June’s Employment Report
Predictions and Precursors:
- ADP’s Employment Report came in yesterday at 150,000 new nonfarm private payroll jobs.
- The consensus (here) is that about 125,000 new jobs were created in June, and that the current unemployment rate of 4.5% would stay the same.
The Report (to be released at 8:30 a.m. ET; BLS release is here):
- Unemployment — 4.5%, unchanged
- New Establishment Survey Jobs — +132,000
- Revisions to previous months — May, +33,000 (from 157,000 to 190,000); April, +42,000 (from 80,000 to 122,000).
- Net change in new jobs, including revisions to prior months — +207,000 (132 + 33 + 42)
- Change in number of people working per the Household Survey — +310,000.
Quick Thoughts:
June’s number was decent. When combined with pretty significant prior month revisions and no change in the overall unemployment rate, you have the picture of an employment market growing nicely but not spectacularly. I would guess that the stock market will shrug this news off and react more strongly to other news.
Media Commentary:
This AP report will probably be typical of what gets reported during the day. Its repeated reference to the “sluggish economy” of the past year is unfortunately somewhat defensible (GDP has grown 2.0% in the past four quarters; I think “mediocre” is a better word), and will be until second quarter GDP, which I believe will come in at 3.0% or more, is released later this month.
Mediocre economy, how about something more shall we say descriptive of a new paradigm? How about sustainable economic expansion? A sustainable economic expansion that avoids the excesses of the boom bust cycle? Or how about a mature economic expansion regulated by the Fed for a soft landing to wring out the excesses of the housing speculation and Subprime lender bubble? One can also say an engineered orderly slow down of GDP growth by the Fed to anticipate and control inflation. The purpose of such an orderly GDP control is to allow technological advancements to an opportunity to be fully integrated businesses for productivity gains which help to control inflation by taking pressure off the bottom line.
Comment by dscott — July 6, 2007 @ 1:29 pm
#1 dscott, I think what you want is descriptive of 3.0% - 3.5%. 2.0% is only a point above population growth.
For reasons you noted, maybe the 2.0% of the past year was necessary, but it’s not a good long-term target.
Comment by TBlumer — July 6, 2007 @ 1:44 pm
Hmmm, but that thinking is of historical norms in terms of percent just like full employment being 5 or 5.5%. Maybe we should be looking more to numerical increases instead of percentage increases in a $13 trillion GDP economy with 300 million people. 6.8 million unemployed people is still a lot of people given the mobility of the population. Why should 2% or even 1% annual expansion be a problem with such a dynamic economy with an efficient recycling of the dollar? There comes a time when percentages lose their usefulness and we need to look at the aggregate money flows. Maybe we need new bench marks in gauging the economy instead of percentages? While this expansion percentage is less than population growth, this does not take into account productivity gains and efficiency of recycling the dollar in the economy. My point is past correlation is not current causation, because all things are not equal, things have changed which we may have fudged using gross percentages.
Comment by dscott — July 6, 2007 @ 2:11 pm
“Expanding” on #2, the diff between GDP growth that is 2% above pop growth vs. 1% above pop growth is per capita GDP, which of course eventually translates to income, doubling every 35 years instead of every 70 years. The latter is unacceptable. People would not notice that degree of standard of living increase.
Comment by TBlumer — July 6, 2007 @ 2:16 pm
But that’s the old paradigm! “doubling every 35 years instead of every 70 years. The latter is unacceptable. People would not notice that degree of standard of living increase.” This is using an inflationary increase to determine a standard of living. Instead and I suspect that’s where we are headed, the standard of living will not be grossly measured by quote a dollar figure or percent wage increase influencing the GDP figure but instead measuring the disposable income, the difference between income and absolute need. Example 1, has the standard of living gone up or down when a business produces and sells a computer cheaper than the year before? I submit, the standard has increased because I now have more money to spend on something else. Example 2: If a computer company builds a computer for less this year than the year before but sells it at the same price, has the standard of living gone up or down? Neither, it has remained the same but profits have gone up. We should be measuring the recycling efficiency of the dollar as a means to determine it’s health.
Comment by dscott — July 6, 2007 @ 2:28 pm
btw-this is why Walmart is a successful business venture and liberals hate them so, they raise the standard of living of the poor because they are able to afford more of what they need or want.
Comment by dscott — July 6, 2007 @ 3:05 pm
#5, Supposedly the market basket changes to reflect things like you mentioned with computers over time. Whether that’s done well is anyone’s guess. There is no doubt that today’s market basket contains things that weren’t even invented 20-30 years ago.
I assume you know that GDP is always reported in real (after considering inflation) terms.
Comment by TBlumer — July 6, 2007 @ 10:15 pm