Saturday, March 07, 2009

U.S. Jobs Report Confirm Weakening Economy

You know the U.S. employment report was bad when bulls use really pathetic arguments to spin it as good.

For example, we have Paul Ashworth, arguing that because the preliminary job loss number in February was slightly lower than the revised number in January and December, this means that job destruction may have reached its peak. But even setting aside that 651,000 is not that much lower than the January number of 655,000 and the December number of 681,000, those numbers were reported last month as 598,000 and 577,000 respectively. In other words, the preliminary loss for February was greater than the preliminary losses for January and December. Given how job losses have been consistently revised up for the last year, it seems pretty safe to assume that this preliminary number will be revised up as well.

Then there is Robert Stein, who chooses to focus on the smaller job loss ("only" 351,000) in the household survey, and points to how much of the increase in the unemployment rate was driven by a higher participation rate. But that overlooks how the household survey's monthly changes are notoriously volatile and that one shouldn't make too much of that. In January by contrast, the household survey job loss was 1,239,000, and the 2 month loss is even higher, and the 12 month loss roughly the same as in the payroll survey.

But apart from the smaller decline in the erratic household survey, there was really nothing bullish about the job report. Indeed, even the one thing used to be a silver lining, the increase in average hourly earnings, is getting worse, increasing only 3 cents or 0.16% on the month, much less than in previous months. That could to a large extent reflect a purely statistical effect from which workers are losing their jobs, rather than an actual reduction in wage increases for any actual worker, but it could also mean that the weak demand for labor is finally pushing down wage increases. However, regardless of the extent to which these explanations are true, the implication of that is that aggregate nominal labor income is declining even faster than before.


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