Employment - Further Detail

by: Michael Ashton

Here are my post-employment tweets, summarized and expanded on:

  • Employment Report: Unemployment Rate up to 7.923% from 7.849% -- the consumer confidence report was the hint that would happen.
  • Always hard to look at the January Payrolls report especially. In addition to rockin seasonals, you get prior year revisions.
  • Average Hourly Earnings +2.1% y/y, faster than any time in 2012. Wages lag inflation so this will be higher than this at year-end.
  • …the bad news is that aggregate inflation will be higher as well.
  • So after the benchmark revisions, average 2011 payrolls gain was 153k. For 2012: 156k. Today: 157k. Nice stimulus.
  • Nearly five years after the recession started, “Not in Labor Force, Want a Job Now” still near the highs.

Here is the BLS chart on the “Not in Labor Force, Want a Job Now” series.

And here is a chart (source: BLS, Bloomberg) showing the trailing 12-months deficit (represented positive) vs. Payrolls. You can see why there's some reason to think the massive spending (blue line) curtailed further job losses in the recession, although it's important to remember that we don't know the counterfactual -- that is, what would have happened in the absence of spending.

The graph does not imply that if the government had not run a huge deficit that we would have had continuing job losses, even though that is the tale our elected representatives would like you to believe. Indeed, look at the next chart, which shows the level of the deficit vs. the 12-month acceleration/deceleration in job growth, lagged 12 months.

If there seems to be a correlation between big deficits and job market acceleration, it comes mainly from the big swings associated with the teeth of the crisis when the causality may have been going either direction. Take out that big "S" and you have similar jobs growth with huge government and with small government (and you can see that same fact on the prior chart).