John Hussman: The Recent “Good” Jobs Reports Have Been Among The Worst Ever Recorded
Sep. 13, 2010
First off, John Hussman is still bearish.
Okay, now that we’ve gotten that out of the way, his latest weekly letter takes a look at some of the supposedly “good” jobs data we’ve gotten lately — both on the monthly jobs number, and with the weekly initial claims reports.
In his note, he introduces readers to the notion of an impulse response — basically the tendency of economic data to echo down the road:
To provide some perspective on this, below is a simple estimate of what economists call an “impulse response” profile for the U.S. labor market. When we deal with economic variables – such as employment – that are subject to positive or negative “shocks,” it is often helpful to estimate how those shocks tend to “propagate” over time. For employment, a 1% shock in job creation or destruction (versus trend growth) tends to be followed over the following year by an additional 1% movement in jobs in the same direction. After that, the impulse gradually attenuates over a larger period of years, as the initial positive or negative burst is followed by a trajectory back toward trend growth. In effect, positive and negative “shocks” to job creation have very strong tendency to “cluster,” propagating in the same direction for a period of about 12 months, and then gradually attenuating toward the long-term trend.
Here’s what the echoes look like for a job shortfall: