Hey what do you know? We actually had a modest gain in jobs this last month. The economy gained 117,000 jobs according the statistics released this morning. That is actually better than the number that analysts were predicting, which was around 85,000.
Unfortunately that is all the good news there is on this. The economy needs 150,000 new jobs a month just to keep up with the rate of population growth, so if you are a glass half empty person, we came up 33,000 jobs short of what we needed to break even.
The unemployment rate fell one tenth of a percent to 9.1% but this was almost certainly due to more people leaving the jobs market, instead of robust jobs growth. The question is, will this be enough to blunt the sell-off that we are seeing on world markets?
The answer is likely to be no. The reasons for the sell-off have more to do with the future jobs and growth outlook than they do with any single month’s report. The picture has not improved.
As long as the Euro Zone is imploding (for reasons that have a lot to do with countries not having their own currency and having Euro Zone constitutional requirements for debt limits), and the Japanese economy is still rebuilding from the tsunami and the resultant nuclear disaster of this spring, and the U.S. looking at austerity instead of jobs programs there are more than enough structural issues which can make investors nervous enough to cash in on the market highs that we enjoyed until just last month.
Where does this all end? I wish I could say. Back when the world economy was starting to fall apart in 2008 governments did the right thing by rushing in with lots and lots of money to stabilize their economies. The Chinese were particularly good with this and have had a bubble for the last couple of years while everyone else has struggled.
The bad news with China is that their bubble is in the process of deflating. The government there has been hoping for a soft landing, but with the rest of the world seemingly unable to cope with its own troubles it is unlikely that they will get such a benign outcome.
Back here in the U.S. we have managed to hogtie ourselves to a 10 year commitment to reducing our deficit, right when it seems that we really need to inject cash into the economy. That $2 trillion that companies have had parked on the sidelines is not going to put into the economy at time when they are probably dusting off plans for downsizing in recessionary economy. At least not if they are not forced to do so.
Are there things that the government can do? Sure there are, but the problem is they all take money and we are in the process of taking $200 billion (200,000 million for those who are too comfortable with small seeming numbers) a year out of the economy. Even for those as terminally deluded about economics as the Republicans and far too many Democrats (Senators Conrad and Nelson I am looking right at you two) are removing money from a struggling economy never ever makes things better.
We have seen what the British and Irish austerity have done. It has forced both of these nations back into recessions and the odds are very good that our dumbass focus on debt when we can borrow at almost zero interest is probably going to do the exact same thing.
As of the writing of this, the U.S. markets haven’t opened but futures trading show all three of the big averages up by about a half percentage point before the bell. It will be interesting to see if the optimism that this gain in jobs is producing will last the day. The general pattern over the last few days has been that the morning is significantly better than the afternoon (maybe traders and investors should look at what they are eating for lunch? If it were only that easy!) so it will take some time to see if optimism trumps all the good reasons that investors had for selling off over the last two weeks.
I am an optimist by nature, but even I am unwilling to bet that one little piece of modest good news will overpower the real concern about many structural issues.
So, yay and hurray for those who are now working I am sure you all really needed the jobs, but there is not a lot of real sunshine in the mass of clouds. Here is hoping the economy does not dive off a cliff and all these folks and more lose their jobs.
The floor is yours.