Where Are We?

The key BLS employment release of Feb/5 showed that jobs fell slightly in Jan/10, having declined in 24 of the past 25 months. About 8.5MM jobs have been vaporized since Dec/07, the beginning of the past recession. The level of employment is at its lowest since Sep/99. On the "bright" side, the pace of job loss has slowed.

There’s jobs in a nutshell folks. Doesn’t look too red hot does it? Yet Jan/29 we found out that Q4 GDP rose by 5.7% (% change qt to qt at an annualized rate), following +2.2%, Q3. Wow! The recession is over. Pretty good stuff here, until we look just sub surface and find that almost all of the strength was due to a spurt in exports, not domestic demand. And the 5.7% gain is put in perspective when we reflect that the economy expanded on +0.1% over the past year.

Most of us now understand this recovery is a jobless recovery. We and many other observers have highlighted just why that is so, detailing repeatedly the array of burdens placed on potential employers by the current administration, slowing the process of resuscitation.

No one argues with us any longer. JFK and Reagan ushered in quick recoveries to the recessions they inherited by the simple method of across-the-board tax cuts, then standing back.

But since BO has three years to go, employers figure not this time. The result? Productivity has exploded (+6.2%, Q4) and unit labor costs have collapsed. We don’t need to be an economist to figure this one out. Business has had enough of Obama; permanent changes are being made so that even as domestic demand expands, the "normal" increase in employment that goes with it, is no more. This time there will be no recovering "all those lost jobs" as many of these will fail to materialize. Ongoing, business will do without.

There are two ways to look at this development. Certainly it is great for business, change that would not have been made without the statist agenda looming ahead - in this case, the mother of invention. It is bad news for workers, esp medium to low skill workers, who now have nothing on the other side.

Robert Craven