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Saturday, June 04, 2011

The Post Goes Negative on the Economy

This is somewhat surprising. Dean Baker takes the Washington Post to task for being too pessimistic about the economy:

The Post Goes Negative on the Economy, by Dean Baker: The May jobs report was bad news, but it was not as bad as the Washington Post and many other news outlets made it seem. When we get monthly data it is always important to remember that we are pulling out a snapshot from a longer period of time. ...
For this reason it is important to take the 54,000 jobs created in May against the backdrop of 234,000 jobs added in April. Employers who hired many workers in April were likely to add few or none in May. ...
It is more likely that the April numbers overstated the underlying rate of job growth in the economy and the May numbers understate it, than there was some huge shift in the economy between the two months. Still, the average rate of job growth over the last three months was just 160,000.
It takes roughly 90,000 jobs a month to keep even with the rate of growth of the labor force. This means that if the economy stayed on this growth path, it would take almost a decade to get back to normal levels of unemployment. Furthermore, with house prices falling again and another round of state and local cutbacks kicking in next month, it is more likely that the job growth will be slowing than speeding up in the months ahead.

It's "not as bad as the Washington Post and many other news outlets made it seem"? The prospect of "almost a decade to get back to normal levels of unemployment" is very bad news. I don't usually disagree with Dean, but my reading of the article is that it is a fairly accurate picture of the problems now, and the potential pitfalls ahead. If the Post wants to help us try to goad legislators into action by admitting the economic recovery is faltering, great, welcome aboard (the article doesn't actually call for government action, but at least it doesn't dismiss the signs of weakness as transitory).

Here's a bit from the article:

Job creation withers in May as doubt reigns, by Brady Dennis, Washington Post: Behind the hard numbers in Friday’s dismal report on the job market are scared small-business owners, slashed state budgets, dried-up federal stimulus funds and a lingering uncertainty that has taken hold from corporate boardrooms to factory floors around the country. ...
It is the second time that growth has stumbled; a similar scenario played out last summer, reflecting the long, uneven process of clawing out of a recession spurred by a financial crisis.
Employers from coast to coast describe a situation in which tepid economic growth alone isn’t enough to prompt them to add to their payrolls. Sales have been rising, but slowly and tenuously. Doubts about the future have continued to chip away at confidence...
That standstill showed in the numbers released Friday, which revealed that the job market weakened across a wide range of industries in May. ... The largest job losses were in a public sector that is rapidly retrenching. Local governments have been cutting jobs in vast numbers — 28,000 in May — trying to eliminate their yawning budget gaps by dismissing public employees.
The public school district in Saginaw, Mich., for example, gave pink slips to 12 percent of its employees, including dozens of teachers, custodians and bus drivers. The reasons are familiar: Federal stimulus money is drying up; states are slashing their budgets, and cities and schools are following suit; and health care, fuel and other costs are rising. ...
In contrast with the previous three months, when the private sector was expanding its payrolls aggressively enough to maintain solid job growth despite the loss of government jobs, in May the private sector downshifted. Even as professional and business services and the health-care industry added thousands of jobs, gains in most other sectors slowed to a crawl or went backward. ...

Is that too negative?

    Posted by on Saturday, June 4, 2011 at 08:28 AM in Economics, Fiscal Policy, Press, Unemployment | Permalink  Comments (29)


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