The Employment Report on Friday was bad – but it wasn't the unmitigated disaster that the consensus seems to have spun it into. It is true that there were no bright spots. It is true that the net number of new jobs added was worse than consensus and indeed worse than some of the more pessimistic expectations. But 142k new jobs is not a recessionary collapse (yet). Let us remember that one or two months every year fall below that figure (see chart, source Bloomberg).

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Folks, it's just not a robust recovery and never has been. It has been slow and steady, and now it is probably petering out, but…let's not jump off the buildings just yet. In fact, one of my favorite indicators during this period while the Unemployment Rate has been falling but the general perception of the employment picture has been poor has been the “Not in labor force, want a job now” series, which shows people who are discouraged enough to not be looking for work, but would take a job if it was offered. As the chart below shows, that number is far above the lows from the last couple of expansions, and so has been a good check on the improvement in the Unemployment Rate. Now, however, we must also recognize that it is near the recent lows.

So not all of the “job market internals” are flashing red. True, none of them are exactly flashing green, either! Nor have they really ever been, in this cycle.

At the same time, it is incredible to me that the ex-Chairman of the Fed is taking a victory lap, claiming in the Wall Street Journal today that his policies led to a non-inflationary decline in the unemployment rate. Surely a professional economist ought to know the difference between correlation and causality. It is absolute madness to claim that the Fed's policies did nothing for the price level but had a huge effect on the real economy. That is almost exactly opposite of what generations of monetary policy experience teaches us: that monetary policy has almost no effect on real variables but only affects the price level. A more thorough retort will be given in “What's Wrong with money?”, which you can pre-order now!