The July jobs report, and boy was it good! 163k jobs were added in July, far more than the 96k predicted (the same as last year). The summer doldrums are apparently not hitting as hard in 2012 after all.
It’s not fantastic growth by any measure, but it means that we are still treading water – not drowning counts for something, at least. More importantly, it got us out of the pattern where the summer slowdown sat on the economy like a mini-recession that gave us little hope for the pick-up in Autumn.
What changed? It’s hard to say. But we can make a few guesses.
The first guess is that nothing changed, and that’s backed up by the household survey. There are 850k total “discouraged workers” that have been unemployed so long that they don’t count anymore. Throw in people working part-time to get whatever they can even if it isn’t enough and the “underemployment rate” or U6 unemployment is at 15% – not quite as bad as it was in 2009, but rising steadily.
The big jobs gain in July could just be a blip.
There have been solid gains in the weekly “Initial Claims” for unemployment, which has been running 365k through July. That’s an improvement of about 20k over last year, which helps, but it has to be below 300k before anyone is going to be excited. There is still a big churn in jobs, where about 1.6M jobs are lost each month but 1.8M are gained, a total churn of 1.4% each month or upwards of 16% a year – actually less since some people gain and lose more than one job in a year. But that is at least 1 person in 7 that changes jobs every year, a very dynamic economy.
What we can say at this point is that restructuring is still occurring as jobs are created and other are lost. That process will likely continue for years, which is what makes the summer slowdowns so difficult to handle. The net gain in jobs is a big number subtracted from another big number, and the net difference is relatively small in comparison. This makes everything a bit noisy and hard to read from one month to the next, especially when the surveys conducted to get the job gain data have noise of their own built into them.
For now, we can say that things are looking better than anyone expected and quite a bit better than last year – even if it’s all together nowhere near good enough. There still has to be a big change before we can say that we are climbing out of the Depression, meaning that action by governments and central banks still makes a big difference.
One rather pathetic note in the July report is that government contributed a net loss of 9k jobs last month, meaning that the classic WPA job creation response by government is going the wrong direction. This is happening at the state and local level, where jobs are usually very closely tied to more essential services like police, fire, social workers, and so on. That is dismal. No matter what Barataria has said in the past, there is still a place for a classic Keynesian stimulus of the old school, even if it’s unlikely to get us moving entirely on its own without a commitment to restructuring.
How good was the news for July? Good enough to make a start. If it crashes back down next month because this was all just a statistical blip it will weigh very heavily on the entire economy. That would be horrible. Keep your fingers crossed, unless they are cramped from several years of crossies already.