You’re Hired! Economists Finally Get One Right


WSJ: U.S. employers added 248,000 jobs in May1, the third straight month of solid job growth. Economists, who have been off by a long shot in their payroll estimates lately, finally got this one right. So, the number wasn’t much of a surprise, but it did provide some relief. Most economists agree this fresh evidence of stability in the labor market solidifies the chance that the Federal Reserve will increase interest rates at the next policy meeting in late June. A quarter-percentage-point increase at that meeting is currently priced into the market, and economists don’t see this report changing that or the Fed’s “measured pace” of rate increases through the end of the year. Here’s what some economists had to say about the May employment report:

“This was the missing piece of the economic recovery that everybody was waiting for. There’s proof in the numbers now that the economic recovery has legs.”
— Michael Sgro, equities manager, Chase Personal Financial Services

“What is really key is that every major sector had improvements. That suggests these gains are sustainable.”
— John Silvia, chief economist, Wachovia Securities

“The ongoing slowdown in productivity gains is a key reason for the recent jump in employment. Productivity gains, which rose 5.4% in 2003, should decelerate to about 3% in 2004, making room for more jobs.”
— Sung Won Sohn, chief economic officer, Wells Fargo Bank

“[M]aybe the most important part of the report was the wage data. Hourly wages increased another five cents after increasing four cents in April. … The need for workers is beginning to cause employers to pay up. On the positive side, that means personal income is rising strongly. On the negative side, firms are now facing increased wage costs as well as rising commodity prices. That is a prescription for higher inflation.”
— Joel L. Naroff, president and chief economist, Naroff Economic Advisors

“The employment trend has run above 300,000 in the last three months. This should be more than enough to convince the Fed that the recovery is truly sustainable and keeps the Fed on course for a June 30 rate hike. However, unless the [consumer price index] data suggest a further strong rise in core inflation in May, we believe the Fed will stick to its gradualist agenda and raise rates by only [a quarter percentage point] on that day.”
— John Ryding, chief market economist, Bear Stearns

The May report was another strong reading on employment, “but not enough to force the Fed to move by more than [a quarter percentage point] this month. We remain agnostic on a bigger move in August, not least because surveys suggest job gains may accelerate.”
— Ian Shepherdson, chief U.S. economist, High Frequency Economics

“There is still substantial slack in the labor markets despite the relatively low unemployment rate. As the expansion continues, many of those who dropped out of the labor force are likely to return while some others will switch to full-time work. This will prevent any substantial improvement in joblessness, although the degree of stress in the labor market will diminish.”
— Steven Wood, chief economist, Insight Economics

You’re Hired!
Economists Finally Get One Right
June 4, 2004 1:44 p.m.,,SB108636672393629157,00.html


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  1. Mike commented on Jun 7

    This *is* a good thing, provided that the methodology used for the birth/death model are correct:

    According to the BLS, 733,000 of the million or so new jobs are from that model ((115+153+270+195)*1000)

    Anyone wanna take an over/under on that number?

  2. naum commented on Jun 9

    Paul Craig Roberts has a detailed breakdown of the 248,000 jobs …

    “Here is where the May jobs are: restaurants and bars 33,000; health care and social assistance 36,000; temporary help 31,000; retail trade 19,000; transportation and warehousing 15,000; financial activities 15,000; real estate 9,000; services to buildings and dwellings 8,000; education 8,000.”

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