The big story over the weekend was the surprising drop in the unemployment rate to 7.8 percent, which is the lowest it has been during the Obama presidency. Employment growth remained slow, at 114,000 jobs, but the big story there was that the previous two months were revised upward to much better levels than had been initially estimated. The papers had different focuses, as expected. The Financial Times (FT) cut to the chase with “Obama boosted by US jobs figures” and “Jobs report better than expected but labour growth still slow.” The Wall Street Journal (WSJ) led with “Hiring Notches Modest Gains,” followed by “Jobless See Little Improvement in Outlook” (p. A2). The New York Times (NYT) took the opposite tack, with “Jobless Rate Sinks to 7.8%, Its Lowest for Obama's Term.” Nice to see when the papers wear their hearts on their sleeves.
Surprisingly, the drop in the unemployment rate led to charges, most visibly by Jack Welch, that the government had cooked the numbers. The NYT addressed that directly with “Jobs Report: Cooked or Correct” (p. A17) and “Taming Volatile Data for Jobs Reports” (p. B1); the articles concluded that the numbers were legitimately volatile, not cooked, and explained how the numbers are derived. Apparently, the last time charges like this were widely aired was during the Nixon presidency—an indicator of how wide the political divide is now.
After looking at the arguments here and in other commentaries, I think the numbers are legit, but agree with the on-the-other-hand stories that the numbers do not portend any real change in the slow recovery we are seeing. What they do seem to suggest is that, although there was a slowdown earlier in the year, that has passed and growth has resumed at a stronger level. Not enough, unfortunately, to make a material difference soon, but it is better than what we had thought. I expect to see the unemployment rate tick up again, as people who had left the labor force are encouraged to reenter it. That will actually be a good sign.
The weekend stories all add up to the fact that the U.S. continues to grow slowly, but it is doing much better than the rest of the world on an expectations basis. The FT led Monday with “US defies threat of global recession,” with the first sentence being “The US is the brightest spot in the world economy.” Despite the political uncertainty of the election and the pending fiscal cliff, we are a unified country, unlike Spain (Saturday NYT, p. A5, “Catalan Leader Boldly Grasps Separatist Lever”); our public institutions are solid, unlike Italy (Monday NYT, p. A1, “Corruption Seen as Steady Drain on Italy's South”) and China (Monday FT, p. 1, “Foxconn hit by fresh unrest at iPhone 5 factory”); and our financial system is relatively stable, again, unlike Spain (Monday WSJ, p. A1, “Depositors Turn Up Heat On Ailing Spanish Banks”).
I might also add that the hue and cry around the pending U.S. election is actually a sign of health—unlike Italy, with its technocratic, unelected government—and that the political process is doing its job by starting to generate a consensus on how we solve our current problems.