Now raising intellectual capital
By John M. Berry
John M. Berry, who has covered the economy for four decades for the Washington Post and other publications, is a guest columnist.
Doing more with less is a corporate mantra that some say bodes ill for job growth. Data last week showed that productivity at non-farm business jumped at an extraordinary 9.5 percent annual rate in the third quarter.
Yet the sharp gains in efficiency are helping drive corporate profits and that could be just what’s needed to convince employers that it’s safe to begin hiring again.
Data just out shows the pace of joblessness picked up in September, snapping what had been a steady improvement from “really terrible” to “at least it’s not as terrible as the prior month.” The drop in non-farm payrolls was even worse than Goldman Sach’s downwardly revised -250K forecast, coming in at -263K. But also take a look at July: revised to -304 from -276k. August was revised to -201K from -216K.
The unemployment rate ticked up an expected 0.1 ppt to 9.8%.
Also average hours worked in a week slipped further to 33.0 from 33.1. I guess employers are cutting hours as well as jobs. Not exactly confidence inspiring for the nation’s shoppers.
So German Chancellor Angela Merkel has got her way. After months of pressure from the German government, General Motors has finally caved in and agreed to sell a majority stake in Opel to Canadian car parts maker MagnaÂ and Russian backer Sberbank.
It isn’t all over yet — GM is still attaching conditions to the sale of a 55 percent stake in “new” Opel — but the timing of the announcement and the apparently good news for Opel’s 25,000 German employees will be music to Merkel’s ears with just over two weeks to go before a Sept 27. general election.
Interpreting the employment numbers has become an exercise in scavenging for good news. After a year of beefy job losses, any sign that the pace of deterioration is slowing is certainly welcome. Were it not for the Obama stimulus package, we would probably be continuing to see job declines of closer to half a million a month.
Even so, the data still don’t offer much hope of a vigorous recovery.
While layoffs are declining, there are precious few signs that companies are hiring. As a result the number of people without work for more than six months has reached an alarming 5 million.
Even in weak employment markets, the United States has typically had a trump card to play. The nation’s workers are legendary for their willingness to travel across the country for new opportunities.
The result has been a speedier recovery of job growth than in Europe and possibly a higher productivity rate, since skilled workers are better matched to openings.
The ADP national employment report showed job losses still huge in August, though better than July and the smallest decline it’s recorded since September 2008.
Though it came in worse than expected, markets aren’t doing a whole lot with the data, with Treasuries hovering around the unchanged mark and stocks down only slightly.
Sure they’re still cutting jobs, by nonfarm payrolls are shrinking at slower pace, down only 247K in July, and the unemployment rate actually fell to 9.4% from 9.5%. With other data showing a tentative turning point in housing and manufacturing moving toward expansion, this is starting to feel like the real deal.
Sure July is only one month, but the Treasury market isn’t waiting. The 10-year benchmark is down nearly a point to yield 3.88%, bringing the big 4.0% threshold back into focus. Question now will be whether investors start fearing a rise in yields will quash the economic growth.
The United States has been labeled “no vacation nation.” Americans are notoriously diligent compared with citizens of other rich nations — putting in long hours and often not even using the skimpy vacations to which they are entitled.
Now more Americans are being forced to take it easy. Even for those who are keeping their jobs, many companies are cutting hours and imposing “shotgun” vacations in an effort to economize.
I’m just getting a chance to look at the Treasury’s quarterly refunding announcement now, and no surprise here. It’s a record amount at $75 billion that will start to hit the market next week. All the details are here. Its decision to increase TIPs issuance also comes as no surprise after the Wall Street Journal flagged it here.
Given the gains in the Treasury market today on weaker-than-expected data on the service sector, it doesn’t look like the mountain of the supply, with much more to come, is weighing too heavily on the Treasury market. But like many things in the financial markets, it won’t matter until suddenly it does. Improving economic conditions will allow bond investors to narrow their focus back on the supply, but given today’s data, which also included a 371K decline in private sector jobs, and the looming monthly employment report from the BLS on Friday, fears about the economy still rule.
– Christopher Swann is a Reuters columnist. The views expressed are his own —
NEW YORK, July 24 (Reuters) – For the first time in three generations, Americans across the nation are facing the threat of long-term unemployment. Already more than one in four jobless Americans have now been out of work for more than six months, the highest level since records began in 1948.