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Discussion: (4 comments)

  1. Tom Sullivan

    Jobs growth is heavily shifted to part time and low-paying sectors.

  2. patsfaninpittsburgh

    Actually, the “employment” numbers overstate the strength of the so-called “recovery”.

    Real earnings are negative so job “growth” is simply a reflection of Obamacare shifting to part time. The process of turning a $1000 full time job into three $300 part time jobs will not grow economic activity.

    GDP sucks because the economy sucks.

    You know things are bad when supposed conservatives are coming up with clown car excuses for the disaster that is the economy.

  3. Is the US economy stronger than GDP numbers suggest?
    by James Pethokoukis
    Thanks to a disappointing June retail sales report, banks across Wall Street are cutting their second-quarter GDP forecasts. Barclays and Citi, for instance, are now looking for growth of just 0.5% annualized. JPMorgan thinks the data add “some downside risk to our 1.0% GDP number for last quarter.”

    Now remember, this follows meager GDP growth of 1.8% in the first three months of the year. So overall the first half of 2013 is shaping up as weaker than the first six months of last year when the economy expanded by 2.0% in the first quarter and 1.3% in the second quarter.

    But there has actually been a bit more employment growth in the first half of this year than in the first half of 2012, 1.2 million jobs versus 1.1 million jobs. And to some analysts, there is a mismatch between OK job growth and really weak GDP growth. Mike Feroli of JPMorgan:

    Two questions that the really lousy Q2 GDP tracking raise are (i) how will the disconnect between weak GDP and solid payrolls be resolved and (ii) how will the FOMC feel about pulling its foot off the gas while looking at what could be a zero-handle on the most recent GDP print.

    Another JPMorgan economist, James Glassman, echoes that question and offers a possible answer:

    Pay no attention to the Q2 GDP report to be released on July 31. Maybe the 14th comprehensive revision to the National Income Accounts released at the same time will bring GDP figures back in the game. It would help to know how employment has been growing almost 2 percent annually. Don’t say productivity: that’s a cop out.

    That’s right, the Commerce Department is revising GDP statistics going back to 1929. Maybe they will show the economy growing faster than first calculated.

    There is also another bit of evidence that GDP numbers are understating economic strength. There has been an unusually large discrepancy between GDP, which measures goods and services the economy produces, and GDI, or gross domestic income, which measures the income generated by the production process. The two numbers should be more or less the same since everyone’s cost is someone else’s income. Looking at nominal GDP and GDI, economist Scott Sumner makes the following observation:

    Over the past 6 months NGDP has grown at an annual rate of 2.19%, whereas NGDI (which measures exactly the same thing!) has grown at a rate of 5.06%. I suspect the truth is somewhere in between but closer to the 5.06%. Here’s why:

    1. The labor market has been fairly strong over the last 6 months, with job creation accelerating from the middle of last year.

    2. All sorts of asset markets (stocks, house prices, bonds, etc) suggest stronger US growth.

    3. US consumer confidence has been strengthening.

    4. I am not aware of any data confirming an ultra-low 2.19% NGDP growth rate. At that rate there shouldn’t have been any jobs created over the past 6 months.

    A 2010 Fed paper finds “considerable evidence suggests that the growth rates of [GDI] better represent the business cycle fluctuations in true output growth than do the growth rates of [GDP].” Indeed, GDI showed a deeper Great Recession and now a stronger recovery. And a 2011 paper suggests combining the two for a truer measure.

    This is the same Fed that couldn’t see the housing bubble even after it burst and could not foresee a major impact of that bubble bursting. What is clear to any rational person is that the Fed is usually wrong and that it is clueless. Add do that the fact that if we used the same methodology as we did during the Carter or Reagan administrations we would be looking at a recession for most of the past decade and you have a serious problem with reality. I suggest that you go and take a drive around your cities. See all those shuttered factories, mills, and retail stores? They tell us that things are not as you think they are. Perhaps I have spent too much time around Detroit, Buffalo, Cleveland, Cincinnati, Toledo, Rochester, Fort Lauderdale, or Memphis and not enough in the places where there is real growth and progress but I know of no such places outside of the oil patch and some areas of Miami and New York where the richer segment of society lives and hangs out. I suspect that you are going to be surprised about the weakness in the economy just as you were surprised by housing.

  4. John in Tempe

    The shifting of jobs from 40+hr FT to <30hr PT jobs results in greater employment numbers, and, because fringe benefits go down as jobs shift to PT, employers can use fringe savings to pay higher total nominal wages.
    The disparity in Jobs & GDI v. GDP will continue as jobs continue to be shifted to PT to avoid the Obamacare employer mandate. Equilibrium will bring reality to all the stats.

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