Fiscal Cliff Concerns Did Not Restrain Hiring

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Saturday, 02 February 2013 06:29

The NYT is still pushing the line that, "uncertainty over fiscal policy and the fragility of the economy still seem to be holding back employers." There is no evidence in this or prior job reports to support this contention. If employers are seeing a level of demand that would otherwise justify hiring, but are reluctant to do so because of uncertainty, they would look to fill this demand through alternative channels.

The two obvious alternatives are increasing the length of the average workweek and hiring temporary employees. The average workweek has been stable or even gotten slightly shorter in recent months. Temp hiring has been extremely weak. These facts suggest that the reason for lack of hiring is simply that employers are not seeing adequate demand, not uncertainty. 

The piece also told readers:

"Economists are forecasting job growth of around 170,000 a month for the rest of 2013, comparable to job growth over the last year."

That would probably be the view of economists who could not see an $8 trillion housing bubble. Economists with a better understanding of the economy would probably project a slower rate of job growth. The economy had been growing at just a 1.5 percent annual rate in the second half of 2012. There will be downward pressure on growth from the ending of the tax cuts and the sequester or other budget cuts. In this context it is more likely that growth will be around 120,000 a month, a pace closer to the underlying rate of growth of the labor force.