Given the turmoil in world financial markets over the past couple of months, with stock market indices testing new yearly lows, fears about the U.S. labor market and economy have been amplified; according to Google search, “double dip” became an increasingly popular search term (and not because of a surge in the demand for ice cream).
By contrast, much of the incoming economic data over the past months shows that the economy continues to grow, not contract, and today’s jobs report adds continued evidence of that fact. Indeed, an optimistic examination reveals non-farm payroll employment rose by 103,000 jobs in September, and revisions to the July and August data added another 99,000 jobs. By this measure, today’s report exceeded expectations. Taking a less optimistic look and adjusting for the impact of the Verizon strike, we find that private payroll employment rose by about 90,000 jobs in August and September. This is decent news, but it is surprising that the markets and the press feel so much better about today’s employment news than last month’s when (restating the earlier point) the economy has in fact been growing all along.
Among the many data series drawn from BLS’s monthly business payroll survey, employment in the temporary help services industry and average weekly hours of manufacturing production workers are oft cited as leading indicators. Indeed, as we entered 2011, temp help employment already hinted that slower growth would be on the way. However, after turning slightly negative in the second quarter of this year, temporary employment grew by 53,200 jobs during the third quarter (including 19,400 in September), which may suggest that overall private sector hiring will pick up in the months ahead.
The factory workweek (for production workers) has been more neutral. It ended 2010 at 41.3 hours, up from a recessionary low of 39.3 hours in March 2009. Growth has stalled this year, though, and as of September the workweek was still at 41.3 hours. But on the positive side, over the year, factory employment is up by 196,000 jobs and demand for manufacturing workers has not waned this year. Job openings in manufacturing (measured by BLS’s Job Openings and Labor Turnover Survey) totaled 257,000 as of the last business day of July, the highest vacancy count in more than three years. More generally, openings for all sectors combined are on the rise: as of July, non-farm businesses had 3.2 million unfilled openings posted, the highest level since August 2008 and up 50 percent from the July 2009 low of 2.1 million.
None of these data suggest that the labor market is ready of takeoff -- neither do they tell us it should be removed from the launching pad.
“But Mark, the stock markets have plummeted and watching CNBC scares me!” It is certainly true that sharp drops in the stock market negatively affect the economy through multiple channels. However, as the figure below illustrates, there is little correlation between short-term changes in the stock market and employment growth. That is, sharp drops in the S&P 500 do not necessarily translate into job losses. Both series can be roller coasters, but the stock market is the one that requires shoulder straps and Dramamine.
So what about a double dip recession? Based on what we know right now, if you’re looking for a double-dip, head to the ice cream shop. Actually given all of the turmoil, the economy is doing relatively well, but not well enough. One way to boost hiring is to spur consumer spending by cutting payroll taxes (an idea that has both bipartisan appeal and works) and by cutting payroll taxes that businesses pay (another effective approach with bipartisan appeal ). Guess what? These are two major components of the American Jobs Act. Seems like a no brainer to me.
~Mark Doms, Chief Economist, U.S. Department of Commerce
October 7, 2011
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