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DOUBLE-DIPPERS WERE BRIEFLY FORCED to revise their dopesheet in response to key economic data released last week on manufacturing and on jobs. Not only do the data negate the likelihood of an imminent relapse into recession. The monthly figures even suggest that growth in real gross domestic product for the April-June quarter ran a bit faster than its annual rate of 2.7% in the January-March quarter.
Friday's eagerly awaited jobs report for June revealed an increase of 83,000 in private-sector employment. But since any single month's number is highly volatile and subject to revision, the three-month tend helps clarify the picture. For the April-June quarter, monthly gains in private employment averaged 119,000, up from an average of 79,000 in the first quarter.
These figures, taken from the establishment-survey part of the monthly jobs report, often provoke skepticism on the grounds that too much guesswork goes into adjusting the numbers for business births and deaths. The skeptics' doubts should be allayed by parallel data tracked in the household-survey part of the report, from which the unemployment rate is taken.
THE HOUSEHOLD SURVEY INCLUDES a series on "private wage and salary workers" in "all nonagricultural industries except private households"—very comparable to the private-sector employment series carried in the establishment data, and not subject to any adjustment for business births and deaths. In the first six months, gains in this household-data series have actually been running more than double the gains reported by the establishment data. So if anything, the establishment data may be underestimating the private-sector increase in employment.
The unemployment rate in June fell to 9.5% from 9.7%. In the April-June quarter, the rate of joblessness averaged 9.7%, the same as in the January-March quarter. That shows an improvement from the 10% average in the fourth quarter of last year. But all it indicates is that, over the past six months, the increase in jobs about matched the increase in the labor force. For the unemployment rate to keep declining, employment must grow faster than the labor force.
Speaking of other coming challenges, total nonfarm payroll employment, including government, fell by 125,000 in June. All the decline, and then some, was accounted for by the layoff of 225,000 temporary Census workers. But that leaves 339,000 temporary workers still on the Census payroll, many of whom will probably start looking for private-sector jobs once they're laid off.
The Institute for Supply Management reported on Thursday that its purchasing manager's index of manufacturing declined to 56.2% in June. But that was still solidly in expansion mode, since any figure over 50 indicates expansion. In the April-June quarter, the PMI averaged 58.8%, a bit higher than its January-March average of 58.2%.
Further evidence of improvement in the second quarter comes from private- sector aggregate hours work, tracked in the establishment data. Aggregate hours rose at an annual rate of 3.3% in the quarter, indicating that second-quarter growth in real gross domestic product ran more than that, assuming some increase in worker productivity.
Finally, double-dip dopesters take note: The Credit Suisse probability model of recession, discussed here last week, put the six-month probability of recession at zero—and still does.
E-mail: gepstein@barrons.com
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