A few PhD economic bloggers I respect have forecasted a slow recovery but an improvement in employment numbers. Based on my view from my small corner of the world I have remained skeptical. Many small business people have remained reluctant to hire and invest due to massive increase in regulation (especially the health care bill), the huge deficit, fear of pending tax increases, credit tightening and often irrational banking practices.
With tax increases only forestalled a few years, income was pushed into 2010 and expenses pushed into future years when able. And the many businesses I see being closed or shut down are not likely to reopen (especially with tightening credit). New business creation is negligible and that is often the source of employment coming out of a recovery.
But Scott Grannis at Calafia Beach Pundit commented on the June employment numbers, claiming it is so shockingly low that it may be an aberration.
In June jobs report so bad it’s difficult to believe Grannis writes:
A weak employment report might be understandable given that the economy was still suffering from its “soft patch” in June, but bad news of this magnitude—and especially considering the huge variance between the household, establishment, and ADP surveys—must be considered suspect. Sometimes these surveys just go buggy. When they all line up in the same direction, then one can be reasonably confident that the data is somewhat sound. But when they vary by almost 600K, then it’s time to take a deep breath and avoid jumping to extreme conclusions.
For the past year or two, one consistent theme in the jobs data has been a steady—and perhaps even an accelerating—decline in the number of public sector jobs, and June was no exception. As the chart below shows, public sector jobs have declined by a little more than 500K on net since their peak in 2009 (abstracting from the temporary census jobs). This is welcome news, since bloated public sector spending and public sector payrolls (and their attendant and generous benefits) have been a drag on growth for some time.
If this is the result of a decline in public sector jobs then maybe this is not such a bad thing. The more unemployment becomes politicized the more difficult it is to get a clear picture.