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The Jobs Report: Nothing to Write Home About

12:00 AM, Aug 4, 2012 • By IRWIN M. STELZER
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Nor is any of this likely to improve soon. Stanford University professor Edward Lazear estimates that the rate of job creation is so slow that employment will not reach pre-recession levels until 2016. One “headwind,” to use the word now applied to any drag on economic growth, is the situation faced by small businesses. Studies by Lowell Ricketts and Juan Sánchez, also of the Federal Reserve Bank of St. Louis, show that small firms did a better job of maintaining employment in the recession than did big companies. And these small companies are generally regarded as key to any acceleration in job creation. But small firms are being hit especially hard by the provisions of Obamacare. If they grow to more than 50 employees they will have to provide expensive health care insurance, or pay a fine. Several fast-food franchisees report that in order to avoid these ruinous costs they have aborted plans to grow beyond 49 workers. 

In a land of bad news, even moderately good news is a reason for rejoicing. The housing market continues its steady rebound. The closely watched S&P Case-Shiller home price index has risen for four consecutive months in 18 of the 20 cities covered by the index, and all 20 cities recorded increases in May, the last month for which data are available. Prices are now about where they were at this time last year—a big deal after continual reports of drops from year-ago levels. Inventories of unsold homes and vacant homes offered for rent are down. Along with continued low mortgage interest rates, this improvement in prices and the inventory picture has driven shares in homebuilders up some 50 percent this year, about five times the rise in the overall S&P index of 500 shares. But even in this sector there are reasons to worry. After a strong May, sales of newly-built, single-family homes plunged by 8.4 percent in June. And pending home sales—deals that are agreed but not completed—also fell.

There are other shards of good news. More and more homeowners are refinancing their mortgages—trading in higher- for lower-interest mortgages, saving some $2,500-$3,000 per year, cash that should in good part find its way into store tills. And earlier today the Institute for Supply Management (ISM) reported that the service sector grew in July for the 31st consecutive month, with new orders increasing for 36 straight months. But non-manufacturing employment, which had been growing, contracted.

All in all, as Art Cashin, veteran director of floor operations for UBS Financial Services told a CNBC television audience, we are “above stall speed, but not by much … not enough to write home to mother about.” Or allow Fed chairman Ben Bernanke to plan a leisurely summer vacation. 

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