David Rosenberg is quoted in Alan Abelson’s column this week, calling the employment report “a mega reality check.”

The jobs data, according to Rosie, was “horrible…not just the headline but also the details.” He say that the data should make those who believe that 1H weakness to be merely transitory back to their drawing boards to rethink their bullishness. And, he adds, we should stop ignoring weak consumer-confidence surveys, as they are a byproduct of the crummy job market.

The hiring freeze is rather simple to understand: “Pure and simple, business is jittery about the macroeconomic outlook, especially with the Fed fading into the background and fiscal policies swinging from stimulus to restraint.”

Various stimuli gave the economy a “brief sugar high, but now that’s over:

“Now the policy cupboard is bare, and “we can see what the emperor looks like disrobed. It’s not a pretty picture.”The economy, Dave goes on, is in a very fragile state. Which isn’t all that surprising since it still bears the scars of the credit and market collapse and the Great Recession that accompanied it.

However, historically, such ugly episodes—and there are quite a few slumps and crashes in the postwar period—are not typically followed by recoveries as flaccid and as pathetic one has been.

Particularly rare is to see an economy that’s supposedly well into recovery produce the likes of a puny 18,000 monthly job gain. For a recovery worthy of its name, Dave contends, celebrating its second anniversary you would expect employment to rise more on the order of 180,000. It’s hard to overlook that missing zero in Friday’s headlines.

Scanning the gory details of the data, Dave notes that the total of unemployed in June swelled by 173,000 and exceeded 14 million for the first time this year. Including discouraged workers, the pool of available labor soared by 483,000 to 20.6 million, which works out to seven people vying for every job opening. The normal ratio is close to three.

The logical question, he writes, is what are the prospects for a rebound in July? Not great, he says. In the June report, virtually all the tell-tale indicators of what’s ahead—temp hiring, the decline in the workweek, since “hours tend to lead bodies,” and the revisions, which have a habit of feeding on themselves—were negative.

In his summing up, Dave points out that: “Here we are, two years into an economic recovery, and the level of employment at 131 million is actually lower than it was in March 2000. At this stage of the cycle, what is normal is that payrolls are making new cyclical highs. This time around, barely 20% of the recession losses have been recouped.”

Yes, the recovery is mediocre. But that is exactly what is should be.

As we have noted ad nauseum, the typical post WW2 recession recovery cycle is the wrong metric for comparison. As Reinhard & Rogoff have so conclusively demonstrated, post credit-crisis recoveries should be your (and Dave’s) frame of reference. These are described as mediocre, low growth, anemic job producing affairs.

The dismal set seems to be particularly surprised by the stinky data. They should not be.


Horror Story
Barron’s Up and Down Wall Street July 9, 2011    

Category: Data Analysis, Employment

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

24 Responses to “Rosenberg: NFP ‘Mega Reality Check’”

  1. DeDude says:

    Yes this was not the “great recession” it was the “puny depression” (thanks to stimulus). None of the post WWII recessions are good reference points. Even the great Volker recession is a poor reference because the credit restraint back then was due to extremely high interest rates, not insolvency and lack of demand.

  2. ToNYC says:

    The profound lack of leadership from the White House…hello, a domestic energy mandate policy, and tax-credit for a reversal of outsourced labor efficiencies for a couple, we are embracing the horror show rather than get religion, or at the very least, morality. Self-hostage dramas are particularly pathological.

  3. Nuggz says:

    From NPR’s Marketplace:

    “For manufacturer Erick Ajax, the key is more training and new technology.

    AJAX: Even though our revenue is back to pre-recession levels, we’re doing the same amount of work with 10 to 15 percent fewer employees.

    And companies with open jobs aren’t always finding what they need. Ajax is hiring, but you’d better have the skills: The guy he just hired to run a high-tech metal press has a fresh degree in precision sheet metal manufacturing.”

    And that, my friend, is all you need to know. as the only “Mega Reality Check” it that residential construction soaks up a lot of marginally employable people.

  4. foosion says:

    Post credit-crisis recoveries are lousy because govts don’t do enough to remedy the problems. This is a classic example of learned helplessness.

    Look at what we’ve tried – a federal stimulus that was almost exactly counterbalanced by state cutbacks. Now we’re trying federal austerity combined with state and local austerity. Of course the recovery will be slow and weak.

    If policymakers wanted to make things better they would. Instead we have Obama spouting Republican talking points about govt tightening its belt and Republicans desperate to advance their policy and political goals no matter what the cost to the economy.

