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The labor report: an infinte loop
Friday, July 06, 2007
According to Wikipedia, an infinite loop is "a sequence of instructions in a computer program which loops endlessly, either due to the loop having no terminating condition or having one that can never be met."
That's how the labor report from the Bureau of Labor Statistics has seemed in recent months. It's pretty much been the same thing over and over and over - just when you think that it might exit the current loop, you just get more of the same.
In Basic, an infinite loop would look something like this:
In the nonfarm payrolls report, it looks like this:
At first glance, that sort of output wouldn't seem likely to be the foundation for a self-sustaining economy but, so far, it is.
In chart form, it looks like this:
Steady as she goes.
In addition to June's 132,000 new spots at hospitals, fast-food joints, and city hall, another 85,000 jobs showed up in the April and May reports. April's initial total of 80,000 was revised upward to 122,000 and May's 157,000 first count increased to 190,000.
Naturally, the unemployment rate remained at a freakishly low 4.5 percent and hourly earnings rose only modestly - a sure sign that current trends can be sustained indefinitely into the future. They could probably cut the BLS staff in half given the repetitive nature of recent reports, but that might hurt the government employment stats.
With underlying inflation now falling - the core rate of inflation is now within the Fed's "comfort zone" of between one and two percent - the economy seems to be back on an even keel.
Pay no attention to the price of oil or the turmoil in the housing market.
This economy could go on like this forever.
Who pays the salaries for all these new jobs?
10 comments:
Benchmark revision surprise:
The behavior of residential construction payrolls remains one of the ongoing mysteries of the monthly employment data, as they are so far out of touch with the behavior of housing construction and home sales that they hardly seem credible… We think an even larger story looming off in the distance will be the annual benchmark revisions to be released in January… It is likely that the annual benchmark revisions will reveal that job growth has been slower than suggested by the monthly reports. –Mission Residential Research
For a smart person, Tim, sometimes you write really stupid, even ignorant, posts and this is one of them. You are falling into the same trap as a lot of other idiots out there, including many in the MSM, who equate a few data points to a trend.
History writes that it is almost impossible for the U.S. economy to sustain growth through a severe downturn in both residential and commercial real estate, and that is what is now deep underway. The commercial dip may lag by more than 5 months, but it will hit hard. Put away your microscope and look at the big picture. Look at the fact that construction of hotel rooms increased by 70% over the last year! Is that a top or what? How many hotel rooms is enough?
It's even stupider to mistake sarcasm for optimism.
Tim, you are looking at the wrong data. Stop focusing so much on the headline data and look at the trend in the actual numbers. In the first six months of 2007, the U.S. civilian labor force increased from 145.926 million to 146.140 million, seasonally adjusted.
Look here:
http://research.stlouisfed.org/fred2/data/CE16OV.txt
and here:
http://www.bls.gov/news.release/empsit.t01.htm
That's a bit over 200,000 jobs added in 6 months! I'm not being sarcastic. And I'm certainly not optimistic about this economy. I'm just trying to point out a hole in your vision.
You should explain to me what you think my vision is - I've written about the labor report for years now and view it more as a source of amusement than anything else.
And the moronic comment of the year award goes to Anon... *boo, hiss*
anon 8:50 must be new around here - either that or he's a little slow
I think some people are mad at me for not blindly supporting Peter Schiff earlier this weeek: Shiff vs. Luskin: an ugly draw
Tim, the hole in your vision that I'm referring to is this statement:
"a sure sign that current trends can be sustained indefinitely into the future"
That's about as ignorant as it gets, unless you were being ironic, which I doubt, given context. The current trend in the U.S. economy is erratic but prone to weakness, and there is no such thing in modern economics as "indefinitely." You must just be having a bad day.
I've been reading your stuff for some time. It's really excellent writing and analysis.
Well, at least now I know where I lost you.
Modest wage growth as a sign that things can go on like they are forever?
It was sarcasm - in this case, saying something that economists at the Fed probably think to themselves but don't dare say out loud, fearful perhaps that their hubris might somehow be misinterpreted.
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