Tuesday, November 09, 2004

Sorry, but hurricane reconstruction = zero sum

Anthony Chan, J.P. Morgan : "We're not going to see all October economic reports look as good as this employment report, and next month's employment is not likely to be another gain of 337,000," he said.

Chan agreed that slower employment gains are ahead in coming months. He pointed out that the average work week stayed steady at 33.8 hours and that number normally climbs before a sustained period of increased hiring.

"Without an increase (in hours), it is hard to believe that employers are dying to hire 300,000-plus new workers each month," he said."

Why not? Becuase 71,000 of the new jobs are in construction in the Southeast. First, rebuilding destroyed property & infrastructure doesn't add anything new to the economy, it just brings us back to where we were before. Secondly, because this is replacement, not expansion, these people are basically just temp workers, but they weren't hired to ramp up expansion - only to perform a recovery effort.

The other problem with this: "The unemployment rate came in at 5.5 percent, up from 5.4 percent in September. The unemployment rate edged up because there were 367,000 more people in the labor force, the department [of Labor] said. " This is a much larger problem - we're not creating jobs fast enough to keep up with new people entering the workforce. This problem could be solved by the coming labour shortage (it's for real - if it wasn't Social Security wouldn't be in trouble), but until then, it's difficult to determine if how the economy is going to react to entry-level workers.

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