NBER's Hall Says `Faltering' Jobs Don't Imply a `Second Dip'
The U.S. labor market’s “weak and faltering” recovery doesn’t imply the economy is sliding back into a recession and may instead reflect productivity gains, said Stanford University economist Robert Hall, who heads the National Bureau of Economic Research’s business-cycle dating committee.
“So far, there has been no second dip,” Hall, whose group is tasked with marking the start and end of recessions, said in an interview.
Private payrolls that exclude government agencies rose by 71,000 last month, less than forecast, after a June gain of 31,000 that was smaller than previously reported, the Labor Department said today. Economists projected a 90,000 July increase, according to the median estimate in a Bloomberg News survey. Overall employment fell 131,000 and unemployment held at 9.5 percent.
Higher productivity, driven by increased business spending, may help explain how economic output has risen while jobs have been stagnant, said Hall and a second committee member, Harvard University economist James Stock, who commented in a separate interview.
“The way we judge the performance of the economy should be its success in growing employment,” Hall said by e-mail. “By this standard, the recovery is weak and faltering.”
The NBER committee in April issued a statement that it was too soon to declare the recession that began in December 2007 over, though some committee members including Hall and Jeffrey Frankel, also of Harvard, have said it’s clear the contraction has probably ended.
“It is frustrating and disappointing that employment growth hasn’t been stronger,” Stock said. “Eventually our initially strong, now moderate, output growth must sooner or later bring along employment growth.”
Capital spending that was deferred during the recession is now boosting productivity, and in the short run, that is eliminating the need for extra workers on the factory floor or offices.
“The disparity between modest output growth and close to zero employment growth is the result, by definition, of productivity growth,” Hall said.
Stock said there are indications that more jobs may be coming soon.
“Firms deferred investment for a long time and that is consistent with the capital expenditure boom,” Stock said. “By the same token, average weekly hours are now almost at pre- recession levels which is another indication that employment should be picking up in the near future.
“So these considerations make me remain optimistic that output growth will be continued and will start to spill over into employment growth.”