The Deteriorating Job Outlook

Excerpt from Raymond James Economist Dr. Scott Brown's latest economic commentary:

This year, there are a variety of problems for the economy. The housing correction is ongoing. Credit conditions have tightened. Higher food and energy prices are squeezing household budgets. The housing and credit problems seemed likely to slow the expansion significantly, but not end it. Higher oil prices, on the other hand, are a much bigger problem. Tax rebates have helped, but not much. The personal income and spending data for May, which are subject to revision, showed about 85% of the income increase was saved.

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The weaker job market implies a decline in labor input into the economy. The index of aggregate private-sector hours fell 0.6% y/y in June. There’s really only one recipe for growth. Output is simply the amount of labor input times the productivity of that labor. That means that output growth is the sum of the growth rate in labor plus the growth in the labor productivity. The economy can still expand if labor input is declining, but not if labor input is falling faster than productivity growth. Note that productivity growth jumped in the early stages of the current expansion, yielding moderate growth in GDP even as the economy continued to shed jobs (the recession ended in November 2001, the economy didn’t start adding jobs until the second half of 2003).

Comments

[Bob Gary:]

This is huge. Jobs are everything. Right now it's the last man standing. If jobs go, so goes the economy. Well written.

2008 Jul 09 11:02 PM

[notsosmart:]

part of the problem is that there are many who dont believe this govt. figures on anything including jobs.

2008 Jul 10 10:50 AM

[Jason Rines...:]

49% of our GDP is small businesses. The blood on the street has been running for almost a year. I submitted a plan to the Administration on energy independence in March about channeling $150 B into responsible commercial banks and the Small Business Administration for job creation. The Administration has been responding but gridlock in Washington is a real issue and one that the voters must also help solve. A 9% approval rating for this obtuse, counter-culture influenced Congress says it all. It ain't the summer of love people on the Hill. Get over it and begin leading or we will replace you the hard way if necessary.

2008 Jul 10 11:55 AM