Support for WSJ’s Jobs Optimism is Thin

There’s plenty of green-shoot glory in the Journal’s Ahead of the Tape column, which uses accelerating corporate profits to help suggest that “a powerful turn toward job growth could soon be at hand.”

But this isn’t just ordinary job growth on the way. The Journal is talking “robust.”

That worked out to $12,491 in profits per worker in the third quarter, according to Deutsche Bank, up from a low of $9,927 in the fourth quarter of 2008. “You tend to get these big increases right before strong job growth,” says Joseph LaVorgna, the firm’s chief U.S. economist.

The U.S. could add 200,000 jobs a month for the rest of this year, he says, even excluding the hiring of workers to conduct the 2010 Census.

The recent surge in hiring of temporary workers, often a precursor to full-time positions, also points to vigorous gains. Employment of temps has jumped by 248,000 since October, a 15% gain that is one of the strongest rebounds on record.

Ahead of the Tape is meant to be short and snappy, I know. But this seems like one of those times where just a few more words would go a long way to making a stronger case.

We’d love to believe that jobs will follow profits that way. And Friday’s better-than-expected unemployment data is a good sign.

And, indeed, it is logical to assume that jobs follow profits. But if that’s the basis for a case that robust growth is on the way, the Journal should provide some data to show how that pattern has played out in the past.

Then there’s that pesky U-6 number, which includes people who have stopped looking for jobs or can’t find full-time work. That one actually went up by 0.3 percentage point to 16.8%. As the Journal put it in a different story after those numbers came out:

Though the rate is still 0.6 percentage point below its high of 17.4% in October, its continuing divergence from the official number (the “U-3″ unemployment measure) indicates the job market has a long way to go before growth in the economy translates into relief for workers.

And, while relying on corporate profits seems logical, there’s some recent history that makes us cautious on that approach. GDP and productivity and profits were all going up during the last expansion, but somehow job growth was tepid —and median income fell.

Paul Krugman has written about this before.

If he’s wrong, so be it.

But when was it that the Deutsche theory held true? Journal readers should have been told.

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Holly Yeager is CJR's Peterson Fellow, covering fiscal and economic policy. She is based in Washington and reachable at