The first estimate of the unemployment rate for December 2009 is due out tomorrow and already some are looking forward to it with a combination of hope and dread. Daniel Fisher, writing in Forbes, wonders if the latest figures won’t reveal yet another problem, inflation:
The Labor Department surveys 380,000 employers to determine its nonfarm payroll estimate, Resler said, so the number is a highly accurate picture of how many people are employed. It hasn’t risen in two years, so any increase for December would be an important change, he said. The nation has shed 7.2 million payroll jobs since the onset of the recession.
The unemployment estimate is derived from interviews with 60,000 households and often diverges from payroll. A sustained increase in temporary employment–the sector added 52,000 jobs in November–would provide the classic leading indicator that businesses believe the economy is improving and are willing to risk adding jobs, Resler said.
Only a stunning drop in unemployment to below 9.5% (still well above the 6.8% in November 2008) would cause economists like Resler to revise their views about low inflation. And that’s unlikely.
Yet another bit of good news: the increased load of government debt is likely to reduce future growth (as many of us have been warning):
“With high debt levels, people expect a fiscal response,†which could include higher taxes and lower government spending, said Reinhart, who presented a paper on the subject at the meeting of the American Economic Association in Atlanta earlier this week. As the level of government debt rises past 90% of gross domestic product (it’s currently around 84%) Reinhart and her co-author, Kennneth Rogoff of Harvard, find economic growth is trimmed at least 1%.
I continue to suspect that the latest figures will show flat or increasing unemployment. For one thing look at the productivity numbers. I interpret them as meaning that outputs have remained reasonably high or even grown using fewer workers. In today’s uncertain regulatory environment it’s hard to imagine employers hiring new workers as long as they’re able to keep up with demand.
