The Economist writes about the increasing share of national income that is being earned in the form of corporate profits:

Last year, America's after-tax profits rose to their highest as a proportion of GDP for 75 years; the shares of profit in the euro area and Japan are also close to their highest for at least 25 years. UBS, a Swiss bank, estimates that in the G7 economies as a whole, the share of profits in national income has never been higher. The flip side is that labour's share of the cake has never been lower.

The article posits a few possible explanations, but unfortunately it then only hints at the real answer.

Could the rise in profits be due to the very high productivity growth of the past few years? By itself that is not a sufficient explanation; as the article notes, “It is normal for the share of profits in national income to rise during the early stages of a technological revolution, but then those extra profits tend to be competed away. Higher profits tempt firms to cut prices to steal market share; they also increase the incentive for new firms to enter the market.”

What about globalization, and specifically the effective entry into the world market of millions of new low-cost workers in China and elsewhere? Again, the article notes that this by itself is not a sufficient explanation:

Outsourcing may not have destroyed many jobs in developed economies, but the threat that firms could produce offshore helps to keep a lid on wages. As a result, the share of profits in national income could stay relatively high for a period. Labour's share would remain low, though workers may still be better off if the cake itself is growing faster. But this is not a reason to expect profits to continue to grow faster than GDP; indeed, in a competitive market profit margins will eventually narrow. Even if outsourcing reduces costs, competition will eventually force firms to reduce prices, distributing the benefits back to consumers and workers.

So if these two oft-cited causes of the rising share of income going to profits are not adequate explanations, what is? The answer is contained in the article, though never explicitly identified as such. The rise in profits as a share of income, if sustained, is only possible if competition is weaker than usual. Put simply, the lack of adequate competition is a necessary condition for the larger and larger share of income going to corporate profits. And I think it’s time for commentators and policy-makers to explicitly recognize this.

Kash

In his New York Times oped, Dr. Varian clearly distinguishes between the solvency issue facing the Trust Fund and the risk-return choices individuals might rationally make with their retirement portfolios. Alas, Donald Luskin mischaracterizes what Dr. Varian said in order to launch another pointless personal attack as Luskin shows how little he knows about financial economics:

On what stone tablet is it carved that "those with little income should invest in safe assets"? Virtually the entire voice of modern financial theory screams otherwise. Those with little income possess nothing but their human capital - they are precisely the ones most desperately in need of diversification through the addition of risky assets to their life portfolios. And even the most basic concept of equal opportunity screams just as loudly - don't these people, among all people, deserve a chance at higher returns?

Notice how Luskin failed to explain his concept of diversification and how it somehow applies to the correlation between returns from human capital v. the returns from financial assets. But also note that Dr. Varian’s well written article that he does not advocate restricting people’s portfolio choices. The only shred of wisdom in Luskin’s rant may be this:

Those with little income can't afford to contribute to their 401(k) plan, because the Social Security payroll tax has already sucked up 100% of their savings capacity.

Of course, investing Social Security funds in stocks was something that President Clinton favoved but the Club for Growth crowd opposed. And yes Mr. Roth – I do know your crowd favors choice over investing privately held funds (albeit Luskin is flip-flopping over that one).

Jesse Taylor has been reading some of the latest from the free lunch supply-siders so we don’t have to. Shorter Jesse: last year’s increase in real GDP and tax revenues only partially makes up for the losses in the earlier part of Bush’s first term. But I want to pick up on this from Alan Reynolds:

But that rosy figure depends entirely on the hidden assumption that the economy would be just as strong with higher tax rates as with lower tax rates. I am aware of no economic theory or evidence that suggests that might be true.

Unless Alan never learned classical macroeconomics, this statement is beyond disingenuous. Not even the most extreme Keynesian would argue that we need permanent fiscal stimulus to get back to full employment. And many of the free lunch supply-siders are also Bush43 cheerleaders who have declared the recession long and buried (not that they are entirely correct). And if you are going to claim “giving people their money back” promotes consumption, you can’t hide behind Ricardian Equivalence to put forth the phony notion that the law of scarcity (aka crowding-out) has been repealed.

Beyond theory, look at the vaunted Reagan tax cuts, which resulted in less savings and investment. And look at the fact that over the Reagan-Bush41 era, real GDP growth averaged only 3% v. 3.5% during the 1947 to 1980 era and 3.7% during the Clinton years. Of course, 3% is better than the 2.5% average annual growth during Bush43’s first term.

