Getting worse more slowly isn't good enough

Oct 1st 2012, 14:55 by R.A. | WASHINGTON

THE crisis in the euro area is beginning to feel like a permanent piece of the world's economic landscape: a great red spot that just churns and churns and never goes away. It isn't, though. One day the crisis will be over, either because the euro zone managed to muddle through or because it didn't, and came apart.

To avoid coming apart, the euro zone needs to accomplish three things. First, it needs a policy mix from the European Central Bank and from its member states sufficient to prevent a market panic leading to a quick end. There have certainly been moments when it seemed as though it would fail this first task, but at every point enough action has been taken to prevent an immediate disaster. The ECB's role has steadily evolved and has in the process reduced the risk of an implosion of the banking system and contagion across sovereign debt markets. And at the same time, Europe's governments have—slowly, haltingly, inadequately—begun building an infrastructure for a banking and fiscal union. The odds of a Lehman like miscalculation precipitating a sudden financial catastrophe and break-up seem to have steadily receded.

Yet that is just the first hurdle. The euro area also needs to reestablish strong growth, sufficient to begin meeting fiscal goals. On this score, the euro area has done very poorly. The story is more or less this. The crisis, recession, and capital outflows of 2008-09 led to broad weakness in the domestic economies of many peripheral countries. On top of this troubled sovereigns have been raising taxes and cutting spending in order to try and meet budget goals (some necessitated by markets, some imposed by core economies in exchange for fiscal assistance). The result was a descent back into recession, which has in turn worsened budget balance, undermining the process of fiscal consolidation. This weakness could be offset by rising net exports.

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America's jobs report

Oct 5th 2012, 12:55 by G.I. | Washington, D.C.

BARACK OBAMA'S re-election hopes were dealt a setback by Mitt Romney's relentless attack on his economic record at Wednesday's presidential debate. Today, he got a lifeline from an unlikely source: the economy.

In September, the unemployment rate plunged, unexpectedly, to 7.8%, from 8.1% in August. It was the first time it fell below 8% since January, 2009, the month that Mr Obama took office. More important was the reason it fell: not because people were quitting the labour force, but because they were finding work, by remarkable numbers.

Non-farm payroll employment rose by 114,000, an unremarkable number in itself and pretty close to Wall Street's expectations. But the two prior months were revised up sharply. Payrolls rose 142,000 in August and 181,000 in July, a cumulative 86,000 more than first reported. That, however, is not the full story. The Bureau of Labour Statistics measures jobs two ways: the well-known payroll survey of employers, and the lesser-known survey of households, which yields the unemployment rate. According to that latter survey, the number of people with jobs skyrocketed by 873,000 in September from August. That is the largest gain since January, 2003. January figures are often distorted by annual revisions to assumptions about the size of the population. You have to go back to 1983 to find a monthly gain this big outside January.

Let's take this with a grain of salt. The household survey numbers are extremely volatile, and September's gain in part merely makes up for two large drops in prior months; reality is somewhere in between. Moreover, the gains in payroll employment, for a change, got a big hand from government; state and local jobs have climbed a relatively hefty 72,000 in the last three months. That's a welcome reversal from the shrinkage of previous months, but not as solid a sign of revived animal spirits had the gains all come from the private sector, a point that Mr Romney's camp will no doubt make.

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