Saturday, May 03, 2008

Employment situation still not experiencing a full-blown recession

The employment report for March was not as gloomy as many pundits had hoped. Although the New York Times incorrectly touted the measly 20,000 loss as "powerful evidence that the United States is almost certainly now ensnared in a recession", it simply is not credible to consider a very slim -0.01% change as being "powerful evidence" of anything other than that the U.S. is not deeply "ensnared" in a full-blown recession. The cumulative loss of 260,000 payroll jobs over four months is certainly a slowdown but still amounts to only a -0.2% decline, which is well short of the level of decline typical in a recession, especially after four months. In a real recession we would see declines on the order of 250,000 or higher in individual months. Sure, there was other gloomy news in the report as well, notably a decline in payroll income, but overall the report had far more good news than bad. The simple fact is that household employment is 618,000 jobs higher than a year ago. This is not what one would see in a true, full-blown recession.

There was a lot of chatter about a lot of new jobs being part-time and incomes falling, but it is difficult to separate the wheat from the chaff here. Not all part-time jobs are necessarily bad. It is also true that the economy is still shifting from reducing excess highly-paid jobs (think Wall Street) and creating a larger number of lower-paying job (think services), and that is not necessarily a bad thing either. Yes, there is some bad mixed in with the good, but that does not mean that the net is bad. The economy is certainly rather flat right now, which means that there are roughly equal measures of good and bad, so while it is certainly disheartening to see so many bad numbers, we need to look at them in the overall context.

In short, this employment report was not a major disappointment except to the pundits who continue to try to drum up support for a big recession. There was more good news than bad news in this report, but still enough bad news to conclude that we shouldn't get too excited, yet.

-- Jack Krupansky

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