Today's jobs report

I am back in the office after a couple of weeks off. There is some relatively good news in today's jobs report: the unemployment rate in July dropped from 9.5 to 9.4 percent. Although employment declined by 247,000 in July, this is well below expectations and far below the 443,000 number for June. (Aside: the press always labels the employment decline as "jobs lost." This is incorrect. Every month new jobs are created and existing positions vanish. The number reported is the net change in employment.)

Today's report provides further evidence that the economy is beginning to recover. Historically, employment growth lags behind output growth. So even if GDP grows by 2 or 3 percent for the rest of the year, we probably should not expect anything dramatic for employment until 2010. Uncertainty about possible healthcare mandates is likely to provide an additional drag on labor market recovery. Companies that do not currently provide health insurance are well aware that the price of labor may increase by 10 percent in the next few months. Demand curves slope down.