Update: Jesse’s post provides a link to Federal tax revenues by year, which includes forecasts through 2009. Comparing the 2009 projections to 2000, it would seem that the average annual growth in income tax revenues and corporate profit taxes (per these projections) would be barely enough to cover the increase in prices for the period. So Bush’s two terms will see no increase in inflation-adjusted tax revenues even as the economy sluggishly grows. Of course, these are projections and if Bush makes his tax cuts permanent, we are likely to see lower real revenues in 2009 than in 2000. And yet the supply-siders are given the exclusive blame for the deficits to government spending?

The Bush administration acheived one of its goals today:

North Korea on Thursday declared itself a de facto nuclear power, claiming in its strongest terms to date that it had "manufactured nuclear weapons" to defend itself from the United States and saying it would withdraw indefinitely from international disarmament talks.

A self-proclaimed nuclear North Korea is the perfect reason to keep working on national missile defense, after all. Who on Capitol Hill will now dare to question the administration's wisdom of throwing tens of billions of dollars at defense contractors in order to continue experimenting with a useless missile defense program?

Kash

Cesar Conda’s guest oped makes a point that I can almost agree with:

Personal-Account Myths: They’re not the speculative vehicles Democrats want you to think they are… Like the TSP, personal retirement accounts would be invested in a conservative mix of broadly diversified bond and stock funds.

Let’s be clear – a shift from a defined benefits program to a defined contributions program involves aspects of risk beyond the portfolio risk that Mr. Conda discusses. But to be fair, my post focused on portfolio risk.

Mr. Conda will be happy to note that not only did I agree with the premise that individuals would not invest in highly speculative portfolios, but that Robert Barro and Edward Prescott agree with this premise. But they would also note that the higher expected returns promised by the free lunch advocates of privatization come only as the reward for taking extra risk. If one chooses to allocate one’s portfolio so as to not take extra risk, which is the premise that Dr. Barro and I have been arguing, there is no extra expected return. If Mr. Conda agrees with us – great. But then why are his colleagues arguing there is some free lunch?

Andy Xie of Morgan Stanley explains why his bearishness on China's property market has become difficult to, er... bear:

“I lost 20% because of you,” a schoolmate in Shanghai screamed at me. “I had to hire several guys to line up for seven days and seven nights to buy three flats last month.”

Last October, he read in the paper that I had said Shanghai property was a bubble. He was scared and held off his purchases. Then the prices kept rising. By January he couldn’t take it any more and jumped in.

I felt terrible. I didn’t say that the bubble was popping. I said that the bubble could last for months but not years. The basic assumption was that the dollar would bottom in 2005. I thought that the Fed would raise interest rates above 3% and that US consumption would weaken substantially in 2005, which would cut off the hot money flow to Shanghai. It would be hard, I felt, for the Shanghai bubble to survive 2005.

...My schoolmate called me again and wanted me to meet up with someone who could explain to me how Shanghai’s property market worked. I went to a bar in an expatriate area. It was the sort of place that charges for a drink as much as a waiter earns in a day.

When my schoolmate saw me, he called me over and whispered something into his pal’s ear. He took a hard look at me and then burst into laughter. “You scared me,” he said, pointing a finger at me. “I bought 20 flats last October. You then said it was a bubble. Now, Hong Kong property agents call me every day and offer 20% more.”

“Yeah, I listened to him and missed 20%,” said my schoolmate. “I should call him Mr. -20%.” He was not happy.

“Mr. -20%.” The chap was laughing uncontrollably and nearly fell off the chair. “You will soon be Mr. -50%. Come, come, and have a drink. It is on me.”

I was thick-skinned and poured down the drink. I needed it.

Kash

In response to the news (pointed out by AB below) that the actual cost of the Bush administration's vaunted Medicare drug benefit will be far more than they first admitted, Democratic Congressman Rahm Emanuel states the obvious:

"The new cost estimate destroys the credibility of the Bush administration. Officials were so far off in estimating the cost of the Medicare law. Why should we believe what they say about the financial problems of Social Security?"

My only quibble is to point out that Emanuel's statement implies that the Bush administration had some credibility to begin with. When it comes to budget estimates, it lost that credibility long ago.

Kash

New White House Estimate Lifts Drug Benefit Cost to $720 Billion

WASHINGTON, Feb. 8 - The Bush administration offered a new estimate of the cost of the Medicare drug benefit on Tuesday, saying it would cost $720 billion in the next 10 years.

