How Could We Lose 84,000 Jobs When Q2 GDP is up 3.3%?

Sep 5, 2008
This article is part of a series called Opinion.

OK, we lost 84k jobs, with June and July revised upward by 56k. Puzzling indeed with Q2 real (after inflation) GDP growth revised upward from 1% to 3.3%. How could this be? Last month we seemed to be turning the corner in job losses — only 51,000 with downward revisions of previous numbers — and now these numbers are going backward again.

The government loves to watch its rear-view mirrors, second-guessing the numbers. Q4 GDP last year was just revised down to -0.2% after the two usual revisions during Q1, which finally agrees with what the rest of us have known all along — we suffered through some sort of recession.

Ah, shades of the last slowdown after 9/11 when six months after the fact, these ‘certified geniuses’ finally agreed we did indeed have a very short recession. This time around it’s much milder, with job losses less than half of the 2001-02 numbers.

Another indicator, weekly jobless claims, a healthy 320k in January, averaged 370k a month February-July, moving over 400k in August, 444k this week — also showing a mild sort of recession.

85k jobs lost per month during Q1, 75k during Q2, and 71k so far in Q3 — it defies a healthy 3.3% economy. The cuprit? Productivity, up 4.3% in Q2, but 2.6% in the last year. Since GDP grew coincidentally at 2.6%, it takes the same number of workers today than a year ago to effect 2.6% growth. How could this be, as we all know a-million-plus were added to unemployment rolls, gave up, or went to part-time? Mostly, it’s the million who returned usually to Mexico, usually due to the residential building slowdown.

Looking at the 6.1% unemployment figure: is it the worst in five years, or is it? Rising from 5.0% in April, the July and August jumps can be attributed to benefits extended by three months, with one more month of unemployed not dropping off the rolls. In October the upward pressure should subside. And if oil prices
continue to crash, lower unemployment is indicated.

Finally, the dollar is on a roll, having recovered 12 months of losses, basically because Europe and Japan are six months behind us in Q2 GDP -0.2% and -0.6% recessionary readings. And with the Chinese stock market off 62% in the last year, despite the Olympics, investors see a rough road ahead there too.

Until next month.

This article is part of a series called Opinion.
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