The elephant in the room: jobs

Commentary: Demand for labor has improved, but remains very, very thin

On the first Friday of each month comes the elephant: fresh jobs data from the immediately prior month.

No other indicator — maybe not all others combined — has the power of payrolls to move markets, to describe the economy and the prospects for inflation, and to alter the course of public policy.

The headline is "non-farm payrolls," today’s report a meager April gain of 115,000 jobs, about the same as March, but only half the figure in the three prior months, gains that made us think we were at last getting somewhere.

One generic problem with elephants, especially at close range: shades of grey. Another: estimating size.

The inherent inaccuracy in each non-farm payroll report is a couple of hundred thousand jobs. All of the reports in the last six months have lain inside that range of error. Another element writ on wrinkled grey: Everybody seems to understand that the official unemployment rate fails to describe anything useful.

So, watch other things: Wages last month rose by $0.01 per hour, one whole cent, 1.8 percent year over year. A sustained increase in inflation is impossible without a wage spiral.

Same for GDP. The average workweek in April — unchanged. The percent of the 24-54 age cohort at work is stuck at early 1980s levels, about 7 million below the 2000 peak.

Of those at work, another 8 million are part-time because they can’t find full time. Involuntary part-time workers are included in the U-6 measure, which had been improving in recent months but stalled at 14.5 percent in April. Demand for labor has improved, but remains very, very thin.

Ten-year T-notes today at 1.87 percent have cracked long-term resistance at 1.9 percent, bets going down that the Fed will ease again. Not until core inflation fades back below 2 percent, but the odds are up.

Stocks are having a hard time despite Fed prospects, and today’s sinking-before-Fed is out of prior pattern. There is little follow-through in mortgages, a 10-day drift near 4 percent anticipating today’s going-nowhere report.

A story follows, typical of our overall predicament. Charlie Rose, focusing on successive nights on the topic of fiscal hazard, interviewed Paul Krugman and Sen. Tom Coburn, R-Okla.

Krugman has debased his profession and his Nobel by pushing inflation as the free-money solution. The surprises were from Coburn, widely regarded as a nut case, who opened by saying, "Of course the wealthy should pay more."

Coburn, after 30 minutes as the soul of reason (one of many in Congress, in both parties, now acknowledging the need for Bowles-Simpson’s harpoon-all-whales), returned to his native, anti-government soaps, announcing that "Everything after 1929 was because the Fed did too much." To which Rose nodded and replied with a Krugman line: "The Depression ended only because of war spending."

Americans have always been able to select media tilted to their preference, but it’s a hell of a lot easier now. Every big city used to have newspapers offering competitive political leaning and fibbing, but nothing like the instantly available Fox and MSNBC, and acres of websites ginning up partisan lies. Thus, citizens — even those trying hard to stay informed — are at risk to "silo" their information and corrupt their perspective.

Coburn and Rose were perfect examples, repeating silo fables. After 1929 the Fed did nothing as the U.S. banking system collapsed, the primary factor making the Depression "Great." And it remained inert. Deposit insurance, reflation via gold price, and federal lending agencies combined by 1935 to restore GDP to the 1929 level. Coburn, bright and adaptable on the fiscal issue, is a captive parroting the right’s endless effort to discredit the New Deal. His own jailer!

The Depression did double dip, but because of fiscal zeal, trying to balance the budget too soon, too fast. We didn’t know any better then. We adopted Social Security, but raised taxes to fund it for three years before paying any benefits. The Depression ended because of state spending — but not ours, Europe’s, whose governments placed war orders with our factories. There was no free-money spigot from the Treasury.

Soapbox: It is the duty of each of us to stay out of silos, listen to the other side, and "snopes" everything we think we like.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@pmglending.com.

Contact Lou Barnes:
Email Email Letter to the Editor Letter to the Editor


Comments