  5. leeward says:

    “Yes, the recovery is mediocre. But that is exactly what is should be.”

    If the bondholders had been forced two years ago to take a meaningful haircut would the recovery be gaining traction now-even if from a lower point? Or would the entire universe have melted down into a black hole because some bets went bad? I am not making light of such a big move but Sheila Bair’s Exit Interview (as suggested by TBP) is a great parallel read http://www.nytimes.com/2011/07/10/magazine/sheila-bairs-exit-interview.html?_r=1&nl=todaysheadlines&emc=tha210

  6. Chief Tomahawk says:

    Hey, I’m a broken record … but if one wants a timely window into the state of the economy, http://www.condo.com for you search city or zip code, then re-order the search results by the “Price drop” feature. The working/middle class suburbs I keep tabs on here in suburban Chicago are just being decimated.

  7. denim says:

    This should be, but won’t be enough to silence those who claim the business economy can take care of itself. Don’t the economist say that unemployment is causing low aggregate demand and that is the cause of the recession. Yet, instead of hiring more people in sync with each other, businesses just keep throwing more overboard. duh!

  8. yuan says:

    “post credit-crisis recoveries”

    reinhard [sic] and rogoff discuss sovereign debt crises too…just saying.

  9. champs2011 says:

    Will the great Chinese economy boom boom turn into Doom doom

  10. blackjaquekerouac says:

    why should this recovery be worse than a typical WWII recovery? Seems to me with three wars going on it should be better. Simply acknowledging R&R while giving the appearance of being smart does nothing to show that you actually are. R&R’s book is far from detailed in it’s approach to dealing with THIS crisis. This Adiministration’s policies of “never let a crisis go to waste” and “go f yourself” i don’t think have been fully vetted for working at cross purposes–if not being diametrically opposed–to the emergency measures taken to keep the vairous states in our Union from going bankrupt in a very short period of time. In fact a good argument could be made that the policies of increasing the war, passing the biggest health care entitlement in American history, paying no attention to either cost or benefit to a single federal program and finally turning a blind eye while the media engages in a massive illegal spying campaign against the American people and as we now know for a fact the folks of England as well–and there you have it. “No thought of winning” just process and procedure in what i heard described once as “living in cloud-coockoo land.”

  11. MayorQuimby says:

    Considering our debt to GDP levels are as high as they were at the end of WWII withOUT the world’s only intact manufacturing base as it sought to rebuild itself after 70 million people perished means that post WWII comparisons are irrelevant.

  12. Lyle says:

    Lets look at two major depressions/severe recessions, 1873 and 1893 both took 6 years to work out. Both were financial panics, both caused by overbuilding of railroads and rampant speculation. The federal government also almost went bk in 1893 with the gold reserve falling to less than $100 million threating the currency. It took JP Morgan to bail the federal government out. (The man) So it seems that a overbuilding boom and resulting financial crash take a long time to work out on an historical basis.

    Also as noted residential construction is not in general a high skill job, set, perhaps with plumbers and electricians being excepted, and to boot new residential construction is the easiest part of those trades. Clearly we see the falloff in illegal workers (which were heavily into residential construction) as a sign of the slow down. A75% fall off in this should mean a 75% fall off in employment in the sector, as well as the allied finance sectors.

  13. mark says:

    blackjaquekerouac said “Seems to me with three wars going on it should be better.” In response I would paraphrase him – Simply saying that wars end recessions/depressions while giving the appearance of being smart does nothing to show that you actually are. I think that you will find that most empires throughout history (of which the US is surely one) ended as they developed a rentier class that did not think they needed to sacrifice any of their money or privileges in order to fight wars to protect or expand the empire.

    Lyle is certainly on the right track to refocus our attention on the Depression(s) of the late 19th century (known as the Great Depression until the 1930′s). I have long thought that or Japan in the late 20th century were the most appropriate models for our current situation.

  14. Winston Munn says:

    I am still shaking my head that the man elected as the “brainy” President could do no better than Bernanke, Geithner, and Summers, especially when pre-crisis Bernanke’s written plan to prevent a Japan-like lost decade was to do exactly the same thing as Japan, only more of it and faster.

    The plan to prevent premature burial is to dig a deeper hole in a shorter period of time…Ben the Wizard

  15. philipat says:

    What caused the problems? Was it fixed? I rest my case.

