reports.

Jerad Bernstein describes today's jobs reports. He's not selling happy talk.

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