MacroScope

The productively disinflationary American worker

Strong productivity may be good for an economy’s long-term growth prospects. But it’s not always great for workers in the near-run, since it literally means firms are squeezing more out of each employee. In reality, rapid productivity growth can make it harder for workers to get new jobs or bargain for raises.

The benefits of operating efficiently are obvious enough: Productive firms will have more money left over to invest, which should lead to more job creation in the future. Except lately, that future seems never to come, giving rise to the somewhat oxymoronic notion of a jobless recovery.

Millan Mulraine at TD Securities explains:

In many ways, the 2009 and 2002 economic rebounds are very similar in that both can be characterized as largely ‘jobless recoveries’. However, the compensating boost from capital investment – which was a defining feature of the 2003 economic recovery and a key underpinning for economic and productivity growth during the 2003-2007 period – has been largely missing during this cycle. The missing boost from capital investment activity has reinforced the subpar economic performance over the past two years, and will portend poorly for longer-term economic growth potential if the trend continues.

Productivity was very strong at the start of the recovery, but then lost steam as the rebound went on.

FRED Graph

Data on Wednesday showed productivity growth picking up again in the second quarter, posting a 1.6 percent increase that was more than double the first quarter’s pace.

Soft underbelly to firmer July jobs report

After a string of very weak figures in the second quarter, the July employment figures prompted a collective sigh of relief that the U.S. economy was at least not sinking into recession. That doesn’t mean the news was particularly comforting. U.S. employers created a net 163,000 new jobs last month, far above the Reuters poll consensus of 100,000. Still, the jobless rate rose to 8.3 percent.

Steve Blitz of ITG Investment Research explains why the underlying components of the payrolls survey offered little cause for enthusiasm:

The headline is good but the details do nothing to dissuade the notion that economic activity remains soft. There is, in effect, no sign in the details economic activity has accelerated from June’s pace when a downward revised 73,000 private sector jobs were added. Hours worked remain the same and overtime at manufacturing firms fell. The diffusion index (percentage of firms adding workers plus one-half of the percentage with unchanged payrolls) dropped in July to 56.4 from 56.8 in June, 61.3 in May, and 62.2 in July of last year. The civilian labor force dropped by 150,000 and the broad U-6 measure of unemployment rose to 15.0% — reversing all the gains made in 2012.

July non-farm payrolls to disappoint a fifth month in a row?

U.S. non-farm payrolls have come in below the Reuters Poll consensus for the past four months, the longest streak since an eight-month period in 2008-09 when the U.S. was in the depths of recession and, at one point, losing more than half a million jobs a month.

Compared with a few years ago when there was a very wild range of forecasts on a given jobs report — the widest spread polled since the financial crisis began was 575,000 for the May 2010 data — economists are now huddling together in a pessimistic pack.

For the July data, due out at 1230 GMT, the range of forecasts in the Reuters Poll (on a consensus of 100,000) has narrowed to a 107,000 spread between highest and lowest, compared with 132,000 for the June data.

U.S. payrolls ‘wild card’: public school teachers, employees

The “big wildcard” in making July payroll projections is the size of the swing in public school teachers and other school workers.

Because of the size of teacher layoffs and the effect of the July 4th holiday on the data, the July seasonal adjustment factor can vary significantly from one year to the next, and the variation can be extreme, says Ward McCarthy, managing director and chief financial economist at Jefferies & Co in New York.

Many public school teachers, in addition to some other public school employees, are hired on a ten-month calendar that runs from September through June, large-scale layoffs occurring in July and large-scale hiring occurring in September.

Hudson Yards and New York’s love-hate relationship with Mayor Bloomberg

(Updates with background on Fiscal Policy Institute, details on city bonds)

New York City’s Hudson Yards project – a $12 billion transformative development slated for Manhattan’s West Side – embodies several aspects of the Bloomberg administration’s strategies that infuriate critics while delighting boosters.