  16. ashpelham2 says:

    Philipat, you have the most easy explanation that I’ve seen yet. Thanks for that.

    I saw something on tv the other day going after Obama and his people for suggesting that we get used to a new normal, with higher unemployment and less impressive economic vitals. I must say, that while Bush 2 was in office, much of the better employment and economic was on the backs of overleveraged businesses and homeowners. So, perhaps those that want to crucify Obama and all of his guys should step back and realize that this shoe that dropped back in late 07 was a long time coming. If and when the other shoe drops, God help us.

  17. eurostoxx says:

    Rosie is great, just dont listen to his advice on the stock market!! He’s been a bear the whole way up. And he hasnt changed his cyclical view of the economy (ok we know his secular view) either. At last Hatziusand others have (and been wrong but big deal)

    Just bc he is saying interest rates wont go up (ok ) doenst mean bonds are a good investment.

    But at least he got the gold call right

  18. craig.r.jackson says:

    Regarding the public sector job layoffs, I’d like to point out that government, both large and small, tend to grow over time, in the long run. This is a very very safe bet. In all likelihood, the recent shrinkage is a temporary blip. The government is experiencing what businesses did in 2008/9 and will probably experience a “snap back” in 2012 as leaders realize they cut too much in order to fit short term budget cuts.

  19. Winston Munn says:

    It’s not that the recovery is mediocre, but that the leadership is mediocre.

  20. wafranklin says:

    It is more likely that the situation viewed from the penthouses is: there are simply 50 million excess people; that it is time to trim the reserve army of the unemployed. Only problem is that the simpletons in Washington in the White Peoples’ Party (i.e. GOP) do not understand this. Their peons have been bought to vote against themselves repeatedly. That’s ok, the turn of the religious fanatics and tea party zealots will be fed to the grinder soon enough.

  21. Mike C says:

    Yes, the recovery is mediocre. But that is exactly what is should be.

    As we have noted ad nauseum, the typical post WW2 recession recovery cycle is the wrong metric for comparison. As Reinhard & Rogoff have so conclusively demonstrated, post credit-crisis recoveries should be your (and Dave’s) frame of reference. These are described as mediocre, low growth, anemic job producing affairs.

    How long can the stock market continue to basically ignore all this? More than I can ever remember the performance of the stock market appears to be totally divergent from the real economy. Yes, it is about corporate profits, and they are strong, but it seems to me the current level of corporate profits are at an unsustainable disequilibrium with the rest of the economy when you look at employment, housing, etc.

  22. swag says:

    My usual suggestion for most any blog post: “ad nauseam,” please, not “ad nauseum”. Accusative case. Many thanks.

    Oh, also, “in memoriam,”‘ not “in memorium.” Same deal.

  23. AHodge says:

    cannot go with “weak… as it should be”
    as i rant regularly
    draw a line between good delevering and low growth inevitable
    and the fixable parts of the last crisis which was a debt crisis but also unique
    unique in “fake assets” securitization, complex product, atrocious accounting, size of financial profits, and fake insurance.
    THIS and the unfixed is why we flounder in spite of huge stimulus..
    so please dont keep giving us get used to it (a growth recession or close to a real recession)
    i have studied rogoff
    i get it
    they have a great point and insightful view
    it is not a 100% answer to the US and Europe stalled economy problem

  24. dsawy says:

    The modern dismal set is infected with the notion that hyper-quantification leads to predictive skill. It doesn’t, obviously. The whole of modern economics has been exposed as a fraud, yet economists seem to be the last to get the clue.

    The current situation is quantified by R&R, but it was well described in the middle of the last large debt deflation the US endured, the Depression, by Irving Fisher in 1935. Fisher made points in his 1935 paper that have been entirely consistent with what we’re seeing today. I can’t find anything therein where Fisher is outright wrong. The striking difference between Fisher’s paper in ’35 and today’s papers trying to get their Excel spreadsheets around today’s issues is that Fisher didn’t load up his evaluation of a debt deflation with lots of superfluous mathematics trying to make predictions as to what quarter we could expect recovery, etc.

    All that has happened in this debt deflation so far is that we’ve seen the bad debt transferred from private ownership to public ownership (eg, Fannie/Freddie) and thence to the Fed. Sooner or later, the debt that cannot be serviced will be defaulted. In the meantime, the mendacity of both policy makers and bankers leads to a climate of distrust and poor capital formation, as it has in post-1991 Japan – for the same reasons.