September 4, 2009

Dark Clouds from Kudlow

Let me get that three day weekend off to a rippin' start. Lawrence Kudlow, the financial community's most inveterate optimist, looks in the lobs numbers and sees dark clouds:

Veep Joe Biden is out there saying the Obama stimulus plan has saved or created 150,000 jobs in the administrationís first 100 days and another 600,000 in its second 100 days. But he sure isnít talking about small-business jobs.

In fact, itís hard to know what heís talking about. Uncle Sam has borrowed $388 billion in the second quarter and is scheduled to borrow $406 billion in the third quarter and nearly $500 billion in the fourth. In order to provide $152 billion in so-called fiscal stimulus, the government is draining close to $800 billion from the private-sector savings supply -- $800 billion that will not be invested in new-business enterprises, including small businesses.

Borrowing from Peter to redistribute to Paul is not fiscal stimulus. Itís a fiscal depressant. Small businesses are having enough trouble getting their hands on credit. And now they canít find enough capital for new start-ups. The government prospers, but the small-business sector sinks.


Kudlow's point is the differential between the payroll survey and the household survey. This was a staple of his when they were flipped (some Texas guy was President) and the job growth was in the household survey, which captures entrepreneurial and small company jobs. He felt it bullish Schumpeterianism that big company jobs were losing to start ups.

Now the trend has reversed. Big companies and government are adding workers, and the household survey losses are staggering.

Happy Labor Day!

Posted by John Kranz at September 4, 2009 5:47 PM

Let's see ... 750,000 jobs created or "saved" in 200 days. Take them all as created and disregard the "saved" business for the canard that it is ... and we have 750K new jobs in just over six and a half months, or 115,384 jobs per month. Stuart Varney tells me it takes 100,000 jobs per month just to keep the unemployment rate constant. So the question is, if Uncle Joe is going to make up specious job creation claims why doesn't he claim enough to make a difference?

Damn. I should have seen it in the first place. He can't claim administration policies are making a difference because everyone can plainly see that nothing has changed.

Posted by: johngalt at September 4, 2009 9:22 PM

You will have to forgive me my lack of understanding of economics, but it takes 100,000 jobs per month to keep the unemployment rate constant? If the unemployment rate is 5% then that means that 2 million new workers enter the job market each month? Do retiring workers count as lost jobs? I thought this huge "boomer" generation would mean that more workers are retiring than entering the work force. Is my problem that I have assumed the word "new" in jobs "created"? In all these wonderful stats can every worker who gets laid off from one job, but finds another be counted as a job "created"?

Posted by: Silence Dogood at September 6, 2009 3:08 AM

It depends on the population and how fast it's growing; the current unemployment rate is not a factor, but a cause. So if you have 150 million workers (which is different than a total population of 300 million) with 2% population growth, then assuming that the work force has the same population growth, you'll need 3 million new jobs a year, or 250,000 per month. The number of new jobs needed to keep unemployment stable, you see, will increase as the population increases.

Retired workers do not count as "lost" jobs, not if the counting is done properly. The statistics you see about "jobs created" or "jobs lost" are net numbers. That's why if a manufacturing worker is laid off but finds a new manufacturing job quickly enough, that by itself is zero change. It explains why you might have a few thousand jobs lost one month in any given sector, then a gain of a few thousand jobs the next month. It's also common that one sector will lose jobs while another gains, because workers go into different types of jobs.

U.S. worker population growth is still sufficient to replace retiring baby boomers, even though their numbers are considerable. We're not yet to the level of Russia and Japan, whose total populations (not just labor forces) are actually shrinking now. France is nearly in the same boat; right now it's importing enough African Muslims.

Posted by: Perry Eidelbus at September 6, 2009 9:47 PM | What do you think? [3]