Speculators and catastrophists were given another kick in the nuts, last Friday, as the US announced that not only had 517,000 new jobs been created in January, but the figures for the previous month were also revised upwards by more than 50,000, and the unemployment rate fell from 3.5% to 3.4%. The highest estimate for new jobs was 300,000, but the consensus estimate was for less than 200,000. The speculators and catastrophists, who have been praying for a recession for their own different reasons, were left seeking consolation in the fact that hourly wages are still not rising as fast as prices, but, as I have set out before, that is not relevant. The fact is that millions of jobs have been created, pumping millions of additional pay packets into US households, and, from there, into the US economy.
In addition to the rise in jobs, the previous day also saw initial jobless claims continue to fall to just 183,000 for the week. Not only is employment continuing to rise strongly, but unemployment continues to fall. The number unemployed fell by 28,000 for the month. Continuing the bad news for the speculators and catastrophists, the average number of hours worked also rose from 34.4 to 34.7 hours per week, again indicating that workers are able to work additional hours to boost earnings. The ideologists of the speculators, like Larry Summers, have argued the need to throw millions of workers on to the dole, so as to subdue workers, and the demand for labour, so as to reduce wages, boost profits, and reduce interest rates, so that asset prices can rise again. But, the labour market continues, instead to get even tighter.
The number of job vacancies rose from 9.756 million, to 9.957 million; job offers rose from 10.440 million to 11.012 million, with the number of job openings continuing at around 2 to every unemployed worker. The participation rate also from 62.3 to 62.4 %, indicating that some of those previously outside the workforce have been drawn into it, with also the working population having risen. This is not an economy seeing falling output, or approaching recession.
And, with 80% of the economy consisting of service industry, the ISM Services data, also backed this up. December had seen a sharp reduction, but the January data showed a huge rebound. Anything above 50 represents economic expansion. Its Business Activity Index rose to 60.4%, as did the New Orders Index, whilst the Employment Index and Suppliers Delivery Index both came in at dead on 50. The US economy continues to grow, jobs continue to grow, feeding wages into US households, which in turn feeds back out into demand for wage goods, and, thereby to aggregate demand.
Some have looked to a rise in US credit card debt, by households, but again, this data is misleading. When economic activity picks up, firms automatically increase commercial credit. In other words, firm A sells more to firm B, and continues to give firm B 30 days to pay the invoice. Firms also take on additional workers, who are paid at the end of the month, and who may need to borrow for the intervening period. But, also, workers feeling more affluent, and buying more wage goods, nowadays, often use credit cards for those purchases. It may be that actual debt rises as a result, but often, all this is is that they accrue a larger balance each month, which, so long as they pay it off, does not result either in an increase in debt, or an increase in their debt servicing cost.
The US data comes along with data from Europe, showing that the predicted recession is also nowhere in sight, despite the huge rise in energy costs, resulting from NATO's boycott of cheap Russian oil and gas supplies.
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