Jobs growth still moderate

There is no way we are even close to a recession when the number of people working in the private sector grows at a 1.75% annual pace—or about 160K per month—and that is exactly what we have seen so far this year, according to the establishment survey. The increase in new jobs is disappointingly slow, to be sure, but it is not something that can be dismissed as meager or recessionary.

Yesterday I suggested that the July jobs increase reported today was likely to be better than expected, and that proved to be the case (+172K private sector jobs vs. 110K expected). I based that guess on the observation that this year's growth in jobs as reported in the household survey has been much stronger than reported by the establishment survey, and that perhaps it was time for the establishment survey to "catch up" to the household survey. That indeed happened, and as it turns out, the household survey reported a decline in jobs, thus narrowing the gap between the two from both sides. Splitting the difference between the two surveys is a strategy I've always favored, and doing so puts the growth rate of jobs somewhere in the range of 1.5–2.2%. That's just about what the pace of jobs growth was in the 2004-2006 period, in fact. In any event, no matter how you slice and dice these numbers, jobs are growing and there is absolutely no sign of a recession. 

Those in the public sector will disagree, however, since public sector jobs have been contracting for the past three years, with no end in sight. The folks at Brookings lament this fact, but they fail to recognize that there are still many more public sector jobs today than there were in 2000, whereas the number of private sector jobs has barely risen at all. Public sector jobs are declining because of public sector bloat that is being painfully reduced, and we will all be better off as a result, once the dust settles. It's also appropriate to note that wealth is created in the private sector, so that's where it is important to see the growth in jobs.

UPDATE: Today's jobs report also served to vindicate the ADP report from last Wednesday.