String of Sour Numbers on U.S. Jobs Today, More Possible Tomorrow

In advance of tomorrow's release of an important jobs report for December, 2004, numbers released today indicate anemic job creation and retention in the waning days of the year just concluded. For the week ending on the first day of the new year, new jobless claims surged to 364,000, as a Labor Department spokesperson tried to explain away the unexpected jump by pointing to "difficulties" with the way the seasonal adjustment had affected the number. Most statistics on employment released by the government to the news media are not raw numbers; instead, they are corrected to smooth out known cycles that arise because of the ebbs and flows of business and consumer activity during different parts of the year. It is not clear, though, why it would be the case that a seasonal adjustment method that had been used for many years would suddenly provide results that were unreliable just at the time when those results were giving further evidence of a U.S. economy sliding ever closer to recession.

The Labor Department encouraged observers to give more weight to the moving average of new unemployment claims. A moving average, favored for the analysis of data that has some unpredictable randomness in it, uses an average of recent data values. A four-week moving average of new unemployment claims would use the most recent four weeks of data, rather than only the most recent value. In the case of new unemployment claims, the four-week moving average still rose from 332,500 to 333,000 for the average of the four, one-week periods ending on January 1, 2005. This indicates that, despite the claim by the Labor Department that its own, single-week number was unreliable, a longer-term measure of new unemployment claims confirms that the job market is weakening.

In a separate piece of news, the online employment firm Monster.com reported today that job postings in December fell in about 83% of its occupational categories, and its own employment index dropped by four points to 113.

Tomorrow morning, the Labor Department will release non-agricultural payroll numbers for December. Although the concensus among analysts is that non-farm payroll rose by 175,000 jobs in December—barely enough to keep pace with the expanding workforce—a study by Deutsche Bank has found that concensus forecasts were too high in five of that last six months, with the monthly over-estimate averaging 98,000 jobs that didn't materialize in the official, final numbers. This string of disappointments indicates that institutional economists have yet to adjust their quantitative and qualitative models to the diminished and fragile economy already being described and predicted by economists outside the perview of the mainstream media.

Even if the growth in payroll hits the 175,000 concensus forecast mark, this would indicate that the economy was providing just a little over one job for each worker seeking one, provided every new job available had a good match to a worker looking in the right place geographically, at the right time, and with the right skills. The lack of realism in a scenario such as this means that the economy should generally produce perhaps as many as 200,000 new jobs a month to allow for regional, skill, and other mismatches between the supply of newly available jobs and the demand for them.

The Bush Administration has offered no indication that it is concerned about the spate of recent bad jobs numbers; instead, in the case of the dramatic rise in new unemployment claims released today, it chose to have a politically mindful spokeperson for the Labor Department dispute the reliability of numbers provided by its own economists and statisticians.

Stocks today closed nearly dead in the water, with tiny percentage gains in the large-cap indices and a small percentage loss in the mostly smaller-cap stocks NASDAQ. Treasury prices closed mixed but generally muted, with the 10- and 5-year Notes giving ground on price, thus pushing their yields up. Oil prices surged 5%, partly on renewed concerns about demand, and partly on inflation expectations.

Major news services, following the lead of Wall Steet insiders, have begun to focus more news stories in recent days on the possibility of inflation creeping back into the economy after years of relatively stable prices. However, journalistic efforts to analyze inflation turn on the Federal Reserve Board's actions to prevent it from accelerating, and this often leads to a discussion of why interest rates are rising. However, explaining the fight against inflation as the cause for rising interest rates gives the impression that the Federal Reserve's recent actions are the underlying force behind the upward pressure on U.S. interest rates.

Little attention is being paid by the media to the much more fundamental reason interest rates are going up: massive federal budget deficits and the unending prospects of more red ink. Some analysts outside of government point to Republicans' refusal to back down from revenue-draining tax cuts and an opportunistic, expensive war; but these budget busters are just a prelude to what is expected in the next couple of years: implementation of the neo-conservatives' and other radical Republicans' long-awaited dream of Social Security "overhaul," a restructuring for which the United States may have to borrow as much as $2 trillion as a prelude to eventually dismantling the government's participation in the successful old-age pension system.

From tax cuts to war to rapid privatization of Social Security, the federal government's demand for money is creating an unprecedented appetite of the federal government for borrowed funds; and that borrowing will for years into this new century absorb a large chunk of the lendable funds available across the globe and in the United States, making the remaining funds available for loans to the private sector more and more expensive in terms of interest rates on everything from corporate bonds to home mortgages.