Kudlow's Corner

Does today’s jobs report spell recession?


The latest overall job loss numbers showed a loss of 49,000 jobs in May and a jump in unemployment rate up to 5.5%.  The drop is still well below the six figure numbers seen in past recessions.

Additional background information:

We asked our panel:

Does today’s jobs report spell recession?


NO 6

The Kudlow Caucus Breakdown

Stefan AbramsManaging Partner, Bryden-Abrams Investment Management
Today’s jobs report is likely to be revised upward, and moreover, April/May represents the economy’s low point.

Joe Battipaglia
Market Strategist, Stifel Nicolaus
The economy continues to contract with this being the 6th straight month of job losses. Labor market job losses along with no income growth (net of inflation) combined with the housing slump and rising energy costs means no growth in the economy for 2008.

Jared Bernstein
Senior Economist, Economic Policy Institute
Since the 1950s we’ve never had a protracted reversal in payroll employment like this outside of a recession, and the spike in unemployment points in exactly the same direction. That said, I recognize that lots of other data are more ambiguous, so I’m not sure. I will tell you this, however: upside surprises in GDP and factory orders mean a lot less to most people than jobs and wages, so from the perspective of most families, it’s a recession.

Jerry BowyerChief Economist, Benchmark Financial Network
No bloomin’ way.

A couple of hundred thousand college kids can’t get summer jobs because the economic flat-earthers in congress just hiked the minimum wage and priced the kids (110% of whom plan to vote for Obama) out of the job market.

Fraternity pizza-budget impact: substantial.

GDP impact: minimal.

Seeing markets react to stupid congress just the way we said they would: priceless.

Vince FarrellScotsman Capital Management
The 30 year average for the unemployment rate is 6.1%. Today’s jump to 5.5% shows a struggling economy, but not a recessionary one. The loss of 49,000 payroll jobs compares to an average of well over 200,000 jobs lost on average during the last recession.

Jim LaCampPortfolio Manager, Portfolio Focus, RBC Wealth Management
Co-Host, Opening Bell Radio Show, Biz Radio Network
The jobs numbers are troubling as is the unemployment rate...but both are subject to wide revisions and this number had seasonal summer jobs data that will need to be tweaked. The average wage number was up as well and average workweek was unchanged. Troubling number...but not enough to spell recession.

Art LafferFmr. Reagan Economic Advisor
Chief Investment Officer, Laffer Investments
Today’s jobs report is confirmation of the slowdown/recession—and there’s more to come.

Donald L. Luskin Chief Investment Officer, Trend Macrolytics LLC
The payroll report is in line with the pattern of slowdown that has been in place this year -- not recession.

The jump in the unemployment rate was due more to the increase of the size of the workforce than a reduction in the number of employed. That increase may be a seasonal peculiarity, but in a recession you surely don't see the workforce increasing. Besides, the unemployment rate announced today, 5.5% is very low in absolute terms. In fact, it is the average rate experienced in expansions, not recessions.

Steve MooreSr. Economics Writer, The Wall Street Journal Editorial Board
The economy is weak, weak, weak. Worst of the housing crisis isn't behind us. I see a slowdown in the 2nd half of 08, not a pick up, with a lot better than 50-50 chance of recession driven by dollar weakness.

James Pethokoukis
Sr. Writer, U.S. News & World Report (Money & Business)
Although Wall Street's bears love to roll around in bad news, they shouldn't get too happy about the jobs report. Jobs losses are still way, way below what's typically seen during recessions. The job market is a lagging indicator and should improve as the economy gains some steam. In 2003, the unemployment rate rose sharply even though the economy had already emerged from recession.

Robert Reich
Former Labor Secretary
Professor of Public Policy, UC Berkeley
Consumers are at the end of their ropes, out of cash, deep in debt, can't borrow more. So spending is dropping, and employers are cutting jobs. A vicious cycle.

Gary Shilling
A. Gary Shilling & Co. President
The leap in the unemployment rate from 5% to 5 1/2% and the jump in the number unemployed by over 10% confirm recession. The drop in temp firm payroll jobs foreshadows more job cuts and the deceleration in restaurant and bar employment says consumers are desperate for money. Payroll losses are understated since the birth/death model added 217,000 jobs, an improbable 42,000 in construction. And finally, with falling real wages, inflation continues to be a commodities only phenomenon.