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December 7, 2007
Nonfarm payrolls: Stuck in neutral
Nonfarm payrolls increased by 93,000 last month. The average for the last 5 months is approximately 99,000. We would certainly like it a little better if these numbers were a little higher. If we need somewhere around 125,000 jobs per month to keep up with population growth, then we are falling behind--albeit slowly, but falling behind nonetheless. What is interesting is that the gains have been reasonably consistent. In the last 5 months, three data points were in the 90,000s, just two outliers--one at 170,000 and one at 44,000. So it's as if the economy is trying to keep growing, but just isn't getting the traction it was getting in 2005 and 2006. We're stuck in neutral, unable to get back into the higher gear.
But at the same time, the labor force participation rate climbed a bit last month, back up to 66.1%--where it was in July. The employment to population ratio is at 63%--also the same as its July level. These numbers had dipped a bit in recent months, so this could be a good sign that there still is some strength remaining under the surface.
Of course employment is a lagging indicator. I wouldn't recommend trying to forecast when a recession will begin by looking at the last month's job growth. But given the preponderance of the evidence this number is not going to be enough to cause the Fed to stop cutting interest rates yet. Not until there's a clearer sign that we've finally let out the clutch and are safely in high gear again.
Posted by William Polley at December 7, 2007 11:01 AM
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Comments
As I noted over at Angrybear, BLS and you both put the employment to population ratio jump in the proper perspective. Still wondering what's up with Larry Kudlow as I figured he would be screaming from the moutain tops at the HUGE one month increase in employment per the household survey.
Posted by: pgl at December 7, 2007 3:16 PM