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Monday, June 17, 2013

Mid-June Jobs Weak Before FOMC Meeting

As the Federal Open Market Committee meets this week, one of its main considerations will be assessing the strength of the labor market and how Chairman Ben Bernanke presents the Fed's future "tapering" intentions -- slowing the flow of liquidity the Fed is pouring into the U.S. economy -- to the markets. Gallup's Payroll to Population (P2P) measure suggests this may be a surprisingly easy task, given the weakness it reflects in the job market, and the related need to delay tapering. However, a not-so-easy task for Bernanke would be to take the opportunity that the ending of his term provides to offer some much-needed nonpartisan economic leadership in Washington on fiscal and regulatory issues normally beyond the Fed's purview.

Gallup's P2P shows that full-time jobs as a percentage of the population averaged 44.5% during the 30 days ending June 15, 2013, compared with 44.9% for the month of June 2012. In May, P2P also showed jobs this year trailing those of a year ago. Essentially, there has been no job growth relative to the U.S. population in 2013, with the exception of a temporary uptick in April. Gallup's P2P is not seasonally adjusted, so year over year comparisons provide the best insights into real job market conditions.

This finding is consistent with the government's jobs report, which shows that on an unadjusted basis, the number of unemployed Americans increased by about 300,000 in May -- 100,000 after seasonal adjustment. Perhaps more importantly, the unadjusted participation rate increased to 63.5% in May from 63.1% in April, indicating that more Americans joined the labor force -- something Gallup tracking picked up in April.

At the same time, the percentage of Americans working part time but wanting full-time work is higher now at 9.9% than it was in June 2012, at 9.5%. The U.S. economy simply is not providing the full-time jobs needed to support a growing economy.

The Wells Fargo-Gallup Small Business Index suggests small-business owners' future hiring intentions are modest at best. The most recent National Federation of Independent Business survey implies the same.

The fact is that while Fed policies and the associated "wealth effects" enjoyed by Wall Street and housing have helped the U.S. economy, the real jobs situation remains bleak. There has been little or no progress on the jobs front over the past year.

In turn, this suggests that in his presentation Wednesday, Bernanke needs to make it clear to Washington policymakers that the Fed's efforts to stimulate the economy on its own -- particularly in terms of jobs -- are failing. And he should suggest some policy actions to change the situation -- including areas of fiscal and regulatory policies that are normally outside of the Fed's purview. The chairman's term is ending soon, making him potentially an independent while still powerful nonpartisan economic policy leader in the nation's capital.

What the country needs right now is for someone to provide economic leadership in such a way that it breaks the political stalemate in Washington. Bernanke seems uniquely positioned to provide such leadership over the last half of 2013.


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