Final thoughts on Employment, via Professor Morici:
"Overall, conditions in labor markets remain mixed. Shortages have emerged for workers with key technical skills. For example, construction, business and information technology services, and health care remain strong for workers with technical specialties.
Meanwhile, workers with only high school or a few years of college, having few specialized skills, faced mounting challenges securing positions offering good pay and health benefits. In the Midwest, the weight of troubles at GM, Ford and their suppliers are felt, and in portions of the Southeast, the continuing woes of the textile and furniture sectors weigh down wages.
It is clearly a “haves” and “haves not” labor market, and these conditions go a long way toward explaining why President Bush cannot convince Americans the economy is on solid ground, even as it demonstrates robust GDP and productivity growth . . .
Overall, manufacturing has lost 3million jobs since 2000, and the patterns of past expansions indicate it should have regained about 2 million by now. The huge trade deficit and overvalued dollar against the Chinese yuan play key roles, destroying jobs in manufacturing and knowledge-driven service industries that pay above average wages. In turn, these conditions suppresses wages in communities dependent on manufacturing and other more established industries, and are an important factor creating a “haves” and “haves not” economy.
Unemployment fell to 4.6 percent largely because more adults chose to not participate in the job market. The adult labor force participation rate remains significantly lower than when George Bush took over stewardship of the economy. If adults were participating in the job market at 2000 levels, 2.7 million more people would be looking for work and unemployment would exceed 6 percent."
Professor Peter Morici
Robert H. Smith School of Business
University of Maryland
Today’s NFP number stunk the joint up: 75,000. That’s half of the monthly population growth, meaning the percentage of people working (relative to pop) actually went down, if we are to believe this data.
Astonishingly, some people STILL do not understand the data or the context of the weak job growth within this recovery. To wit, my friend Cody Willard – a telecom strategist – writes:
"Surely, Barry, you’re not seriously trying to rekindle your argument about "job creation is not what it is typically at this phase of a recovery."
That statement has been a cornerstone of your bearish rants for the last couple years. Yes, I know you’ve been a "trading bull" and what not, and rightly so, but this economic argument of yours has been, in my view at least, wrong for the last few years and now that job creation is finally starting to slow — years after your repeated flagging of how this "recovery" (You still call this a "recovery" btw?)"
Ahhh, poor Cody. He is lost in a sea of data, unable to see the truth. He believes the spin.
Rekindle? Just because you close your eyes, the boogie man doesn’t disappear.
Hey Cody, please cite me some data revealing this to be an above-average private sector jobs creation recovery. Hell, I’ll take average.
You won’t, because you cannot.
Cody is engaging in several analytical foibles, but the best way to describe it is "ignore reality." But his subjective error does not change the objective reality for the rest of us: By any honest measure – e.g., NY Federal Reserve or Cleveland Federal Reserve research — this has been the worst modern jobs recovery on record.
This is not a meme I am pushing or a Bear story I fabricated.
It just “is.”
This doesn’t mean you run out and short everything; as I wrote last December, one should Never Confuse Economic Analysis With Trading.
But comprehending the reality of the economic situation is important. Why does this matter? What Cody fails to consider is the importance of understanding the specifics of how a recovery comes about, and how it compares to prior recoveries. What it means as the massive government stimulus that goosed the economy begins to fade. What happens when the Pig is finally thought the Python?
I expect that as we begin to slow, there ain’t a whole lot of fat to get sliced. As unemployment starts ticking up, it will not be pretty. It suggests the next recession will be more severe than the last one.
UPDATE: June 2, 2006: 12: 47pm
Cody and I finish the debate below