The dismal set has gotten all hot and bothered over the preliminary ADP data, thought by some to be an early read on the NFP report. According to National Employment Report from Automatic Data Processing, the "private sector added a seasonally adjusted 368,000 nonfarm jobs in June."
It turns out that the ADP data is compiled, seasonally adjusted, and massaged in a very different manner than BLS does.
Regardless, its actually much ado about very little. Although NFP is eagerly awaited each month by wonks of all stripes (present company included) today’s number is unlikely to represent a significant departure from the well established trend that has developed since the 2001 recession ended.
One point does not a trend make. And even if today is a killer number, we have seen what’s been in place for nearly 5 years — and it has been none too encouraging.
Why? The simple fact is that this recession recovery cycle has been historically very weak in terms of private sector job creation. Indeed, depending upon how you measure it, this is the first or second worst cycle since WWII.
The present cycle is overly dependent on government jobs. Its seen a hugely disproportionate number of private sector employment overly Real Estate reliant. These positions are more the product of government stimulus — i.e., ultra low rates — than they have been of an organic nature. Further, many of the remaining non real estate jobs have been disproportionately of the lower paying / weaker benefit variety than the jobs they are replacing.
And as the recent spate of layoffs in construction, mortgages, and real estate brokerage reveals, as rates rise the new jobs turn out to be somewhat more temporary in nature than originally believed.
So regardless of the outcome of today’s report, it is but one number in an ongoing series. And the prior series has been rather disappointing from a macro perspective.
Prior to the ADP report’s release, the consensus was for 170,000 nonfarm jobs; that’s now been bumped up to 200k.
I’m sticking with the under.
This is scheduled to disappear from Yahoo soon — I wanted to capture it before it went away. Its a criticque of Supply Side economics by Charles Wheelan, former US columnist for the Economist, and at present an economics and public policy professor at the University of Chicago and visiting prof at Dartmouth College. Wheelan is the author of Naked Economics: Undressing the Dismal Science.
Debunking One of the Worst Ideas in Economics
Wednesday, May 3, 2006
"In this column, I’m focusing on bad economics. In fact, I’m going to write about what I consider to be the two worst economic ideas — or at least ideas that pass as economics, though both have been thoroughly repudiated by nearly all credible thinkers.
When I say worst, I don’t mean the most outlandish (e.g. stock prices are controlled by aliens) because those ideas usually collapse of their own weight. Rather, the most pernicious bad ideas in economics are those that have a ring of truth. They’re hard to debunk because they have a certain intuitive appeal. As a result, they stick around, providing bogus intellectual cover for bad policy, year after year, decade after decade.
For the sake of political balance, I’ll skewer a favorite of the right in this column, and then a favorite of the left in my next piece.