That is much more than the $400 billion Congress assumed when it passed legislation creating the benefit in late 2003

Other sources peg the 10 year cost at $1.2 trillion -- with this administration's spending history, I always credit the highest projections available.

What do seniors get for this trillion dollars? An very modest benefit with a bizzare gap in the middle.

AB

He writes over at their Social Security blog

“Club for Growth Rejects Investing Soc. Sec. Funds in Stocks”

Because that statement is completely false, whoever wrote it clearly has lazy fact-checking skills.

Well, he got my title right but he forgot to read the first sentence of my post. Notice I challenged readers to see if Cato provided any evidence for their claim that governments will use stock market investments for political purposes. Here is the best Mr. Roth can do:

In it, the good fellas over at Cato wrote that having the government, as opposed to individual workers, invest our Social Security taxes in the stock market, is NOT a good idea. We agree.

In it, they provide no evidence. And neither does Mr. Roth. I can see why the Club for Growth does not allow comments. Andrew – your readers are not angry that you persistently lie to them? You could take the lead of conservative economists that we at the Angrybear often read and respect, but I guess you’d be fired from the Club for Growth if you did.

David Hogberg has made some rather outrageous claims on this alleged Social Security crisis but Yes, Virgina, It’s a Crisis is interesting:

One might think that a system whose surplus will begin declining in 2009, that will begin taking in less in taxes than it pays out in benefits in 2018, and will cost taxpayers about an extra $25 trillion over 75-years is a system headed for a crisis…One last thing to consider: If we wanted to invest money today to cover the 75-year shortfall, it would require $3.7 trillion. That’s “only” about one-third of our current gross domestic product.

We’ve been through this 2018-just-IOUs nonsense enough and of course the surplus declining rant would only convince a village idiot like Don Luskin. But yes, $3.7 trillion is indeed one-third of current GDP.

But Bruce Bartlett had $44 trillion being only 6.5% of GDP. Oh, that’s GDP in 2075 not 2004. To be fair to Bruce, we should compare the present value of any budget shortfall to the present value of GDP over the same time period. But then Hogberg would not be allowed to do that by the Club for Growth.

A proposal from David Brooks is labeled back door privatization by Noam Scheiber. Brooks writes:

We could start by indexing Social Security benefits to prices, not wages, so the system wouldn't go broke. Then we could give everybody under a certain age KidSave accounts.

Scheiber responds:

So, if I'm understanding this correctly, we'd create private accounts for people and stick a little money in them, then we'd slash Social Security benefits. Finally, we'd allow people to divert their payroll taxes into their private accounts.

When Move On ran its ad suggesting that the Bush proposal would cut Social Security benefits, Factcheck chimed in with its half-truths:

Replacing wage indexing with price indexing would hold that $14,000 benefit constant, adjusting it only for inflation, so that a worker retiring in 2075 would get a benefit with the same buying power as today's average retiree. That would more properly be called a "freeze" than a "cut."

Factcheck forgot to say that future generations would be paying more “payroll contributions” in real terms since the Bush plan would maintain that 12.4% deduction, which would be applied to an ever growing real wage base. So the right analysis could easily state: (1) workers would get a lower percentage of their annual working income in the form of retirement benefits, or (2) they would get a lower implicit real return – perhaps negative, or even better (3) the Bush plan represents a back door employment tax increase.

If either Factcheck or Mr. Brooks is interested in an honest discussion – could they please admit that the Bush Social Security plan is nothing more than an employment tax increase to subsidize the General Fund deficits?

Club for Growth’s Social Security blog is a useful tool for keeping up on the latest from the rightwing hacks. Case in point is the post “The Trust Fund Hoax”, which links to a couple of attempts to defend 2018 “just IOUs” yahoo-ism (and Max Sawicky is welcomed to jump in at any point as I’m liberally using his wonderful ways of setting the issues straight). Before we turn to Mr. Frum and Mr. Nugent, let’s put this in terms of Mr. And Mrs. America (to quote Dick Armey) who are 45-ish middle-class employees. They have been paying a 12.4% payroll tax on the premise that they were prefunding part of their retirement. Under Bush’s plan as explained by the 2018 “just IOUs” yahoo – that was all one great hoax as what they were really doing is subsidizing the General Fund deficit so Ronald Reagan can cut income taxes – mostly for high income folks living off of capital income. And when Mitch Daniels said “there is plenty of money for an income tax”, what Bush43 had in mind as we know see is that Mr. and Mrs. America will continue to pay high employment taxes so Bill Gates can play less in taxes. After all, the President’s budget still leaves a gaping General Fund with the only significant spending reductions being his hope fo slash Social Security benefits for Mr. and Mrs. America.

