With the unemployment rate falling from 10.0 to 9.7 the employment report implies that the economy is in a transition phase.
The period of widespread layoff and job cuts is over. So if you still have a job the odds of
your losing it have roughly returned to normal. This change is reflected in the improvement in
personal confidence. But firms have not yet begin widespread hiring. So if you are still looking
for a job it is going to be rough.

During this transition phase the things that normally happen are occurring about as normal.
Firms are hiring temporary workers and hours worked are expanding.

Average hourly earnings are still weakening as the recent labor compensation reports showed when they reported that labor compensation growth was running at record lows.

But the combination of weak wages and expanding hours is generating a nice acceleration in weekly earnings.

The gains in weekly wages imply that the recent pick-up in nominal personal income should continue and may actually improve. In recent months average hourly earnings has been running at about a 4% rate, a sharp improvement over that in 2009. In 2009 nominal personal income growth turned negative for the first time since 1938. But with nominal personal income only growing in the low single digit rates the threat of accelerating inflation remains remote. Remember, before the 2009 surge in bank reserves can show up in inflation it has to first generate a pick up in money supply growth and nominal income and neither of those appear to be on the immediate horizon.

The cycle is running its course and it should not be long until we can start showing charts of presidential comparisons like this table. the interesting comparison will be between Obama and Reagan. Of course the Reagan administration was during the era of low productivity growth when a given gain in real GDP growth generated a larger increase in employment than should be expected in the current environment of very strong productivity. But the real message in this table is that those who thought Bush did a good job and want to repeat his policies sure have some explaining to do. Even Carter created some five times as many jobs as Bush in only four years.

Correction of first sentence made. Thanks.