Economics writer for the New Yorker John Cassidy has mixed reactions to the "really awful" jobs figures the Bureau of Labor Stats issued yesterday. He thinks the bottom line may be, well, "armageddon."
Cassidy offers four possible scenarios "in ascending order of frightfulness."
1) These are “rogue” figures. The payroll data from the Bureau of Labor Statistics jumps around a lot from month to month, and it is sometimes revised sharply in subsequent releases. Perhaps there was some sampling error, or perhaps the government statisticians got their tweaking wrong. The published job figures are not the raw ones that the government collects. They are adjusted for seasonal variation, a process that is always somewhat arbitrary. (For example, the unemployment rate before seasonal adjustment is actually 9.4 per cent, not 9.8 per cent.)
2) The economy is genuinely picking up, but many businesses don’t quite believe it yet, so they are balking at taking on any permanent new workers. Evidence to support this theory includes the fact that the hiring of temps did pick up last month, but the retail sector actually cut 28,000 jobs. If this is what is happening, then permanent hiring should pick up again in the next couple of months as the level of overall demand in the economy continues to rise.
3) The recovery is real, but it’s a jobless recovery. Thanks to advances in information technology, the application of more aggressive management techniques, competition from China, an expansion in the informal economy, or (enter here your own pet theory) the U.S. economy simply doesn’t need as many permanent workers as it used to need. In which case, unemployment is likely to remain high for the foreseeable future.
4) Armageddon. The recent pickup in spending is a blip, and businesses are right to be worried. Households are still burdened with too much debt, the banks face another wave of housing foreclosures, Washington is in gridlock, and Europe looks like falling apart. Come the New Year, consumers will pull back, the stock market will lurch downward, and the Fed will be out of ammo.
His pick? Number two. But he's worried.
