Courtesy of USA Today
Uh, never mind.
Remember last month’s jobs report, which seemed to show the economy stalling in March for reasons no one could explain?
Well, now the Bureau of Labor Statistics’ April report shows the economy adding a better-than-expected 165,000 new jobs — and the revisions of February and March showed 114,000 more jobs than first reported. Investors jumped headfirst into stocks after the report, pushing the Dow Jones industrial average above 15,000 for the first time and the Standard & Poor’s 500 index through 1,600 in intraday trading.
So the economy is moving, broadly, on the same pace it has managed throughout this stutter-stepping recovery. Today’s report is good news. Unfortunately, another bout with bad news is ahead, and is likely to keep optimism in check while keeping the unemployment rate within a few tenths of a percentage point of the 7.5% the government reported Friday.
That’s because of a wave of federal government austerity that began in 2011, and was in full swing by October. Nearly every economist predicts a growth slowdown at midyear — the only questions are how bad, and for how long.
Investors: Report is good for stocks, bad for bonds
For now, the good news is that the impact of the much-feared payroll tax hike that took effect Jan. 1 still looks minimal.
Employment in bars and restaurants, reflecting the most discretionary consumer spending there is, rose 38,000. Solid consumer confidence also drives construction employment and shopping. Housing construction and remodeling added 13,000 jobs, and retailers added 29,000. Nice work — and you can get it.
Still, the federal austerity program that began with the 2011 deal to raise the debt ceiling is clearly affecting government employment, at least. You can see that in the collapse in defense spending that began in the fourth quarter of last year, and in April’s loss of 11,000 government jobs.
State and local spending is now back to where it was a decade ago in real terms, and still falling, Moody’s Analytics chief economist Mark Zandi said. And now the feds are shrinking fast: Last week’s report on first-quarter GDP showed federal spending falling at an 8.4% annual pace, after a 15% fourth-quarter drop. With numbers like that, bigger job cuts are coming.
You can argue about whether scaling back the upper-income Bush tax cuts in January deterred “job creators,” whether the cuts in Head Start were economically inefficient and also cruel, or even argue that the F-35 fighter plane should be protected from cuts because it creates jobs at suppliers in nearly every state.
But you can’t pull $242 billion out of the economy — that’s the projected decline in the federal deficit this year — and not expect it to show up somewhere.