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Did Washington Save the Economy? Part 1


A "jobful" rebound is unlikely to goose the recovery.

Bye and bye, economic miracles such as the Internet would have logically come along far earlier, perhaps by the 1950s, thereby facilitating its invention not by Al Gore, but, if fate had willed it, by Senator Albert Gore Sr. instead.

There remains the off-chance, however, that the ancient superstitions had merit, and that the last 30 years' debt binge did a great deal of harm. This would be manifest in massive "malinvestment" in shopping malls, office buildings, and household closets and garages, for example, and in a tendency for the prodigious debts that funded this excess to weigh heavily on the American economy for years to come. Furthermore, there would be no reason to expect that jobs liquidated in the aftermath of the boom will ever return -- whether Main Street's allegedly frayed nerves have been repaired or not.

So far, the evidence from the government's own statistical mills -- including the March jobs report -- is overwhelmingly more consistent with the Phony Boom Theory than its bullish opposite. Not only is there no evidence of the purported business "overreaction" during the recent recession as previously explained, but the longer-term trends are also fully consistent with the notion that there's been a massive permanent loss of jobs in the US, and that growth going forward will be anemic, at best.

The starting point for penetrating the non-farm payroll report is to recognize that it's anchored by what might be termed the HES Complex (the vast array of both public and private sector jobs in the BLS health, education and social categories). The HES Complex posted nearly 30 million jobs in the March report, including just under 20 million reported in the BLS's officially designated "health and education" category, as well as another 10.5 million education jobs reported under state and local government. During the most recent 10-year span, from January 2000 to December 2009, the average monthly job growth in the complex was 52,000 -- with very little variation and virtually no correlation to the macro cycle. The astonishing fact is that right on cue, the pickup in March was 48,000, meaning that a third of the report's headline gain (162,000) was a pure evergreen, not a portent of any cyclical rebound.

Likewise, another 20-30,000 of the March headline number likely consisted of weather-related aberrations in the month-to-month statistics. For instance, output is still falling rapidly in non-residential construction, and while this category lost a sizable 66,000 jobs in the first quarter as a whole, the March print actually showed up as an 18,000 gain -- undoubtedly reflecting the shift from stormy skies in February to sunny ones in March. Similarly, it can be questioned as to whether home and garden stores -- still fighting the headwinds of the on-going housing collapse -- actually gained 14,000 permanent jobs during March.
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