At a public hearing on Thursday, the developers will ask a city agency to approve $106 million of property tax breaks for the first office tower planned for the site. The new 46-floor, $1.27 billion building, which is expected to house luxury retailer Coach Inc, should start going up in October, and be finished in July 2015, according to the filing for the tax relief.

Critics say the developers – The Related Companies and Oxford Properties Group Inc – should not be tapping taxpayers’ wallets, but should instead be relying on their own deep pockets.

Fed doves ‘will not be patient’

Ellen Freilich contributed to this post

The Fed did the twist. Will it shout as well? There has been some debate among economists about whether the U.S. central bank might launch a third round of outright bond buys or QE3 given that it just prolonged Operation Twist.

But a truly grim report on the U.S. manufacturing sector from the Institute for Supply Management, if coupled with further evidence of a deteriorating labor market, could certainly induce policymakers to press their foot to the monetary accelerator.

Not only did the index slip below 50 in June, pointing to a contraction for the first time in three years, but the reading of 49.7 was lower than the lowest forecast in a Reuters poll of economists. Moreover, the subcomponents showed the biggest drop in new orders since the aftermath of the Sept. 11 attacks in 2001.

U.S. jobs data marks gloomy hat-trick for economists

By Sarmista Sen and Sumanta Dey

 

Economists predicting jobs growth in the United States, or rather the lack of it, scored an unfortunate hat-trick on Friday – vastly overestimating the rise in payrolls for three consecutive months.

The U.S. economy added 69,000 jobs last month, less than half the Reuters median for a gain of 150,000 jobs and missing even the lowest forecast of 75,000 from nearly 80 economists .

Forecasters last achieved that feat between April and November 2008, when the actual NFP number consistently missed the lowest forecast in the survey, for eight consecutive months.

Asian Americans hit hardest by long-term unemployment

Asian Americans have the highest rate of long-term joblessness of any ethnicity in the United States, according to a report from the Economic Policy Institute, a liberal think tank in Washington.

Last year marked the second year in a row that Asian Americans had the largest share of unemployed workers who were unemployed long term (i.e., for six months or more). In 2011, 50.1 percent of the Asian American unemployed were unemployed long term, up from 48.7 percent in 2010. In both of these years, the Asian American share slightly exceeded the African American share.

Share of unemployed who have been unemployed 27 weeks or more, by race and ethnicity, 2010–2011

Federal Reserve Chairman Ben Bernanke and other central bank officials have argued long-term unemployment is an enormous challenge, but have been reluctant to apply additional monetary stimulus to the problem. In March, Bernanke said:

Jobs or inflation — Is the Fed distracted?

The Federal Reserve doesn’t get much love from Washington these days but it did receive a rare bit of political backing on Wednesday as Democrats defended its role in promoting full employment as well as stable prices.

The U.S. central bank has been the target of criticism from members of both political parties as a result of bank bailouts and hands-off rule-enforcement that let predatory and unsound lending practices go unchecked, among other shortfalls.

But discussing legislation narrowing the Fed’s mandate to a single-minded focus on price stability, Democrats questioned the need to drop the full employment side of the dual mandate.

An upward bias in jobless claims revisions

Weekly data on applications for unemployment benefits have gained renewed importance since a weak March payrolls number left economists wondering whether a tentative labor market recovery was about to cave again. The last two weeks’ readings were just soft enough to leave investors thinking the country’s unemployment crisis may not be healing very quickly.

Daniel Silver at JP Morgan has dug deeper into the claims figures and found a curious trend: a repeated and distinctive tendency toward upward revisions in the numbers.

There has not been a downward revision to the initial claims data reported for the prior week since the start of March 2011, and this recent streak is not a new phenomenon—there have been upward revisions in about 90% of the weekly reports since the start of 2008, as well as going back even further to the start of 2000. These revisions are relatively minor (usually adding only a few thousand claims) and do not change the broader trends in the data, but they can lead to the weekly claims reports showing decreases to the more recent levels, whereas if the prior week had been unrevised, the reports would have shown increases in claims.