Friday, December 04, 2009

Stasis and the jobs report 

Today's jobs report caught everyone by surprise, including me. When it happens while I'm on the air, it is rather fun. The station has a deal for a local financial advising group to come on at 7:45, fifteen minutes after the jobs figures are posted. Since I only need to talk for about two of the intervening fifteen minutes -- the news and sports people do everything but weather in between -- I had time to digest the figures, get another interested person's take on it, and stew awhile.

They're good numbers no matter how you slice them. Perhaps lost in the middle of the report is the fact that job loss figures for September and October were trimmed by 124,000 and 79,000. That is, the job loss from September on was not as bad as we thought. Temporary workers gained another 52,000 jobs in the month, the fourth consecutive gain. Only 7,000 jobs gained in the public sector, so let's not say it's just make-work Porkulus. The number I've waited on for saying the recession is over is the hours index, and that turned positive for the first time this month. As Justin Fox correctly points out, the data could get revised again, but if they didn't and if December and January go the way of November, I'm going to put the end of the national recession at October until NBER rules.

Of course we realize that it takes about a +150,000 jobs reading to get the unemployment rate to flip over. We had 291,000 workers leave the labor force last month, which is helping to pull that unemployment rate down. If the job market improves those workers will come back. And contradicting that possibility is that the broad U-6 figure gave back 0.3% to 17.2%.

I'm still not all smiles: here is where I still have a concern. The rate at which the country is creating jobs on a gross level has been falling through this recession (see the JOLTS survey; see my article on the churn of Minnesota from 2007) so that gross job gains currently run around 4 million a month. Most of the slowdown in job loss has come from slowing job separations. In this market, you don't quit your job unless you have your next. That stasis, that lack of dynamism, that failure of creative destruction -- all plant the seeds of potentially slow growth. You can get only so much productivity by cutting labor costs and shedding workers. Eventually you need a new line, a new way of working, and to do so you have to add some workers. When we get the gross month hires number going in the right direction, is when you will start to see a more robust recovery.

One may wonder, as Ed does, whether the retail sales figures contradict the good news. But let's look at the details. If you are a discounter not named Target, you're doing pretty well. Target is trying to shift downscale, and may still be comparing sales to both a higher market profile and worse credit card portfolio. Their profits are not hurting. Some upscale firms are doing fine with good plans -- Aeropostale, The Buckle -- or with deep discount outlets. If you're upscale you are having problems (it's The Rack that keeps Nordstrom's above water.) After 20+ months of recession, it seems likely people are still going to be skittish about going shopping. The extra money in weekly pay, Spencer notes, should help holiday shopping. You're just not going to give that to Missy to go to Hot Topic at the mall just yet. We'll need not just people getting more overtime to make that turn around. We'll need both those without work beginning to see more openings, and those in good-for-now jobs seeing the possibility of advancement and change. That part will take awhile.

Keith Hennessey is right that we need another month or two to blow the all-clear signal for this recession and put it to bed. But a recovery has to start somewhere, and it may have started today.