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Private sector adds 1.8 million jobs

I doubt you'll see this headline anywhere else. But that's how many new private sector jobs have been added so far this year, according to the household survey of employment. The household survey has a strong tendency to lead the establishment survey, especially in the years following the end of a recession. That's because it is based on a random telephone survey of households, whereas the establishment survey relies on sending a questionnaire to known businesses. So the household survey is more likely to pick up the newly self-employed and those employed by new startups that have not been recognized by the establishment survey yet.

Note that it took almost two years following the 2001 recession for the establishment survey to show an increase in jobs, whereas the household survey showed new jobs after a little over one year.

In any event, both surveys are now showing clear signs of new jobs. This should lay to rest any lingering concerns about a double-dip recession, but it's not enough to convince anyone that the economy is in good shape. The unemployment rate remains very high at 9.6%, and there are still some 9 million people receiving unemployment insurance.

This news has already jolted the markets, however, because it paints a much rosier picture than the market had been assuming. I see lots more upside potential to both equities and Treasury bond yields. There is no double-dip recession—in fact, we are in the midst of a recovery that is ongoing, albeit relatively modest. I continue to expect the economy to expand at a 3-4% rate for the foreseeable future.

UPDATE: Here's a chart of the six-month annualized growth rate of private sector jobs according to each survey. The 2% growth rate reflected in the household survey equates to a little over 200K jobs per month, which if continued, would be enough to bring down the unemployment rate very gradually. Regardless, it's highly doubtful we'll see any meaningful decline in the unemployment rate prior to the November elections. People are going to be moaning and groaning about the supposed "jobless recovery" for many months I suspect. This is the pattern that tends to follow every recession: the man on the street doesn't feel the recovery until long after it has been obvious in the numbers.

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