So how does Nugent dismiss the now $1.6 trillion in Social Security Trust Fund reserves, which are likely to grow to $8 trillion by 2020?:

The truth is that there is no money in the Social Security trust fund. Most Democrats can’t handle this fact and instead fanaticize about a Social Security trust fund that supposedly represents a giant savings plan. The charade is exacerbated by the holding of only low-yield government bonds in the trust fund.

Bonds are not money – they are just IOUs? I have some money in my wallet (cash) and it is an IOU on the American Central Bank (Federal Reserve). I have lots of money in my Bank of America checking and savings accounts, but these financial assets are just IOUs on B of A. I’m not sure how Mr. Nugent would define “money” but most definitions have it being a financial asset, which is an IOU.

But to be fair, Nugent was saying things similar to what Frum had to offer:

NRO readers, being a sophisticated bunch, have probably already spotted the fallacy here. If Fred writes an IOU for $10 to Jim, Jim has an asset. But if Fred writes an IOU to Fred for $10, he has not created an asset for himself – he’s created a reminder notice. And that’s the situation of the Trust Fund. One branch of the US government (the Treasury) owes another branch (the Trust Fund) a bunch of money.

I’ll skip the obvious debating point here (those who trust Kudlow-Luskin-Moore cannot be a sophisticated bunch) and note with approval that Frum caught another Meet the Press piece of idiocy:

MR. RUSSERT: In 2018, the Social Security Trust Fund will begin to draw down, and in 2042 run a deficit, according to the trustees of the fund. What is your plan? What will you do? If the president's wrong, what would you do specifically to fix Social Security?

But Frum forget to point how how utterly Tim Russert confused (1) is – again. A fund with $8 trillion by 2020 and that will supposedly not even have a cash flow deficit for another generation is in trouble? Someone explain to Tim that having lots of money in the bank allows one to “draw down” (run cash flows deficits) for a long time. Instead, Frum was more interested in attacking Senator Kennedy for proposing a reversal of Bush’s income taxes to offset the massive General Fund deficit.

What is Frum really saying here? He is saying that what Mr. and Mrs. America thought was going to prefund their Social Security retirement – both principle and interest – has been given to folks like Bill Gates in the form of income tax cuts – especially tax cuts on capital income, And Mr. and Mrs. America will have to continue to pay high employment taxes as we should perish the thought that Mr. Gates would ever face a tax increase.

Our friend David Altig is a lot more honest about his referring to Social Security as a pay-as-you-go system and not a prefunded defined benefits system as at least he is honest enough to concede that the Bush agenda is a massive redistribution of wealth. And if you have joined Kevin Drum in re-reading the pre-SOTU remarks by the Senior Administration official, you might notice that the White House was referring to some ‘tone” where everyone seemed to agree with Mr. Frum’s view that these reserves are not a prefunding of our Social Security retirement accounts. I’m certainly not agreeing with this tone and neither did President Clinton. But I’m glad the White House and its allies are finally admitting what the real agenda is. Mr. and Mrs. America – take note.

1: thanks to the AB reader who noted I omitted "confused" on 1st draft.

Well, they don’t want the government to do this according to the latest from Andrew Roth and the Cato crowd:

In today’s Washington Post, columnist William Raspberry suggests “… the president ask the Social Security Administration to sell those bonds now in its trust fund and invest the proceeds in the stock market.” The increased rate of return, he says, would help ensure the solvency of Social Security in the future. That’s not a good idea. As the Cato Institute’s Andrew Biggs argued in the Financial Times in April, 2002, such a plan would lead to politicized investments on the part of the president and congress.

Since Cato links to Mr. Biggs 2002 oped, you can check out if he presented any evidence for his claim that the U.S. government would politicize investments. I suspect the whole Cato and Club for Growth position is based “less on economics than on faith” to paraphrase Mr. Biggs.

