August 7, 2004
IS THAT A BIG ROCK CANDY MOUNTAIN I SPY?:
Low Numbers, New Problem (KATHARINE Q. SEELYE, 8/07/04, NY Times)
All week long, President Bush traveled the country, cheerfully telling audiences that ''we've turned the corner'' on the economy. But on Friday, in the face of the government's paltry new numbers on job growth, the president's new slogan suddenly sounded premature at best.
Jobs: July's Stunning Disappointment (Michael Englund and Rick MacDonald, 8/06/04, Business Week)
Elsewhere in the July report, the unemployment rate fell to 5.5% (the median estimate was 5.6%) from 5.6% -- boosted by a hefty 629,000 gain in the household survey's measure of employment. The workweek rebounded to a lower-than-expected 33.7 hours (median expectation was 33.8) from 33.6 hours in June. This signals surprising restraint in total hours worked, given the strength evident in most other economic reports for July. The two-month pattern suggests that workweek growth remains subdued relative to a normal expansion.Hourly earnings, another key component of the report, jumped 0.3% (median expectation was 0.3%). The data implies that total hours worked in the third quarter may match the 2.2% growth rate in the second. That would support our estimate for third-quarter gross domestic product growth of 4.5% and healthy gains in other monthly reports, but with less potential for upside.
Interestingly, the household survey continued to reveal substantially greater strength than the payrolls survey, with a hefty gain in the July job count of 629,000, following a 259,000 increase in June. This strength has been accompanied by a solid bounceback in labor-force growth and accommodates the downtick in the unemployment rate to 5.5%.
The payroll news caused the bond market to take at least a one-quarter point Fed rate hike out of the equation.
Here's a thought experiment for those of you not currently taking medication for depression or bi-polar disorder or other conditions that might make you prone to morosity: Imagine for a moment that you're not lucky enough to be an American. (I know, I shudder with you--but I'll be brief.) You pick up the papers and read that there annual GDP growth of 4.5%, falling unemployment and the creation of over six hundred thousand new jobs in one month is not considered having "turned the corner." No wonder you and your fellow citizens believe that America is the land where the streets are paved with gold. Posted by Orrin Judd at August 7, 2004 8:52 AM
It's fascinating how fast we mistake a proxy of the thing for the thing itself.
Posted by: David Cohen at August 7, 2004 9:39 AMafter shuddering at the notion of being born outside the US, i would agree that the 'take' on our economy is unbelievably negative. gotta be, otherwise a bush election is assured.
regarding the economics of our 'anaemic' job growth in july, the household report shows it all. small businesses run our country and will continue to do so as long as there are incentives to create said businesses. with that in mind, everyone vote against Kerry/Edwards and their stupid "we'll rescind tax cuts for those over $200k" crap. who do they think makes that kind of money, US senators and fortune 500 CEOs only?
Posted by: poormedicalstudent at August 7, 2004 11:36 AMOn Friday I argued with our market traders, economists, etc that the household survey was telling the real picture of the economy, not the payroll survey. I got nowhere. My concern is that the bad payroll survey starts a negative cycle where businesses believe things are bad, start cutting back, and then reenforce the bad news.
Posted by: AWW at August 7, 2004 2:19 PM