naked capitalism

Hugh says:

These were some comments I made earlier today on this elsewhere on the web.

-131,000 jobs lost in July (initial estimate)
-221,000 revised job losses in June, up from -125,000
-181,000 decline in the size of the workforce in July

+117,000 the number of jobs needed in July to keep the unemployment number where it currently is.

Wages and hours were little changed, but these are not broken down by income level so it is not clear if there are offsetting movements in them.

What to look for next month.

Will there be a big adjustment to the July figures as there was this month for June?

There should be at least another month of job losses due to the Census winding down.

Job losses at the state and local level. How much will the $26.1 billion aid package to states offset these?

I have been writing for a while now myself about how dicey the BLS numbers have become, especially the initial numbers on jobs. But also its data collection is not really set up to track a lot of what is going on in the kind of economy we have, with erosion in the size of the workforce and, as I said above, no breaking down gains and losses in a clear cut way based on income level (to get an idea of who is and is not doing well). There is some of this but not clearly laid out.

One other point is that to date and with the numbers we have, the economy has added 640,000 jobs since the beginning of the year. A minimum of 618,000 were needed to just take up those entering the workforce with no changes to the unemployment/employment rates. If we are talking about finding jobs for every new entrant over the first 7 months of the year, 683,000-686,000 jobs would have to have been created over this period. So depending on which way you wanted to look at it, we are currently either 32,000 jobs ahead for the year or 65,000-68,000 behind. Now what is important to keep in mind is that this period marks the high point of the Obama stimulus. And the best it did was to bring us back to in or around a zero point. At the same time, not all the uptick due to the Census has been worked through and we don’t know how many jobs states and local government are going to cut. Private sector hiring remains weak. So we should see worsening employment numbers for the rest of the year, barring a new and highly unlikely stimulus package. This is more or less what I predicted in a general way last year. This is an election year. Small sporadic efforts would be made to keep the economy from tanking before the election but what we are seeing is the beginning of a slide downward.

The probability range for a critical point began last fall. It was offset by the continuation of the Fed’s ZIRP and buying of bank crap assets. There has also been an offloading of crap on to Fannie and Freddie. Geithner took off the loss limits on these to keep them from blowing up but they are showing strains and will blow up at some point.

The European crisis could have blown things up too but it has been papered over for the time being. Much the same could be said about China’s many bubbles. In our country, the calculus seems to be to get through the election. Then you have end of the year effects where profits are pumped up to justify end of the year bonuses. So it is not until the early months of 2011 before it looks like things go seriously off the rails.

This is not to say things might not blow up at any time. They could. But the period of maximum probability for the next crash is some time next year. That’s my opinion. I think the more consensus view of liberal economists is there won’t be another crash but rather a profound and prolonged muddle.

pebird says:

New normal = 10% unemployment