Summary: The jobs report is a monthly gift for journalists and economists. Packed with numbers — mostly noise, with large error bars, subject to big revisions — it generates a flood of clickbait headlines and confident analysis. Lost in this are the important trends we need to know (aka “old news”, because they change slowly). Here are two of the big ones.
The experts will explain that this news is life-changingly significant, every month.
“June’s job growth was big and important!“
No, the June strong headline number is not important. Like May’s horrific slow growth, it’s probably just noise. More important are the 16 months of slowing job growth (i.e., job growth decelerating from the slow grow characteristic of this recovery). In February 2015 YoY growth in non-farm payrolls was 2.3%. In June it was 1.8%. This drop erased the acceleration of Feb 2014 – Feb 2015 that got economists excited about the big Fed rate increases coming really soon. Normal days were coming again! But they’ve been delayed, again.
“Job growth is slow, but it’s still growth!“
The number of jobs is not the best metric in the New America, with its growth in part-time, un-unionizable, no benefits, no training, disposable employees. A better (albeit, like all economic data, imperfect) measure is the total number of hours worked per month. For the full recovery it tells the same story as jobs: slow growth since the crash (jobs are up a total of only 4.4% over nine years, hours are up 5.3%).
But total hours have been flat for the past six months. (total hours for production and non-supervisory workers has been flat for seven months). That’s a red flag. Gaps like this between similar metrics deserve attention, since they signal that something is happening.
Conclusions
This report shows two traits characteristic of this recovery: slow, with remarkable resilience. So far the economy has taken some hits, but shrugged them off and bounced back. Since there is no such thing as a “stall speed”, and the economy grows too slowly to overheat or develop serious imbalances, it’s not clear what will cause the next recession. This recovery might astonish everybody in 2016. Disappointing the optimists by never zooming to “normal” speed; disappointing the bears by not falling into a recession.
As I have said for almost a decade (since starting the FM website in 2007), we have entered the transition to a new age. What were wonders, like negative nominal interest rates and steady slow growth, have become commonplace. What further wonders await us in the next few years? So far the economic surprises since the crash have been mostly good for America. That lucky streak might not continue.