Behind the curve
This is the WSJ’s sober version of recent economic data, showing that employers cut 4000 jobs versus an expectation of 110,000 jobs being added in the economy:
Nonfarm payrolls fell 4,000 in August, the first decline since August 2003, the Labor Department said Friday. (See the text of the report.) Previous reports were revised sharply lower. July job growth was revised down to 68,000 from 92,000. June gains were revised to 69,000 from 126,000. The 44,000 monthly average job gain for the past three months is down sharply from the 147,000 average between January and May. “For those wishing to see some evidence of the impact of sub-prime on the broader macro economy — look no further!” ING Bank economist Rob Carnell wrote in a research note, calling the data “downright awful.”
The Journal’s selection of economic pundits and advisers gives some more color. Excerpt:
# Even Pollyanna and Mary Poppins would be reaching for the Prozac after reading the August employment report… While we tend to be suspicious of large monthly swings in the data, particularly data subject to several rounds of revision, there is no denying that the trend rate of job growth is slowing, which is in line with what has been our steady call for sub-par GDP growth and a lower Fed funds rate – independent of the ongoing credit market turbulence. While we have targeted October as the timing of the first such funds rate cut, today’s employment report may force the FOMC’s hand towards a rate cut at their September 18 meeting. –Richard Moody, Mission Residential Research
# Temp hiring fell again, signalling further broad payroll weakness ahead. One number is not a trend but this will scare the Fed; they will ease [a quarter percentage point] on 9/18 but should ease [a half percentage point]. Remember this report does not fully reflect the market turmoil; worse to come. –Ian Shepherdson, High Frequency Economics
# This report just about clinches a Fed easing move on September 18… Interestingly, employment in the financial arena was unchanged in August, so recently announced job cuts in many housing-related finance jobs have not yet hit these figures. –Joshua Shapiro, MFR
But it is Cramer — who loudly predicted all of this a little while ago — who once again takes the prize for a certain style of economic writing:
And the homebuilders? Good grief, are they and their hedge fund brethren troubled. No moral hazard here, my friends, just hazards. I think after this jobs number that every model that said we were fine as long as employment’s good is now out the window.
The Fed wants most of the reckless homebuilders — meaning everybody but Toll — out of business. They lent recklessly, and we are still in Puritan Fed mode. What do you want them to do, panic? They aren’t about panic. They are about being statesmen! They are as statesmanlike as Hoover was!
As we have said, all the danger in the economy’s current situation would come from the Fed’s not acting fast enough. With the awful employment data, the Fed may be said now to be officially Behind the Curve. Think what you may about Mr. Cramer and his emoting, but in this instance he would appear to have been more on the mark than the cautious and statesmanlike Ben Bernanke.