Stephen Foley: Still waiting for the US to get on top of unemployment

Click to follow
The Independent Online

US Outlook There is something a little bit wonderful about a census, about the fact that, even in an age of information overload, sometimes it is necessary just to physically count people. The US is carrying out this once-a-decade exercise right now, and that is a little bit wonderful, too. From the economy's point of view it couldn't have been more perfectly timed.

Only 72 per cent of US households mailed back their census forms, and little wonder in a country that has so many immigrants living illegally and anti-government crazies who don't want anything to do with the exercise (not to mention its fair share of incompetents and paperwork-phobes). As a result some 635,000 census officers have been hired to go door-to-door to do the rest of the counting over the course of the next month or so. On wages of $19-an-hour, it is a pre-budgeted economic stimulus, and thank goodness.

The 431,000 increase in US jobs in May announced yesterday, the best monthly figure in 10 years, was almost entirely due to the hiring of temporary census workers. Without them, the rise would have been an anaemic 20,000.

There is no denying the disappointment. Economists had hoped for an overall increase above 500,000, and stock markets were quick to sell off. State and local governments are still shedding employees in an attempt to balance the books in the face of falling tax revenues, but the most alarming part of the report was the data on private sector employment. Just 41,000 private sector jobs were created.

In the debate over whether the US economy is headed for a double dip recession it looks like a strike for the bears, but that would be too quick and too simple a judgment. Dig into the report and there is plenty of evidence that the US is still on track for sluggish but consistent economic growth. Exhibit A is the detail that the length of the average working week rose by 0.3 per cent last month, Exhibit B is the figure for average hourly earnings, which was also up 0.3 per cent. This is an economy that is still expanding, it is just that employers are making their staffs work harder and paying them more not to jump ship.

The most likely explanation for this is that the upsurge in negative news from the eurozone, and the subsequent tightening of credit markets across the world, has made business managers less certain about the future and therefore more cautious about hiring.

Ultimately, the demand numbers will out, but the psychological pause is worrying, since it could become contagious.

No wonder Barack Obama was on the phone to European Union leaders last month to urge them to up the size of their eurozone bailout fund; no wonder, either, that Tim Geithner, his Treasury secretary, was in Europe last week urging governments to get a handle on their debts and calm the credit markets. These issues are now threatening to cause real economic impact on their side of the Atlantic.

There are times when recessions are inevitable, and there are times when we can talk ourselves into them. This is one of the latter. The omens are good for some positive real-world data next week, including a strong GDP figure for the US second quarter, and Ben Bernanke, chairman of the Federal Reserve, is likely to reinforce his low interest-rate policy when he appears on Capitol Hill, all of which ought to deflect attention from the eurozone's difficulties.

The Census Bureau's temporary hiring will take us through the next month of uncertainty. But the question remains, what will we be able to count on once the counting is done?

Comments