US Payrolls Rise by 431,000 on Temporary Census Jobs

The US non-farm payrolls number for May came out a few minutes ago, and the market will take it as an inconclusive result. Adding 431,000 jobs should be good news in an economy that is searching for growth. However, the neo-liberal faction will argue that 411,000 of them shouldn't count because they are temporary jobs related to the census. Is the glass half full or half empty? Neither, the glass is too big.

Looking at it from a "good news" standpoint, this adds to the increase of 218,000 in April (just revised from 231,000). The trend is clearly positive, and at least, America has stopped losing jobs. Moreover, manufacturing payrolls rose by 29,000 in May for the fifth consecutive month. Finally, the unemployment rate dropped to 9.7%, largely because the labor force fell by 322,000.

The "bad news" perspective is less obvious. With 411,000 of the 431,000 jobs being temporary government jobs, the private sector seems to have come up with a miserly 20,000 new positions. Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado, told Reuters before the jobs report came out "We really aren't adding many jobs. We've lost some momentum in the economy and final sales clearly aren't enough to generate job growth."

As is so often the case in economics, both sides are right and wrong. That is largely so because the argument is irrelevant. Jobs are a proxy for income, which is the real measure of the economy. Retired millionaires do not have jobs by definition, but they do have income (rather a lot compared to people with jobs). When the income of an economy on a per capita basis is stable or rising, one can count it as a success. When it falls, that society is in trouble.

Buried in today's report, far from the headline numbers, was the fact that the average hourly earnings climbed to $22.57 in May from $22.50 in April. Now, seven cents an hour isn't the kind of raise a high school kid with a job at McDonald's is going to notice, but throw in the work week for all workers going to 34.2 hours in May from 34.1 hours in April, and the picture is rosier. Also, the under-employment rate (made up of part- time workers who want a full-time jobs and people who have given up looking for employment) plummeted to 16.6% from 17.1%.

One data point doesn't make a trend, and 431,000 or 411,000 for May matters almost not at all. The real issue is whether America is making more money than before, and how far down the economic ladder the increase is going. Based on that measure, the recovery is here, and it looks like it will be reasonably strong. Americans just have to finish de-leveraging and then focus on getting the federal budget and trade deficits down -- or dare one suggest into surplus territory with tax increases and reduced spending when the economy has returned to full health?

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