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Irwin Kellner Archives | Email alerts
Feb. 7, 2012, 12:05 a.m. EST
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By Irwin Kellner, MarketWatch
PORT WASHINGTON, N.Y. (MarketWatch) "” The question of whether the latest employment figures are good or bad depends largely on one's point of view.
Although only one data point for just one statistic, January's employment and unemployment statistics loom disproportionately large in the economic and political debates now extant. This is because from jobs flow confidence, spending and more jobs in the months ahead.
Both the pessimists and the optimists can make a good case for the way they view these numbers. Whichever side makes the more convincing argument will have a major influence over the near-term performance of the stock market and the next few weeks' political contests.
Before giving you my opinion, let me lay out the arguments presented by each side.
The optimists note that January was the 23rd month in a row of private-sector job creation. They also point out that growth in total nonfarm payrolls averaged 167,000 in the past six months and over 200,000 in the past three.
January's gain in private jobs was a thumping 257,000 "” spread out among a wide range of industries from manufacturing to construction to retail trade.
MarketWatch.com columnist Rex Nutting likes what he sees in the January jobs report. Photo: Getty Images.
As for the jobless rate, it has fallen almost two percentage points from its cyclical peak of 10.1% reached in late 2009 to a three-year low 0f 8.3%. Layoffs appear to be slowing, since fewer people are filing claims for jobless benefits.
Most important, the unemployment numbers have declined because people have been finding jobs "” not because they have become discouraged and stopped looking, thus effectively dropping out of the labor force. The employment/population ratio was unchanged in January from the month before and up slightly from a year ago.
But there is another side to this story.
The pessimists correctly point out that while the U.S. actually produces more goods and services today than it did before the recession began in 2007, it is doing so with about six million fewer workers.
A jobless rate of 8.3% is nothing to write home about. When you factor in people who are underemployed "” those who are working part-time because they can't find full-time work, those who are employed beneath their skill level and those who have stopped looking for work altogether "” the so-called "true" jobless rate is around 20%.
To make matters worse, the average number of weeks people who lose their job remain out of work is over 40, the longest in the postwar era.
But since economic and political arguments always seem to boil down to "what have you done for me lately," I would have to side with the optimists.
In my view, January's employment starts could be the start of something big. We could very well be on the cusp of a virtuous cycle, where the expansion becomes self-perpetuating.
More jobs will produce an increase in consumers' confidence and more spending.
Meanwhile, added spending will encourage employers to increase their payrolls.
And so the glass will be filled so that it can no longer be considered half empty.
Irwin Kellner is MarketWatch's chief economist.
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Irwin Kellner, MarketWatch's chief economist since 1998, writes a weekly column on the economy and the financial markets. He has been a leading economist for... Expand
Irwin Kellner, MarketWatch's chief economist since 1998, writes a weekly column on the economy and the financial markets. He has been a leading economist for more than 40 years and previously served as chief economist for North Fork Bank, Chase, Chemical and Manufacturers Hanover. Widely quoted by the media in the U.S. and abroad, Kellner regularly addresses groups of business people and community leaders and appears regularly on Cablevision's News 12 Long Island. Collapse
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