When we talk about the strength of “the economy”, we think in terms of jobs, personal incomes, inflation, GDP growth, business starts, balance of import/export trade, corporate profits and resulting stock market returns.
The Bureau of Labor Statistics publishes the official jobs numbers each month, and its statistical modeling relies on two separate surveys that measure two different things.
One is the Establishment Survey, which polls employers (and self-employed), which gives us data on trends in industries, sectors, locations, professional categories and the like. It tells us about jobs and job openings.
The other is the Household Survey, which polls households and gives us data on who is working and how many hours at what rate of earnings, full or part time, unionized or union-free, race, age, and gender breakdowns – things like that.
The jobs numbers for June were released [Friday], and for the fourth month in a row the two surveys tell two different stories about the strength and health of the labor markets in the United States.
The Establishment Survey produced a respectable 372k more jobs – 100k higher than expectations. The Household Survey showed a 315k drop in the number of people with jobs. That is a record gap of 677k. Pick your number; both are reasonably accurate.
The difference is largely explained by the increasing number of people working two jobs. With household incomes rising 2-5% (by quintile) and inflation at 8 plus, many have had to work a second (or third) job to make ends meet.
The economic recovery from the Covid lockdowns of 2020 continues to be erratic and full of dysfunctions localized by industry, by state, and by size of employer. 23 states gained jobs in June, 21 lost jobs in June, and six stayed flat.
We are two years into the re-opening of the economy from the national lockdown and have yet to recover to pre-pandemic levels of GDP, employment, and workforce participation. In recent months the still large number of open positions has fallen for lack of people able and willing to fill them. New unemployment claims are rising again and the list of major corporations downsizing is growing daily.
The rapid recovery in the second half of 2020 slowed in the first half of 2021, stalled in the second half of 2021 and turned back to recession in Q1 of 2022.
The return to normal – i.e. pre-pandemic economic efficiency – is more distant today than it was two years ago. We now face a new recession to recover from before we can fully recover from the old one. Federal boat anchors (regulatory drag) are longer-lasting and harder to lift than the state-by-state lockdown measures of Covid panic. It is hard to stay optimistic.
Consumer spending is down, inflation is up, corporate profits are down, the equity markets are way down, labor market participation is falling and the number of workers forced to work two jobs is rising. That is not a strong economy to me.
The economy is not a partisan thing – there isn’t a “democrat” economy and a “republican” economy, and an “other” economy – there is just the one. The laws of markets are not subject to amendment by government.
The size and scope of interventionist government greatly expanded with the pandemic response, and the nature and breadth of government interference has increased with an administration who believes in “demand-side” central planning and control, quite different than the approach of the previous “supply-side” administration’s team. A year is long enough to test results of major policy shifts.
The previous administration inherited an economy growing at 2% in Q4 of 2016 and posted 3.8% growth in Q1 of 2018. The current administration inherited an economy growing at 4.5% in Q4 of 2020 and posted a negative 1.4% in Q1 of 2022. Q2 GDP will come out next week and will show further contraction.
The teleprompter typists can spin and puff as much as they want, but when it comes to matters of economics and commerce, my favorite quote comes the 1978 movie The Deer Hunter:: “This is This; this ain’t something else.”Welcome to This.