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All Lethality is Dosage

06 August 2010 Job Report- Non-Farm Payrolls:
Total nonfarm payroll employment declined by 131,000 in July, and the unem-
ployment rate was unchanged at 9.5 percent, the U.S. Bureau of Labor Statis-
tics reported today. Federal government employment fell, as 143,000 temporary
workers hired for the decennial census completed their work. Private-sector
payroll employment edged up by 71,000.
All Lethality is Dosage
We have been in the present labor market swoon since December 2007. We are 30 months into the process. Nearly everything is not getting worse fast. Most economic indicators have seen slow, uneven progress. We are a weary nation and hope, is running low. All lethality is dosage and we have received a massive dosage- an overdose- of bad economic news since the winter of 2007. Things are getting ever so slightly less bad in the aggregate. The sheriffs of this rough economic neighborhood are running low and out of ammunition. The populace is fed up. Our Sheriffs are The Treasury and The Fed and they have spent, cut taxes, slashed rates, bought securities and ballooned their balance sheets. They have made the bad less worse, but not appreciable better enough for many. All that economic toxin still pumps through the blood of this economy. Now, the state is having a contractionary direct impact on employment.
The pick-up in private sector hiring is a good sign. It is little and late in the face of waning state spending. We also have built a huge shadow inventory of the unemployed, similar to the situation in private housing. The shadow inventory of workers includes the discouraged and involuntary part timers. March and April were much stronger months for hiring than June and July 2010. The July numbers are distorted by 143,000 job losses among temporary census workers. Average hours worked increased .1 hours to 33.5hours per week.  Average hourly earnings were up 2cents in July.
The duration of unemployment is a very serious issue. 6.6 Million Americans, 44.9% of the unemployed, have been out of work for more than 6 months. U-6, inclusive unemployment that counts discouraged and involuntary part time workers, stayed high at 16.5% in July. State government’s payrolls declined by 10,000 in July. Local governments shed 38,000 jobs last month.
Persistent cuts in Federal, state and local hiring and spending threaten more than just the monthly job numbers. This is a perilous time to slash public goods spending. Public goods provision is about social stability as much as GDP and employment. There were 202,000 job losses at the government level with reduced employment at the Federal, state and local levels.
The risk going forward is that hope is ebbing and so is so support. We got such a dose of pain and we are running low on available medicine.
From the first quarter of 2009 to the first quarter of 2010, output increased 3.0 percent while hours fell 3.0 percent, yielding an increase in productivity of 6.1 percent.  Productivity and Costs Q12010 BLS
As productivity and profit rise with stagnant wages and falling employment, we are watching an upward redistribution amid tough economic times. This has been dramatic and comes as we go into election season. We have seen a divergence of macro and earnings reports. This should be watched moving forward. For the year ended June 2010 wages and salaries rose 1.6%. Over the same year, all items less housing rose in price by 1.9%. Thus, real earnings were flat to down amid sliding benefits and falling employment. Corporate profits have performed better, as have asset markets and values. We have to wonder how long such decoupling can last. Usually, such divergent courses run for only a few quarters.
The question is how much time do we have to achieve a better balance without potentially disruptive political developments driven by public anger? Ideally, the private sector driven macro economy strengthens. However, we could see the macro economy turn down further and pressure corporate profits amid rising populist anger. This could drag down earnings amid adverse policy choices for business.

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