If only statisticians could revise away all terrible news. When the US non-farm payrolls for August were first reported, they showed a 4,000 fall, the first monthly decline since 2003. That sparked talk of recession and helped provoke a 50 basis point cut in the US overnight interest rate. But thanks to the magic of statistical revisions, that has now been turned into an 89,000 gain. Better still, the job counters reported a 110,000 gain in September payrolls.
The upward revision might put talk of recession away for a time. But the new figures are at best a goal scored, certainly not a final victory. The newly created jobs are mostly in the service sector, which has relatively low productivity.
In August and September, employment in manufacturing and construction, where productivity is high, fell by 99,000. Also, the overall total of 199,000 job gains in the past two months is consistent with no better than mediocre gross domestic product growth.
Trade should help keep growth up. The trade-weighted value of the dollar has fallen by 18% in the past five years. That makes a difference. US export volumes rose by 7.6% in the second quarter; imports fell by 3.2%.
Yet danger stalks. As the housing slump worsens, making homeowners?feel poorer, even the current modest growth rate may be hard to sustain. After all, rising house prices added $7 trillion (Rs276.5 trillion) to net household wealth from 2002 to 2006, buoying consumption. Falling house prices are going to squeeze household finances, and perhaps growth.
The stock market responded with only moderate enthusiasm to the announcement—up by 0.7% by Friday afternoon. Equity investors may have been happy to see somewhat better economic news, but they now have to worry that relatively strong job creation will keep the Federal Reserve Board from cutting rates further. And there is always the risk that the next revision will show jobs disappearing again.