Things Getting Better

http://economix.blogs.nytimes.com/2012/03/09/comparing-recessions-and-recoveries-job-changes-5/

***************

"If you want to be a sharp thinker, be around sharp people." (John C. Maxwell)

***************

With the Labor Department reporting a third straight month of net job gains above 200,000, the consensus of economists is there is some momentum on the plus side of economic growth here in the U.S.

I've attached the trend lines I watch ("Comparing Recessions and Recoveries: Job Changes") and they basically show the worst trend line since the Great Depression pulling itself back up. But, this is a trend line so dramatically worse than the others that "up" is more like "less worse."

Four years after employment peaked, barely 1/3rd of the net loss in jobs has been reversed. By the Labor Department's count, after shedding 8.8 million jobs in almost 2 years, the economy has generated about 3.45 million in the following two years.

As Laura Tyson pointed out in her January "Economix" post, job growth trend lines (developed by the Hamilton Project) at a 200,000 jobs-per-month rate would take until 2024 to make up the "gap" from what we've lost. Accelerate that same data to 321,000 jobs per month (average monthly job creation for the best year in the 90s), we're talking 2017.

There is a basic consensus that the U.S. economy has new workers joining (or available to) it at about the rate of 125,000 to 135,000 per month with high school and college graduation, etc. So, the nominal number of 200,000 plus only drops the unemployed number by a net difference per month.

Laura Tyson's perspective is that the central problem remains inadequate aggregate demand - both at home and around the world. The shortfall in demand is reflected in unutilized resources, notably unemployed and underemployed workers and idle plant and machinery.

While there are various estimates on this issue, Tyson quoted a recent Treasury study as indicating that there is a "gap" of about 7% between actual and potential output in the United States: more than $1 trillion in goods and services. And, of course, the "home value" thing gets in the way of consumption.

Temporary hiring is an early indicator of an economic comeback and this week's numbers are very good in that regard. According to one economist, this week's numbers are "unambiguously" positive and the job creation numbers are predictive of a GDP growth rate of 2.0 to 2.5%.

However; Macroeconomic Advisers, one of the most closely watched forecasting firms, reduced its estimate of economic growth in the current quarter to an annual rate of 1.8% from 2%. In the fourth quarter of 2011, the economy actually grew at 3%. Several forecasters expect job growth to slow: IHS Global Insight forecasts a slowdown to 180,000 jobs per month. Macroeconomic Advisers says that growth will slow to 140,000 jobs per month by the end of the year. These people see a drain from rising oil prices and a continued debt overhang.

We'll see.