By James Saft
(Reuters) – A strengthening U.S. jobs picture is the best news in months, carrying within it confirmation of the fruits of a pleasant rebound in American manufacturing.
That said, of the three sources of power for a recovery – private activity, public activity and monetary policy – only one will be a source of strength in the coming months, while the others may well prove a drag.
First, the good news; January’s payrolls data was strong, exceeded expectations, included positive revisions to previous months and, best of all, established something approaching a positive trend. Hours worked are growing more quickly than employment, hinting at hiring to come if employers gain confidence. It is just about possible to put together a thesis that those Americans with jobs are feeling a bit more secure and are finally going ahead with long-deferred purchases of big ticket items like autos.
This hints at something we’ve not yet seen since the bubble popped; a self-sustaining recovery.
The problem with that line of thinking is that we are nowhere near where we usually might be three years into a recovery. That’s because it’s a balance sheet recovery, characterized by paying back of debt and hemmed by the kinds of complications, political and economic, that you get when debt expansion, that great engine of growth in the past 20 years, has stalled.