The brand-new White House budget proposal for 2006 contains some interesting details. One of them is this: the White House is not requesting, or planning for, any reform of the AMT system in this budget. As such, it may represent a backhanded way of effectively repealing the Bush tax cuts. And yes, I’m actually taking my tongue out of my cheek for this post. (C.v. the previous post.)

The exemptions for the AMT are currently scheduled to shrink dramatically at the end of 2005, which means that starting next year millions more middle class taxpayers will be paying their taxes according to the AMT calculation rather than according to the traditional tax calculation. After four years fully one-third of all taxpayers, and virtually all families and individuals who earn over $75,000 per year, will pay taxes according to the AMT system of tax rates and exemptions – which were unchanged by the Bush tax cuts.

This phenomenon is exactly what accounts for the forecasted rise in personal income taxes as a percentage of GDP over the next 5 years according to the CBO, as illustrated in this chart:



(Note: the rest of the rise in personal income taxes as a % of GDP comes from the expiration of the 2001 and 2003 tax cuts, and from bracket creep.)

Yet despite the sharp rise in income taxes that many middle-class taxpayers will face over the next few years, Bush’s budget proposes no changes to the AMT. It does propose an overall tax reform of some sort, which would presumably include altering or abolishing the AMT. However, Bush’s budget also explicitly says that his Advisory Panel on Federal Tax Reform is to “focus on revenue-neutral reforms” (Analytical Perspectives, p. 281). If true, this suggests that the White House is planning on letting the sharply higher tax rates that the AMT will effectively impose on upper-middle income taxpayers during the period 2006-10 remain in effect.

It’s hard for me to believe that the Bush White House will actually let such an increase in tax collections actually happen, so I’m not sure where this leaves us – other than with a strong suspicion that any fundamental tax reform that Bush proposes will be anything but revenue-neutral.

Kash

The White House has just released their budget proposal for FY2006. Bush is a tough-guy with this budget, as he himself said earlier today:

It's a budget that is a lean budget. People on both sides of the aisle have called upon the administration to submit a budget that helps meet our obligations of -- our goal of reducing the deficit in half over a five-year period, and this budget does just that. Discretionary spending is -- will increase at a rate less than inflation.

It takes a tough man to hold the line on government spending. And by making all of those tough decisions on non-defense, non-homeland security (NDNHS) discretionary spending, Bush will take a major bite out of the budget deficit. Remember, all of that NDNHS discretionary spending constitues over $390bn of federal spending annually. Even though that will be only about 16% of total federal spending in 2005 (which will total $2,479bn), taking a tough stand on NDNHS discretionary spending clearly demonstrates the budgetary leadership that we've come to expect from our president.

The results of Bush's budgetary fortitude? Thanks to the tough real cuts to NDNHS discretionary spending that Bush is proposing, such spending will actually fall by $2.2bn this year (assuming that Congress can be as tough as Bush is). On the other hand, if Bush had allowed the White House to craft a weak, spendthrift budget that allowed NDNHS discretionary spending to grow at the rate of inflation, such spending would have grown by $11bn this year – a net difference of over $13bn dollars!

What does that mean? It means that if Bush had not had the strength to mercilessly cut NDNHS discretionary spending, the budget deficit for this year would have been a whopping $403bn instead of the projected modest $390bn.

With such budget strictness emanating from Bush, we can rest easy about the budget deficit. At this rate, I'm sure that the budget deficit stands a pretty good chance of being completely eliminated sometime in the next 50 years. No, maybe not in our lifetimes, but at least in our childrens' or grandchildrens' lifetimes. Who could ask for more?

Kash

For the household survey types, the key number from the recent Employment Situation Summary should be the 62.4% employment-to-population rate which was unchanged. As the author of this post, I was wondering if Lawrence Kudlow might be elated that the only reason the unemployment rate fell to 5.2% was that the labor force participation rate fell from 66.0% to 65.8% (and no I neither predicted nor hoped for that 12/2005-b scenario).

It seems Mr. Kudlow has been busy trying to convince us that savings has risen as a result of Bush’s fiscal regime. Of course, the fact that the share of GDP going to consumption and government purchases has led the NRO pundits to abandon this measure and focus on the increase in nominal household net worth. But even by this measure, net worth at the end of 2004Q3 was lower in inflation-adjusted terms relative to where it was at the end of 1999.

