By Karl Smith
I’ll make a few comments on the jobs report:
- Roughly inline with my expectations. Not a strong report. Auto supply issues and higher gasoline prices have sent a bit of a jolt through the economy. But not on par with devastation
- Note that private sector jobs came in at 154K. That’s actually a decent number. If the government sector were adding a normal 30K or so then we would have 185K. That’s a recovery level report. At this point job creation is slow because government is downsizing.
- Government downsizing will not continue forever. I know many economists and commentators are focused on the contractionary nature of the budget deal. Don’t be. As I have said, there are basically two types of government workers: teachers and not-teachers. What we’ve seen over the last year is a sharp drop in State and Local employment, and a big chunk of that is teachers. This will not continue forever. Local political forces are different than national ones and the push-back against little Johnny having 45 students in his class, or Maggie getting her AP class canceled, will be strong and bipartisan.
A few other notes
Construction added at 8K. It's too early to call this the beginning of an upswing, but we should be seeing stronger number here as the year goes on.
Manufacturing added a very nice 24K. That is, a very good number considering how weak the ISM report was.
Mining is of course up and we should expect it to be as long as oil is above 60 – 70 a barrel.
Both retail and leisure & hospitality showed growth, but not near what they are capable of. I think we are seeing gasoline prices here. Still, the growth is important because these are the industries that employ low skilled workers
FIRE and Information shrank. Our two superstars are still reeling from what is, most likely, actual structural transformations.
Going Forward
I still expect the government downsizing to end. That alone will give us stronger reports. I still expect construction to pick up. That should improve the reports.
Where I am most concerned are with these manufacturing numbers. They do not seem sustainable or in line with my overall expectations. I could be really wrong and we could see a mini-renaissance. However, your baseline expectation has to be for manufacturing employment to fall and to count a slow rate of fall as a strong report.
Yet, right now we are getting 25% of our job growth from manufacturing.
