Monday, August 6, 2012

BLS Jobs Situation Report 08/04/2012: Economic Gloaming

The Bureau of Labor Statistics [BLS] jobs situation report of 08/04/2012 showed 163,000 increase in non-farm payrolls in June. Yet the unemployment rate as measured by u3 rose to 8.3% and the u6 measurement rose to 15%. Further, the labor participation rate fell [again] hence the unemployment rate did not rise due to discouraged workers being attracted back to the labor force and hence flooding the denominator of the calculation. Conversely the labor force shrunk [again] by 150,000. Then why the twin reports of more jobs yet more unemployment? (1) (2)

The increased employment and the increased unemployment come from two reports that occasional differ yet generally trend together. The 163,000 comes from a survey of business whereas the 195,000 unemployed comes from the household survey. (3)

However, one report, a snapshot as it were, does not tell the story. It’s not one BLS report or any one report in particular, it’s a series of reports, combining the reports and the synthesis of the over-time reports resulting in a trend. Regarding the BLS of 08/04/2012 and considering the BLS six month trend and for that matter the three year trend, adding in the ongoing Euro zone woes and ECB reports, adding in ongoing Federal Reserve Open Market Committee [FOMC] statements and notes, and finally looking at the trends in ISM manufacturing and ISM services indexes (the former below 50 and the latter hovering around 50 with below 50 an indicator of recession) …..the totality of reports produces a trend or pattern, that Don Luskin CIO of Trend Marco likes to refer to as: The Not So Great Expansion.

This Not So Great Expansion and the continuation thereof is discussed by Dr. Art Laffer in the Wall Street Journal 08/05/2012 as an Op-ed entitled The Real 'Stimulus' Record . Dr. Laffer is channeling Hayek. He is discussing and reporting statistical data that suggests a "V" shaped recession was turned into an elongated "U" shaped recession aka bathtub shaped recession by the deployment of Keynesian policy. That is, Hayek's proposition that Keynesian policy merely extends recessions. (4) (5)

Regarding the economies reported on by Laffer in his statistical table, one needs to note that these economies can't climb the right side of the elongated "U". They can't climb
the right side of the "U" due in part to [or mostly due to] the deployment of Keynesian policy.

Hence one merely ends up bumping along the bathtub bottom. One might call it "economic gloaming". Its a twilight were the sun never quite sets nor does the sun ever quite rise above the horizon.

(1) BLS jobs situation report 08/04/2012
(2) The Jobs Report Bad News by Larry Kudlow
(3) Why Did Unemployment Rate Increase - Phil Izzo, WSJ
(4) The Real Stimulus Record, Art Laffer
(5) Hayek: His Contributions to the Political and Economic Thought of out Time, Butler and Riggenbach


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