Good news on bad job growth

Saturday, June 03, 2006 at 05:15 PM

Pollyanna had nothing on today's politicians and journalists.  Witness this take by Dan Arnall of ABC on yesterday's grim report of only 75,000 new jobs last month:

You might think today's lackluster jobs report wouldn't leave much for the Bush administration to crow about. But low numbers aren't standing in the way of a little positive spin.

The tiny addition of 75,000 new jobs took a back seat to the one-tenth of a percent drop in the nation's unemployment rate (now at 4.6 percent) as outgoing Treasury Secretary John Snow took to the airwaves in a number of live television interviews after this mornings report. Snow told interviewers that the overall tone of the jobs market is strong and emphasized the fact that unemployment hasn't been this low in five years.

What he didn't say is that this slight drop in unemployment is well within the survey's margin of error and was characterized by the Bureau of Labor Statistics commissioner as "essentially unchanged."
There's a bigger point here. It might actually be a good thing.

A Pause in Fed's Rate Hikes?

For almost two years the Federal Reserve has been raising interest rates. At first, it was to reset the fed funds rate -- what banks pay for overnight loans -- to neutral after it shifted rates to a historic low of 1 percent after the 9/11 attacks.

Recently, though, the Fed has been raising rates to slow growth and defuse inflationary pressures. The low May jobs numbers are a good sign that the central bank's fear of prices rising out of control might be unfounded.

"This was a report that the Fed should love and that investors should embrace," said economist Joel Naroff in a post-release report. "There is a really good chance that the [Fed] will call a pause on June 29. And if second-quarter growth is as soft as I think it will be, that is, below 3 percent, then the August 8 meeting may see a repeat of the watchful waiting approach."

Should that pause actually materialize at the end of the month, Wall Street will likely celebrate. The end of the long march of quarter-point rate hikes (which has left a key Federal interest rate at 5 percent) might spark a stock rally.

Might spark a stock rally.  Not to mention that low job growth leaves plenty of opportunity for growth next month.

And have you heard the good news about Iraq?  Several more buildings exploded today, leaving fewer buildings available as targets for the insurgents.

Heard the good news about the Republicans in congress?  So many are implicated in corruption that we can be damn sure our corruption-finding procedures work Jim Dandy!

Want to hear some good news about business journalism?  So do I.  Write me an e-mail if you foolishly think you have some.