On Thursday, the market's sharp decline had analysts and observers rushing to make proclamations of an imminent double-dip recession. Writing in the Financial Times earlier this week — before Thursday's mini-crash — economist Larry Summers pegged the chances of a double-dip at one in three. Others suggested that the decline, combined with a rash of punk data, was a sign that the U.S. had never left recession in the first place.
But this morning's jobs figure, combined with data that was generally ignored among Thursday's market carnage, should lead us to ratchet down our fear of an imminent recession. The economy may have slowed, and the future is uncertain. But if you want a double-dip this summer, you'll have to go to Carvel.
In the accompanying video I discuss the latest jobs report with Henry Blodget:
First, lets consider the jobs data. The July jobs report was the typical blah-ish report we've come to expect in the past couple of years. The economy added jobs (117,000 on net), but not at a rate sufficient to make a dent either in the unemployment rate or in the vast armies of underemployed Americans. The trends that we've long noticed continued. And while they aren't cause for elation, they should be cause for some relief. The conservative recovery — one in which the private sector adds jobs every month while the public sector cuts them — continued. The private sector in July added 154,000 jobs while the government cut 37,000. Put another way, in a month in which Washington intentionally concocted a crisis designed to foment uncertainty and paralysis, companies added about 38,500 jobs per week.
Another trend that has been prevalent in the past couple of years continued: In hindsight, things looked a little better. In today's report, BLS revised the job-creation figures for May and June upwards. May's figure was revised from a 25,000 gain to a 53,000 gain, while June's was revised from 18,000 to 46,000. In all, BLS discovered 54,000 jobs that it hadn't previously detected. Again, that's not nearly enough. And there was plenty of negative material in the report -- a low employment-to-population ratio, people leaving the workforce, high unemployment rates. But the report simply isn't consistent with an economy that is shrinking. Thanks to corporate focus on productivity, the U.S. economy has shown that it can grow without creating jobs. But it can't create jobs without growing.
In the panic over the markets yesterday, investors and analysts may also have ignored other data that point to expansion. Consumers account for about 70 percent of U.S. economic activity. And preliminary data indicate that consumers didn't pull back in July. Yesterday Thomson Reuters reported that its same-store sales index rose 4.4 percent in July from the year before. The International Council of Shopping Centers reported that same-store sales in the chains it tracks rose 4.6 percent in July from the year before. That's a slower rate than has been reported in recent months, but it is a far cry from a contracting economy. Want more? The Institute for Supply Management's surveys show that both the manufacturing and the service sector expanded in June.
In general, the data flow of the past two weeks from the U.S. — and particularly from Europe -- has been negative. Combined with the toxic rhetoric flow coming from Washington and other state capitals (Minnesota's government shutdown led to a fair number of job losses last month), the headlines have created enormous anxiety over the prospects for growth. Thursday's market slide, I believe, was a response to a sovereign debt and political crisis in Europe — not to a domestic growth crisis. And as we've seen, crises have a way of spilling across borders, markets and oceans.
A single jobs report shouldn't eliminate the legitimate concerns about America's frustratingly slow expansion. But it should allay them -- at least for now.
Daniel Gross is economics editor at Yahoo! Finance.
Follow him on Twitter @grossdm; email him at firstname.lastname@example.org.
- employment-to-population ratio
- government cut
- the Financial Times
- Daniel Gross
- Minnesota s government shutdown
- Thomson Reuters
- Henry Blodget