The employment and unemployment statistics released this morning by the Bureau of Labor Statistics report an expansion in employment of almost 250,000 and a decline in the unemployment rate to 8.3%. Taking these numbers at face value, the media is already editorializing that the economy is bouncing back. Yet if we look more closely at the numbers we find that they are strongly influenced by the approach the BLS takes to seasonally adjusting data. January is a tricky month for statisticians. December often sees a run-up in the labor market followed by a drop in January. What the BLS is reporting is not an increase in employment, but a drop smaller than expected for this season.
Over the last three decades the U.S. economy has gotten fundamentally out of balance and increasingly dependent on private or public sector deficits to maintain demand. Since the start of the Great Recession in 2008 we have replaced (by bailing out – mostly financial) private deficits with public deficits. Cutting the public deficit (without fundamental restructuring) without restoring another unsustainable private deficit (as in the late 90′s) will simply cause the economy to further decline.
Working Papers
