Man Without Qualities

Friday, August 01, 2003

What Will Paul Do This Time?

The New York Times reports:

The government said today that the nation's unemployment rate fell in July. But the employment report offered scant evidence that conditions in the labor market are improving. .... While the drop in the jobless rate is encouraging, the reason it moved lower is not. According to the Labor Department, the labor force shrank by 556,000 in July, to 146 million. Of that number, nearly half a million, or 470,000, were discouraged Americans who just stopped looking for jobs because they did not think work would be available.

Here's something for Herr Doktorprofessor Krugman to write about! Not the fall in unemployment - but the fact that it is "meaningless" because the labor force shrank as discouraged Americans just stopped looking for jobs because they did not think work would be available. Of course, Labor Secretary Elaine Chao ascribed some of the report's negative implications to seasonal factors, preferring to focus on weekly data on claims for unemployment benefits, which have been on the decline. "July is a funny month because there are lots of factors at work," she said in an interview on CNBC. "School is out, a lot of secondary workers … exit the work force."

That 2.4% growth rate and the fact that employment is a trailing indicator can become little asides, at most! Other factors that can be dismissed as part of the very little evidence in the data for a strong recovery ready to break out:

1. Recent declines in weekly initial claims for unemployment benefits took place after the Labor Department conducted its monthly survey.

2. Employers added 42,000 temporary workers to their payrolls in July. This is the third consecutive increase in temporary employment. "As is often the case, you start to see an improvement in temporary workers before you see payroll hiring pick up," said David Resler, chief economist at Nomura Securities International.

3. The Institute of Supply Management said its manufacturing index rose to 51.8 in July from 49.8 in June. A reading above 50 percent means the economy is expanding.

4. Rising mortgage rates may have started to brake what many informed people view as a possible housing bubble - but this can be dismissed by focusing only on the corresponding slow down in the construction.

5. Inflation remained tame.

6. Average hourly earnings rose five cents.

7. The University of Michigan reported that its consumer-sentiment index climbed to 90.9 in July from a mid-month reading of 90.3, and June's 89.7. The latest figure beat economists' forecast of 90.4 and was more upbeat than a report earlier this week from the Conference Board that showed a sharp drop in consumer confidence due to the sour job market. Consumers' take on current conditions improved during the month but expectations for the future were less optimistic.

There is also negative information - and I don't mean to deny its significance. But, to Herr Doktoprofessor the economy is not emitting mixed signals and could go either way. No. For him, it's simply that very little evidence in the data for a strong recovery ready to break out.

And Herr Doktorprofessor could surely find some way to work in his "banana republic" macro, which he once restricted to columns dedicated to attacks on the President and Congressional Republicans - but now seems to have become more of an all-purpose column extrusion device for him.

MORE for Herr Doktorprofessor to ignore:

America's manufacturers saw demand for their products rise in June by the largest amount in three months, another encouraging sign that the fragile factory sector is on the mend along with the rest of the economy. The Commerce Department reported Monday that orders to U.S. factories rose 1.7 percent from May, the second month in a row that orders went up. Gains were fairly broad-based, with orders rising for machinery, household appliances and automobiles as well as ``nondurable'' goods, such as food products and chemicals. June's performance, which followed a 0.3 percent rise in May, was stronger than economists were expecting; they were forecasting a 1.5 percent increase in factory orders. Monday's report, along with other recent data on factory activity, suggest the industry is turning a corner.

Comments: Post a Comment