Economic Activity has been Increasing, 8/6
500,000 new jobs means we are NOT in a recession
(Note to paid subscribers: I plan to have more live Zoom events going forward, but not for the next couple of weeks.)
When the second quarter GDP numbers came out, I pointed out that the total decline of 0.6 percent in real GDP from the end of 2021 through the first half of this year was way less than the margin of error in computing the numbers. I was dubious of the claim that we were in a recession.
Yesterday’s employment release makes me feel strongly vindicated. Over 500,000 new jobs last month, even stronger than the gains in other recent months. I suspect that the job growth over the last few months comes close to a record.
The big question about economic statistics these days has to be, “Where is the missing GDP?” Either firms were hiring all those workers to sit around doing nothing or the GDP data are not picking up all of the economic activity that is taking place. My money would be on the latter. Some day, the GDP statistics are going to show that real GDP was higher in the second quarter of 2022 than at the end of 2021, not lower.
See Scott Sumner’s take, which generally reinforces mine.
Many investors had come to believe that the recession that supposedly will end inflation has already taken place. That view now seems clearly wrong. The corporate earnings reports that are coming out should not be treated as recession-depressed numbers.
Yesterday’s WSJ reported that large companies are increasing their capital spending. This is what one would expect if economic activity is still robust and interest rates are still below the rate of inflation.
At this point, I don’t understand how Wall Street can sustain its view that interest rates will peak soon.
Instead of claiming there's some kind of 'hidden growth' in GDP the more obvious cause to stagnant GDP with increasing employment is that the newly employed are vastly less productive than the people employed at the last peak of growth. The peak of Boomer births occurred around 1957, 65 years ago. We're in the process of swapping Boomers who have decades of work experience for Zoomers with zero experience and woke college degree.
Months ago you argued about inflation but ignored significant differences in U.S. price indexes (and similitudes in consumer price indexes among developed countries). Now you argue about the U.S. recession/stagnation and rely on some BLS employment data but ignore important BLS data.
Please tell me what you think about these ZH posts based on all BLS data for the last two months:
https://www.zerohedge.com/markets/something-snaps-us-labor-market-full-part-time-workers-plunge-multiple-jobholders-soar
https://www.zerohedge.com/markets/something-snaps-job-market-multiple-jobholders-hit-all-time-high-unexplained-18-million
I believe that you and many other economists have been ignoring the economic consequences of government responses to Covid-19. Indeed, U.S. economists have ignored what happened in the rest of the world. I understand that in all countries politicians want to ignore those consequences but the economists' failure to assess them properly makes me laugh at their conclusions. BTW, here in Chile, I'm watching the same movie aggravated by the ongoing political conflict.