There are myriad cross currents making this months NFP seem especially important. The commodity collapse, soft GDP, Japanese nuclear situation, OBL.
For the most part, these are not very significant to the broader sub-par employment trend. We should at this point in the cycle be comfortable with what normally would be considered punk job creation. Anywhere between 100k – 200k are the numbers that should be typical during a credit crisis recovery. Those people expecting 300k plus are likely to be disappointed.
A bigger concern, especially to those people who fear the collapse of the US dollar, is that a sub 100k jobs might set the stage for an eventual QE3.
The commodity collapse already has some commentators claiming this is forecasting a new recession. If we were to adhere to that form of logic, wouldn’t the prior to collapse commodity boom have been forecasting economic expansion? Instead, we should recognize that using markets as tea leaves predicting the future all too often leaves much be desired.
Instead, we should contextualize the data stream — we have had a soft, Fed engineered recovery, with weak job creation and mediocre GDP gains. The weak dollar may have jump-started industrials and exporters, but it failed to generate much in the way of net job creation. Inbdeed, the Fed seems to be impotent when it comes to creating jobs in this current, post-credit crisis recovery. This is true regardless of today’s 8:30 am release.
The misguided belief in austerity — that we can cut our way into growth — is also taking a toll in the US, as states and municipalities are slashing headcounts of teachers, cops and firemen. By the way, how has that been working out in Ireland and England? Not very well . . .
What has been lost in the monthly data has been the structural changes in the US labor market — entire industries have vanished from these shores, and what has replaced them are leaner, technological more sophisticated industries that have lower labor requirements than the industries they replace. Adapting to that reality — rather than merely throwing money at the issue — seems to be a sophisticated, intelligent response beyond the capability of American policy makers.
The painful reality that we have yet to face head on is that we have a lumpy uneven jobs recovery for specific, identifiable reasons. Higher educated, technically skilled workers remain in high demand; manual laborers have seen demand fall and wages follow.
The policy making apparatus of the United States seems to consistently misunderstand the economic problems. Is it any wonder that our responses are misguided and inadequate?
Employment Situation Report released by BLS at 8:30am