Played chin music all day on the jobs report and stumbled on a number of good and no-so-good points made by various peeps throughout the day.
–With the revisions to last year’s payroll numbers, job growth in the last few months of 2012 was pretty strong, at least by recent standards—about 200k in Nov and 250k in Dec. Re that, Dean Baker made a point worth remembering: apparently, uncertainty around the fiscal cliff wasn’t exactly dampening hiring.
I’ve got the rule that comes in very handy: I largely discount the warnings of those who can’t possibly know what they’re talking about. If people tell me firms are not hiring because they’re worried about a fiscal “cliff” that a) isn’t at all a cliff and b) is a phenomenon for which history provides no guidance, I smile pleasantly and get back to my Sudoku.
–Just taped a spot with Ezra Klein on movements in various economic indicators and once again, I loved his setup. The logic went like this:
–GDP was flat in the 4th quarter in large part due to a contraction in government spending.
–Jobs are trucking along, but at too slow a rate and the unemployment rate remains uncomfortably high.
–The stock market is on a bit of a tear, even though we just raised taxes a bit.
As I’ve stressed, real GDP growth isn’t as grim as this week’s report suggested, but the gods of data releases saw fit to provide us with a warning as to the impact of government austerity on growth at a time like this, when the private sector isn’t yet firing on all cylinders.
The figure below from GS Researchers shows the extent of fiscal drag that is or could be in the mix for 2013 in terms of its impact on GDP growth. The tax part is mostly from the loss of the payroll tax break, and the sequester is mostly the $85 billion of automatic spending cuts that will take effect in March if Congress doesn’t defuse them. And some of those bars are awfully big negatives.
So, the points are a) cut government spending now and you’ll cut growth, b) cut growth and you’ll reduce our already too weak pace of job creation. The stock market point above…that’s just a dig at the Larry Kudlow’s of the world who incessantly go on about how tax increases will kill the market, the economy, and our freedom.