Employment Numbers

The release of some marginally positive job numbers on Friday occasioned a discussion between a colleague and me on Saturday.

First, seen from a slightly more objective perspective, 110,000 jobs for the past month is anemic.

With some 6 million lost jobs in the past 2+ years, plus the natural growth of employable Americans, and underemployed numbering almost twice that 6 million, 110,000 is so small a number as to be nearly invisible.

Yes, I know. the importance is allegedly in the trend. The cessation of months of lost jobs. A month in which jobs were added.

But here's something to ponder.

Old jobs don't, typically, come back. Due to process change, outsourcing, business failures, etc., it's not like the same jobs lost two years ago are now 'back.'

Sure, there may be a few auto jobs involving calling back production employees. Like those, ah, already on full pay at job banks.

There may be a few manufacturing firms calling back the marginal employee for slightly increased production volumes.

But big numbers of new jobs, large-scale job growth, typically comes from....new business.

However, given the spread available to financial institutions in Treasuries, they aren't lending excess liquidity. They are investing them. And, with the recent mortgage market bubble bursting after too much low-rate lending, bankers are wary of doing that all over again.

Thus, despite idiot CNBC economic no-nothing Steve Liesman's protestations (see linked post), ultra-low rates are a curse right now. David Malpass was and is correct in contending that investors should determine appropriate market rates and corresponding funding available to projects.

Thus, there's not much in the way of new business formation at present.

In fact, between federal government actions giving unions sweetheart deals on auto maker bankruptcies, excessive witch hunts among bankers, and the nationalization of the medical and health insurance sectors last week, an investor or businessman with a new idea is very wary of risking capital right now.

Government is simply too capricious to trust for anyone to make large-scale investments just now.

Without new business creation, you can forget about much in the way of strong 'new' job growth.

A "double-dip" recession? No, probably not.

More like just a flat, slow non-expansive, sluggish economy that won't shrink again until all those hundreds of billions of borrowed and printed dollars have been spread around.

But it won't grow robustly, either. Because the 'stimulus' was borrowed federal money, not genuine, private sector-sourced investing or spending.

Keep that in mind in the coming months, as each new successive jobs report is released.

The US economy is much smaller now than it was only two years ago. Deleveraging has accomplished that. Federal leveraging isn't providing large numbers of quality private sector jobs to replace those that were lost.

At even 300,000 new jobs per month, it's going to take over two years to soak up the unemployed. Even longer to use the underemployed.

A few months of 100,000 jobs increases won't materially affect our economy at all, nor signal the dynamic new private investment which will really lead to healthy, large-scale private sector job growth in months and years to come.