Friday, August 2, 2013

Another Way To Look At US NFP

Taking the FRED database numbers from 1968 we can see how the current American nonfarm payrolls (NFP) numbers stack up, how they look when smoothed with moving averages (three, six and twelve month), and how they relate to average and median job creation numbers going back to 1968. 

There is no science to going back to that date; if anything, it illustrates further the weakness of the current recovery and the lack of resilience of the world's largest economy going into the next downturn. Yes, downturn. We are not in an age of new paradigms despite what you may have heard about the renaissance in US oil production. 

The best  case is that we are half way through an expansion --like that of the 1990s when the Greenspan FED orchestrated a soft landing-- that is a decade in length. But this is very unlikely given the limits of monetary policy in the current circumstance despite the bloviating writings on the blogosphere about macroeconomic modeling at the zero lower bound. Historians will forget these discussions and people who care about the economy rather than economic modeling find them as interesting as discussions of medieval angelology.

The continued presence of global imbalances between surplus and debtor nations will not go away; the challenge of China becoming a consumption haven before it can  escape the middle income trap is here to stay; and the globalizing forces that have made increasing inequality a mainstay  in our political discourse and precarious employment an everyday reality is a battle that must be fought each and every day. 

None of these issues will be solved with mystic monetarism. Sustained recoveries require sustained job growth (and the acquisition of hopefully decent jobs) at monthly levels above the median level for consecutive years. We have yet to see that.

Total NFP data (1968 - 2013 YTD)
Total NFP data (1968 - 2013 YTD) against Median and Average
Total NFP (12 month MA 1968 - 2013 YTD)
Total NFP (6 month MA 1968 - 2013 YTD)
Total NFP (3 month MA 1968 - 2013 YTD)