Friday, January 08, 2010

Competing Views

The December job report hit today and was a disappointment for folks who thought the economy was turning a corner; Unemployment remains at 10% but the economy, rather than adding jobs, shed an additional 85,000.

Bob Stein of First Trust Advisers doesn't think it's all bad news:

However, the other data in the report suggest payroll growth will start again very soon. I say "again" because revisions to last months' data show that payrolls increased 4,000 in November, the first gain in two years. Two other positive numbers jumped out of the report. First, finance/insurance jobs increased 10,000, the most in three years. Second, temp employment — traditionally a leading sign of labor demand — increased for the fifth straight month. Meanwhile, the total number of hours worked in the private sector were unchanged in December, remaining 0.6 percent above the bottom in October. Given the economic growth we've had since the summer, the jobless rate probably peaked at 10.1 percent in October. Unemployment ticked down to 10.0 percent in November and held there in December. The jobless rate will not decline every month, but is likely to be significantly lower by late next year.

Hhhmmm. A glimmer of hope? Maybe. But then came James Pethoukis:

1. Remember this simple formula: Unemployment drives presidential approval numbers and presidential approval numbers drive midterm election results.

2. President Barack Obama’s approval numbers are hovering just a tick below 50 percent. Since 1962, the average House midterm loss for the president’s party when his approval is sub-50 percent is 41 seats. The GOP needs 40 to take the House.

3. And make no mistake, the December unemployment numbers were bad both economically and politically. The 85,000 job loss was worse than expected and will be played that way the media. The continuation of a double-digit unemployment also resonates with voters. And not a in a good way.

4. Then will come the second-take stories that will notice the shrinking labor force, which dropped by nearly 700,000 from November. Had it stayed stable for last month, the jobless rate would have been 10.4 percent. Had it stayed stable since August, the jobless rate would be 11 percent!

5. But wait, there’s more! The U-6 rate rate which combines the basic jobless rate, discouraged workers, part-timers-who-would-rather-be-full-tim ers climbed to 17.3 percent. And the average duration of unemployment rose to a record high 29.1 weeks.

6. Also, there is every indication that as the slowly growing economy eventually draws workers back in the labor force, the jobless rate will creep up to new highs. (Big companies remain cautious about hiring, and small biz remains under pressure due to tight capital markets.) The validity of the Obama recovery plan will seriously be cast in doubt.

7. The sickly labor market will also make is that much harder for the White House and Hill Dems to celebrate what is likely to be a brisk upcoming GDP report in the 4-5 percent range. That seems like an abstract number compared to the unemployment rate.

8. Combine a weak labor market – which may appear to be getting worse to voters – with the moribund housing market and rising gas prices, and you got a toxic triple threat that will be poisonous to Democratic incumbents and further drain Obama’s political capital

Granted, their takes come from different angles but what to think?

No comments:

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