Oil Up, Job Growth Sluggish

The latest stats about the economy are hardly promising. Oil is flirting with $45 per barrel on its way to challenge the $50 mark. Meanwhile, the US economy added a miserable 32,000 jobs. Thanks to the odd way in which unemployment figures are calculated, the jobless rate fell to 5.5% from 5.6%. However, the weak job growth figure is a clear sign that the hidden tax on the entire economy that is the oil price increase is having almost immediate effect.

As the old saw has it, figures can lie and liars can figure, and the fact that the jobless rate is at its lowest point since October 2001 will give some comfort to those who claim the corner has been turned. But the revisions to the preceding months' non-farm payroll numbers prove that things are not rosy for those who need to work for a living. June's payrolls were revised down to 78,000 and May's were lowered to 208,000. There is no reason, in light of these changes, to believe that July's 32,000 increase will hold up -- indeed, a revision in a few weeks might show that jobs were lost.

None of this would be much of a problem save for the fact that the Wall Street "experts" had expectations that were way off the mark. The range talked about prior to the release of the figure today at 8:30 was for a gain between 200,000 and 250,000. Recall that June's job figures also missed their mark, initially coming in at 112,000 (now 78,000) against expectations of 250,000. Wall Street expected there to be 400,000 more jobs than there are right now.

Between now and the election, the government will report figures for August and September. Non-farm payrolls come out the first Friday of the month, and the election is the first Tuesday in November, meaning October will not factor into the vote. The trend makes predicting an election turning on jobs a dubious proposition. There is job growth, there is far less of it than people expected, and the campaigns will have to argue over inconclusive data.

What is clear is that oil price increases have tapped the breaks on the job end of the recovery. The uncertainty over the price of energy, upon which every business depends, has lead personnel departments to play things conservatively. The only jobs on offer are those that absolutely must be filled, or those at the low end of the scale that don't cost employers much. Looking back, it seems the Fed made a mistake in increasing interest rates when it did.


© Copyright 2004 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.


Home