A few thoughts and observations arising from today's employment report, which shows the economy lost 62,000 jobs in June (with total negative revisions of 52,000 for May and April), leaving the unemployment rate at 5.5 percent:
1) Before we all throw ourselves out the window, remember that job losses are usually several times higher in outright recessions. So there's that.
2) I'm actually more concerned about the latest weekly initial jobless claims report (through June 28), which came in at 404,000. That's up from 388,000 the previous week, and pushed the four-week moving average to 390,500. Is this flashing a recession signal? Could be.
3) The smartest take on the report is from Michael Darda, Chief Economist at MKM Partners:
Leading indicators of labor market trends—household employment, temporary jobs, and jobless claims—all remain weak, which means the punch from the rebate stimulus in Q2 is likely to fade during the second half. We had been holding out hope for monetary stimulus to fill this gap, but the recent widening in credit spreads and parallel decline in stock prices suggest a longer period of weakness than we had assumed. Nonetheless, stock prices have come down significantly relative to both forward earnings and NIPA-based profits, which means the market has already priced in an extended period of weakness in both growth and earnings. While we remain constructive here, we acknowledge that the crude price and credit spread fever is going to have to break in order to get this market to move materially higher.
4) What's John McCain saying? This:
To get our economy back on track, we must enact a jobs-first economic plan that supports job creation, provide immediate tax relief for families, enact a plan to help those facing foreclosure, lower healthcare costs, invest in innovation, move toward strategic energy independence, and open more foreign markets to our goods. The American people cannot afford an economic agenda that will take our country in the wrong direction and cost jobs. At a time when our small businesses need support from Washington, we cannot raise taxes, increase regulation, and isolate ourselves from foreign markets. These are the same old siren songs that have failed the American people time and time again.
5) What's Barack Obama saying? This:
The American people are paying the price for the failed economic policies of the past eight years, and we can't afford four more years of more of the same. That is the essential issue of this campaign, because Senator McCain has fully embraced the Bush economic agenda. I believe it has to change. But, as these numbers demonstrate, the American people can't wait another six months. We need action now. That's why I'm calling on Congress and the President to enact real, immediate relief with energy rebates for working families this summer, a fund to help families avoid foreclosure, extended benefits for the long-term jobless, and assistance to states that have been hard-hit by the economic downturn. As president, I'll move us in a new direction with policies to restore broad-based, bottom-up growth that benefits all Americans. I will provide working families with a middle-class tax cut, fight for affordable healthcare and college tuition, work to help raise workers' wages, and invest in infrastructure, education, and a clean energy future to create millions of new jobs. That's the change the American people need.
6) Want more bad news? There's this from Jim Hamilton over at Econbrowser:
The dramatic abandonment of gas guzzlers by American consumers continues, with last month's sales of domestically manufactured light trucks (which include the once almighty SUV category) down 28% from June 2007. The shift is a necessary change in the long run, but in the short run will definitely put additional strains on the U.S. economy, as it's precisely this kind of disruption in domestic spending that appears to be responsible for the contribution that historical oil price shocks have made to previous U.S. economic recessions.
7) I am sticking with my prediction of no Fed rate hikes until after the November election.