Weaker jobs report is a reminder that we’re still on a rocky road

Summary: The author of this post sees the recent jobs report in March as very troubling since it is significantly lower than in previous months.  However, she also states that although January and February were higher, there is still not enough jobs to return to full employment in three years.  She blames much of the weak job growth to the warm weather in January and February.

The March 2012 employment situation report from the Bureau of Labor Statistics was a negative surprise and underscored the fact that a robust jobs recovery has not yet solidified.   The job growth of 120,000 was much lower than the 275,000 jobs added in January and 240,000 jobs added in February. However, much of the weak job growth in March was likely due to unseasonably warm weather in January and February (think, say, of hiring being pulled forward, i.e., people getting hired in January or February instead of March). Looking over the last three months, average job growth was 212,000, probably a better measure of underlying growth. This, however, is still a far cry from the roughly 350,000 jobs we need per month to get back to full employment in three years.

The unemployment rate ticked down by one-tenth of a percent to 8.2 percent in March, but that was largely due to people dropping out of the labor force, not an increase in the share of the working-age population with jobs. As a reminder of what a healthy unemployment rate looks like, consider that five years ago, in March 2007, the unemployment rate stood at 4.4 percent, and 12 years ago, in March 2000, the unemployment rate was 4.0 percent.

One broad concern is that the drop in the unemployment rate over the last two years has been unexpectedly large given the relatively tepid growth in gross domestic product over this period, and that further significant improvements in the unemployment rate will likely require faster GDP growth than what we’ve been seeing.  For more on this, see this recent EPI analysis.

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Phelps on Keynesianism

Karl Smith says:

I am not even sure what to make of this, but in a note relating to the Keynes-Hayek debate Edmund Phelps writes--

What now do we do? With some luck, the economy will “recover” through a return of investment activity to sustainable levels once some capital stocks, like houses, have been worked down. But it will not recover to a strong level of business activity unless something happens to boost innovation. The great question is how best to get innovators humming again through the breadth of the land. Hayek himself said little on innovation. But at least he had an applicable theory of how a healthy economy works.

The Keynesians, sad to say, show no understanding of how the economy works. They think they can lever employment up or down by pushing buttons – as if the economy were hydraulic. They show no grasp of the concepts that would be necessary to restore us to prosperity and flourishing. In an old image that applies well to the posturing of today’s self-styled Keynesians, “the Emperor has
no clothes.”--

So obviously there is the general mincing of welfare and macroeconomic notions. Does anyone seriously doubt that the government can lever up down employment by pushing buttons? Suppose  that anyone found having a job was shot on sight. Show of hand for how many think this would lower employment.

Suppose I drafted all citizens between the ages of 16 and 65, do you think this would raise employment?

But, lets leave that aside since a lot of folks get confused over the difference between welfare and economic aggregates.

What is anyone to make of the statement that a

a strong level of business activity unless something happens to boost innovation.

How can that possibly be anything other than a monetary statement, which Phelps rejects as a cause for the slump. Accept for concerns over monetary policy what at all would innovation have to do with business activity?

It is clear why you could not get economic growth without innovation but the vast majority of business activity over the course of human history have been in economies that were not growing.

Indeed, the vast majority of business activity that occurs from now until the end time will almost certainly be in economies that are not growing. Sustained per capita growth is an odd thing that just started recently and will likely end in fairly short span of time.

I hate to put it this way but I cannot read this without wondering, if this is what Edmund Phelps thinks, then what do most people think?

Original reading here

Coordination & Coercion

John Wallis’s presentation was to understand how countries or such societies can enforce impersonal rules for everyone. John Wallis spoke about how impersonal rules apply to “most” all individuals, but not universal and anonymous rules are those that apply differently to different individuals.  Governments do not get their power from coercion but instead from coordination with the elites.  His definition of elites, were people who had coercion power and could impose some form of violence to other individuals.   Since government gets its coordination power through the coercion power of the elites, why would elites give up some of their own coercion power?  This was explained as that there has to be some form of benefits, better known as rents, to the elites for them to give more coordination, and possibly but not necessarily coercion, to the government.  This coordination between elites in the form of “government” can give validation to the organization, given by the elites.  It was discussed that in the face of being overthrown by the “elites” own people, the elites will turn to creating some formal entity to entice the people to see fairness achieved throughout the lands by this entity.  This so called “entity” is what can be called a government.  For government gives some validation of political and economic hope for fairness in which the elites will relinquish some coordination and possibly coercion power to the government.  The key question observed was, At what point can the government punish the elites?   Ultimately, in conclusion, the government must treat everyone the same which is what we began the discussion about, impersonal rules.  With this point made, now organizations, elites, and likewise interested parties must pay more attention to what the government is doing because of this stated “rules for everyone” type atmosphere.  John stated that this turns the government into a largely more political environment more similar to what we see today. 

At Least One Italian Export Is Soaring: Gold

Tyler Durden from the blog Zero Hedge:

When one thinks PIIGS, one usually imagines countries with collapsing economies, 50%+ youth unemployment, and current account deficits so large they are about to drag down the ECB, Bundesbank and Germany. And while that is absolutely correct for the most part, there is one product which the PIIGS, or in this case Italy, are all too happy to export in size. Gold, and not just to anywhere, but to that ultimate safe haven - Switzerland. From BBC: "Italian exports of gold ingots to Switzerland have soared in recent months, data has shown. Exports to Switzerland were 35.6% higher than in February 2011 "mainly because of sales of non-monetary raw gold", statistics agency Istat said. This followed a 34.6% year-on-year rise in exports to Switzerland in January." And the absolutely funniest attempt at spin ever:

"Experts say improvements in the trade deficit could be a sign that Prime Minister Mario Monti's economic reforms are starting to take effect."

Uhm, when the country is exporting the only real asset it has for when it will need to backstop its own currency following the inevitable collapse of the EUR, this is not exactly a sign that the country's reforms are taking effect, but rather that everyone else in Europe is stockpiling the precious metal in advance of "some" event, which is coming.

In the meantime, and closely related, as we posted two months ago, another soaring Italian export... are bank deposits.