It seems that Kudlow has outsourced his employment cheerleading to David Malpass who writes:

Job growth for January in the establishment survey came in at a weaker-than-expected 146,000, with the previous three months revised down by a total of 59,000 to an average 182,000 new payroll jobs per month. But this is not a poor result for this survey. Rather, it is fully consistent with an improving and relatively strong labor situation, continued rapid economic growth, and a durable, multi-year expansion. The establishment survey shows a record 132.6 million jobs currently, which tops the previous high reached in February 2001. The household survey - the Labor Department’s other, lesser-recognized employment measure that includes the self-employed - shows that jobs hit a record 140.3 million in November 2004, with January coming in at 140.2 million…Since the 2001 recession, the unemployment rate has fallen to 5.2 percent from 6.3 percent, indicating a sharp improvement in labor conditions and a return to relatively full employment.

The sharp reader might wonder about this decline in the reported household survey employment number (140.3 million to 140.2 million) but one should also the footnote that BLS puts in its household survey table:

Data affected by changes in population controls in January 2000, January 2003, January 2004, and January 2005.

OK, the NRO pundits do not recognize this footnote, but we should raise the discussion over the labor market above their stupidity and mendacity.

It seems their political masters wanted the CEA to say the Social Security Trust Fund will soon be bankrupt so they write:

A Small Business Analogy: Consider a small business that has $750,000 in annual revenue and $1 million in annual costs, for a $250,000 annual loss. Obviously, that business would be able to stay open only as long as it has enough money in the bank to cover its losses. Once the money runs out, the business will be bankrupt. The business won’t necessarily disappear, but to stay open it would have to restructure so that its revenues at least cover its costs.

It would seem the Social Security Trust Fund won’t disappear in 2052 either, but by this definition, Bush’s 2001 tax cut caused the Federal government to be bankrupt a few years back.

Don Luskin nitpicks himself into a corner again with another attack on Paul Krugman that also goes after Peter Orszag. He notes that Krugman argued:

when you divert some of your Social Security payroll-tax dollars into a personal account of the kind that President Bush is proposing, the government is effectively making a loan to you so that you can buy stocks on margin — “speculation that no financial adviser would recommend.”… Peter Orszag of the Brookings Institution got it exactly right: “It’s not a nest egg. It’s a loan.”

So Luskin fires off:

Wrong, wrong, wrong. If it’s a loan at all, it’s a loan you make to yourself.

Odd – someone just forwarded this email from David “just IOUs” Frum to me:

If I have an IOU from you, I have an asset. If you have an IOU from you, you have an unenforceable intention. Likewise, if I own a US government bond vs. if the US government owns a US government bond. I thought John Maynard Keynes explained all this 70 years ago!

I doubt Mr. Frum ever read the General Theory but I do think he and Luskin should compare notes. Of course, neither would admit that this whole Social Security deform idea is to divert my retirement funds to pay for tax cuts for the rich. But then that is what Mitch Daniels was talking about with “plenty of money for a tax cut”, I guess.

Update: I got another email from a reader of Angrybear that commented on Luskin’s NRO oped in the most delightful way:

He's forgetting (or more likely omitting) the trillions of dollars the government needs to borrow (a loan!) to cover the transition costs. It doesn't matter much where the actual revenue is coming from for the private accounts, because there has be equal amount borrowed to cover current benefits. In honor of his amazing stupidity, can we call this specific topic the "Luskin Equivalency Theory"?

Of course, Barro’s Ricardian Equivalence theory should not be confused with Luskin’s.

From CNN:

OMAHA, Nebraska (AP) - President Bush, on a campaign-style road trip to pressure recalcitrant Democrats and reluctant Republicans on a Social Security overhaul, warned Friday against "scare tactics" in the burgeoning debate. The president decried the kind of opposition campaigns now being waged against his proposals, saying they mislead seniors into thinking they won't get the Social Security checks on which they depend.

Excuse me – but when did Bush hire Donald Luskin to write his stomp speeches?

Jobs were created in January on net, but not as many as one might have wished for, according to the BLS:

Nonfarm payroll employment increased by 146,000 in January and the unemployment rate decreased to 5.2 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Job growth continued in several service-providing industries, while manufacturing employment declined over themonth.

This number is barely enough to keep up with population growth, and was decidedly below expectations. Given yesterday's weak productivity numbers, one might have thought that more jobs was improving... but apparently not.

Nevertheless, this figure does suggest that the sluggish labor market is not improving, and if anything, may be slowing slightly, as shown in the figure below.



All in all, a disappointing report.

Kash