Friday, May 6, 2011


The initial reaction of the stock market to today’s employment report was quite positive. Certainly, the mood was brightened by yesterday’s sharp correction in petroleum prices, and we all know not to make too much of a single month’s data. So, let’s not gloat over this accomplishment, either.

In fact, I am more disturbed than heartened by the news that the American economy added a higher than expected 244,000 non-farm jobs in April. My caution isn’t based solely on the increase in the unemployment rate to 9.0 percent, up two tenths of a point over March. That’s disturbing enough, but consider the rest of the relevant figures:

· Manufacturing jobs increased by only 29,000. By contrast, retail trade jobs grew by 57,100, almost double the production jobs. What does this say about the progress we’re making as a country to shift away from consumption-led growth?

· Government jobs actually shrank, thanks mostly to the loss of 22,000 positions in state and local government, further shrinking the revenue base for the same governments that let the workers go. As budget nooses tighten all across this country, the loss of public sector jobs could be enough to choke off the fitful recovery.

· The Department of Labor reported separately that the rate of new unemployment claims exceeded 1.7 million in April (the 4-week rolling average of 431,250 times four). That means that, roughly speaking, the economy had to produce a gross increase of upwards of two million jobs in order to achieve the net increase of 244,000. That’s an impressive performance for a single month, yet the unemployment rate actually rose nevertheless. There’s a lot more restructuring going on than real growth.

· Looked at another way, the economy would have to produce 360,00 net new jobs for each of the next 36 months to bring the unemployment rate down to a still high six percent. Every time a month falls short – April did so by 116,000 jobs – the bar is raised for the remaining months till March 2014. We’re falling behind, not progressing.

· Worse yet, our aim can’t simply be to reduce the employment statistics. All jobs are not created equal. Just ask the 8.6 million Americans involuntarily working at part-time positions – with reduced pay and low or no benefits.

As a country, we have our work cut out for us. It’s not enough to reduce budget deficits; in fact in the short run that will only make the employment and revenue problem worse. It’s not enough to aim merely to reduce the “jobs deficit.” That is a symptom, not a cause of what ails us. Instead, we must address the trade deficit itself. That means investing and producing more in the United States, importing less, and exporting more. Nothing less will be enough to address the jobs deficit.

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