[IP] Roach on jobs "struggling as never before"
Begin forwarded message:
From: Peter Jones <peter@xxxxxxxxxxxxxxxxxxxx>
Date: January 9, 2006 9:52:55 AM EST
To: dave@xxxxxxxxxx
Subject: Roach on jobs "struggling as never before"
Reply-To: peter@xxxxxxxxxxxxxxxxxxxx
Dave - For IP, if you like. Stephen Roach's Morgan Stanley column,
always worth reading to start your week on a cheerful note, for today:
http://www.morganstanley.com/GEFdata/digests/20060109-mon.html
America’s once mighty job machine is struggling as never before. The
combination of subpar job creation and real wage stagnation puts
extraordinary pressure on the income-generating capacity of the
world’s most aggressive consumer. Of course, you’d never know that
from the spin that followed the release of the latest monthly labor
market surveys of the US Bureau of Labor Statistics. From Washington
to Wall Street, the verdict was nearly unanimous -- all is fine on
the US labor market front. Nothing could be further from the truth.
The overall pace of job creation in December (108,000) was half that
expected by the market consensus (200,000). Consolation for this
miss was taken from a big upward revision to the original job count
in November (from 215,000 to 305,000). As if that’s all that
mattered. Never mind that the two largest contributors to this
upward revision were temporary hiring agencies and the so-called
leisure industry (mainly restaurants); the basic point is that the
underlying hiring trend is decidedly on the wane. You can’t tell
that by fixating on the vigor of average gains in November and
December -- they were hugely distorted by a post-Katrina rebound
effect. The four-month average, which covers the storm-related
disruption -- which held employment growth to a mere 21,000 in
September and October -- and its subsequent rebound, was a mere
114,000. That’s the only accurate way to measure the underlying
trend in job growth during this storm-distorted period, and it
represents a decided shortfall from the more robust pace of job
creation that had prevailed over the preceding 18 months (197,000 per
month).
But context is key in understanding that subpar job creation is now
the norm in America. The US economy has just completed the 49th
month of an expansion that began in November 2001. At this juncture
in the four long cycles of the past -- the ones that began in 1961,
1976, 1982, and 1991 -- job growth was cruising ahead by about
210,000 per month. Moreover, in those earlier cycles both the
economy and labor market were considerably smaller than is the case
today. Adjusting for the scale effect, the 210,000 cyclical norm
from earlier cycles would translate into about 325,000 per month in
today’s economy. On that basis, the latest four-month average of
114,000 on the hiring front looks all the more pathetic -- literally
35% of the pace that would be expected at this phase in a normal
business cycle expansion. Of course, this has never been a normal
business cycle expansion insofar as hiring has been concerned. For
the first two years, it was the infamous “jobless recovery.” While
the pace of hiring has picked up somewhat in the subsequent two
years, growth has been chronically weak when compared with any
expansion of the past 40 years. Had hiring followed the trajectory
of the previous four expansions, our calculations suggest about 11
million more workers would have been added to nonfarm payrolls by now.
(More ...)
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