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Revisiting Job Dynamics

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While waiting for new information, it’s always good to go over the old stuff and see how we’ve done so far.  Barataria used to use the weekly unemployment initial claims as an instant guide to how the Depression has been running, but stopped a year ago.  The rationale at the time was that we were close to equilibrium at about 360k jobs lost every week.   There wasn’t much reason to expect a change.

How did that assumption fare?  And was this really proof, along with job growth leading GDP growth, that we are in an unusual economic event?  Let’s go back over some old ground and see how the old predictions went.   Some of this went well and some not so well.

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Gets Warmer From Here

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The Superbowl is behind us, as are the depths of Winter.  In many ways the year really starts now that January is behind us and the plans for the year are set.  As we have come to expect since the real depth of the latest downturn, January 2010, there is good news always tempered with not so great news.

Jobs are growing, yes, but the shock was the downturn in GDP growth in 4Q12 – a 0.1% annualized loss.  Most analysts who didn’t see this coming (your humble writer included) expect this was due to uncertainty in Washington, a result that sounds like a cheap excuse.  But it’s all we have given that there really is no reason to expect that things are continuing to slowly, ever so slowly, improve.

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It Works Out – Because of the Bad Stuff

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Over the past year, we’ve been discussing how the current depression might end.  Two distinct scenarios have emerged as the likely candidates – a slow return to work for everyone as small companies complete a transition to a new economy and a collapse of the world’s economic system.  Which will it be?

There is plenty of evidence for both.  The decline in people of working age in the developed world (and soon the developing!) points to more opportunity and higher wages once everything evens out – something like a golden age.  But the recent World Economic Forum and ongoing trauma in Europe highlight the obvious weakness at the top, starting with leadership.

The best answer for crystal ball readers is an obvious one – both might happen simultaneously.  That’s not a punt, it’s a statement of deep belief that, in the long run, the Free Market is probably going to work.

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It’s Clearly Different

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Consumer confidence, as measured by a survey plugged into a magic formula, is at the highest level in nearly five years.  Housing prices have risen for the sixth straight month.  All is attributed to improvements in employment, something rarely noted in the media over the summer but felt by people all across the US.

The long answer is that everyone who watches this never believed that employment was improving much.  Employment growth leading the overall economy hasn’t been the way recessions have run since the end of WWII.  That alone tells us that this time is different.  What makes it different is important because it highlights what Barataria readers have been clued into since 2007 and urgently since 2008 – that this is at the very least a different kind of economic event.

Call it what you will, but there can be little doubt that different times call for different measures.

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