Right on schedule, 2010 jobs numbers are improving dramatically, following in the footsteps of the U.S. stock market’s impressive, year-plus climb back from 2008-2009 financial-crisis lows. “The best job growth in [the] manufacturing sector since 1998″ as Senator Dodd described it on Face the Nation. However, in the past week, the market has fallen 5%. Does this indicate a problem for the recovery or signal that employment gains will not continue?
The stock market, which reflects a willingness to invest in companies on the prediction of future profits, gained 23% in the last twelve months. However, many called this a “jobless recovery” because unemployment numbers were poor during much of this period. Job growth typically follows many months after the stock market gains, as businesses turn increased prospects, sales and planning activity into action on the hiring front.
Look at the recent employment numbers: 290,000 new jobs in April; 230,000 new jobs in March, after 39,000 in February; and 14,000 in January. While it will take a few years for the 8+ million unemployed Americans to find new work even if the economy creates three- or four-hundred thousand new jobs a month as the recovery continues, the strong stock market of the past year would suggest continued strength.
Following the same reasoning, does this past month’s stock market downturn foretell a loss of jobs in 2011? That depends on whether the stock market slide reflects only a “correction” — temporary profit taking and selling in light of how extraordinarily fast the market rebounded over the past year — or a more negative economic prediction in light of financial instability in Europe.
On the bright side, the trouble in Greece, which has shaken Europe, is still small in proportion to the size of the U.S. economy — the entire Greek bailout package, somewhere above 100 billion dollars, is in the ballpark of what the U.S. government spent to bailout insurer A.I.G. On the other hand, the European Union is not the United States, politically speaking (although public disapproval of the bailout is reminiscent), and if the rescue is not performed as well as it was in the US, instability could spread to larger EU nations. As an important trading partner, what happens in Europe will impact the United States (More coverage of Greek financial issues in the New York Times).
Even with EU weakness, however, the North American and Asian economies are poised for growth. After a severe recession, U.S. growth will be driven by pent-up demand and new innovation, as well as continuing stimulus spending. The bubble and bust of the 2000s was very destructive, but there should be no doubt of the underlying demand for U.S. goods and services. The need for quality health care, environmentally sound products, better energy solutions and cutting-edge technologies has never been greater. Even the U.S.’s greatest liabilities, such as its over-dependence on fossil fuels, will force research, development and significant economic activity.
It remains to be seen how European economies will cope with the current crisis, but the United States is now beginning a significant economic recovery. With plans for better regulation of financial markets working their way through Congress, a new period of sustainable economic growth, while by no means guaranteed, is within reach. It will take more than a minor setback to derail the U.S. economy now, and that’s good for workers waiting to get aboard.
Marc Seltzer also podcasts about the Supreme Court at SupremePodcast.com