The recent NFP print appeared to contradict our long-held view on US growth. That is, many, perhaps most observers believe jobs lead GDP; these same observers, most of whom had their predictions flattened by the Q1 GDP print of -2.9%, were cheered by recent jobs figures and claimant counts. These folk predict a major acceleration in growth (which would save their necks). We did and still do predict little to nothing by the way of growth.
Where in the world do they get this stuff? Jobs have never been a leader, at least not during our time in the arena. We never use charts but if the reader insists, take the correlation of NFP to GDP, past 20 years or so and report back. Jobs may be a coincident indicator, at best, which is why we could never explain the near-orgasmic response tied to buoyant payroll reads.
And jobs and claims are especially poor indicators now given the change in payroll practices. Employers hire temps more than ever. They do it to manage production; they don’t want to get hung out to dry. Now if a temp goes back to the agency, it is not a layoff; it does not raise unemployment insurance – they can’t collect it. So of course this makes the weekly claims reads look rosier than reality would justify.
But this is not the only reason to discount jobs figures. Another is that productivity (aggregate hours / output) has tanked. That is, it takes a heck of a lot more workers now to produce a given quantity of goods than it did, Q4 ’13; about 1,500,000 more by some estimates. Productivity is down maybe 5%, Q1, because – you guessed it – the fall in business investment. It was incessant meddling by the Fed and administration that led to this; risk takers don’t trust either one. They fear the risk that high corporate taxes will go higher, the risk that the bloat in regulations will bloat further, and finally, they fear the results of what they understand to be the fatal conceit of a Fed chair who thinks she is capable of fine-tuning the US economy.
Robert Craven
Where in the world do they get this stuff? Jobs have never been a leader, at least not during our time in the arena. We never use charts but if the reader insists, take the correlation of NFP to GDP, past 20 years or so and report back. Jobs may be a coincident indicator, at best, which is why we could never explain the near-orgasmic response tied to buoyant payroll reads.
And jobs and claims are especially poor indicators now given the change in payroll practices. Employers hire temps more than ever. They do it to manage production; they don’t want to get hung out to dry. Now if a temp goes back to the agency, it is not a layoff; it does not raise unemployment insurance – they can’t collect it. So of course this makes the weekly claims reads look rosier than reality would justify.
But this is not the only reason to discount jobs figures. Another is that productivity (aggregate hours / output) has tanked. That is, it takes a heck of a lot more workers now to produce a given quantity of goods than it did, Q4 ’13; about 1,500,000 more by some estimates. Productivity is down maybe 5%, Q1, because – you guessed it – the fall in business investment. It was incessant meddling by the Fed and administration that led to this; risk takers don’t trust either one. They fear the risk that high corporate taxes will go higher, the risk that the bloat in regulations will bloat further, and finally, they fear the results of what they understand to be the fatal conceit of a Fed chair who thinks she is capable of fine-tuning the US economy.
Robert Craven
No comments:
Post a Comment