Plenty of ink has been spilled already about the latest jobs report which shows a large gain in total jobs but a tepid gain in private employment. Let me just add a few things.

First off, for the purposes of kick starting demand jobs are jobs – sort of. What is key about the census jobs is that they are temporary and the job holders know that. This means that landing a census job doesn’t do a lot to encourage the household to spend. Or, if you prefer, temporary employment has far less effect on money demand that permanent employment.

However, the effect is not negligible. Census employment likely relieves cash-flow constraints in some households. One thing that many macro models ignore is the bid-ask spread in credit markets. This means that there is an asymmetry between saving money and borrowing money that will wind up trapping some households in a cash zone. Saving doesn’t pay enough to be worth it but borrowing is too expensive to be worth it.

One of the ways in which I view our current climate is that rising credit spreads increase the cash zone and thus make more households sensitive to cash-flow constraints. To the extent this is true temporary employment may relieve cash constraints and encourage spending.

What is not important from a demand stimulation point of view is public versus private jobs. That’s a demand trend issue. And, on that front the trend don’t look so hot. That is, what we would like to see is previous increases in final goods demand stimulating current demand for private sector labor. This report does not show that.

Perhaps, Casey Mulligan will want to tell us that this is due to crowding out by the government. That is all that census hiring sucked up workers that would have gone into private business. With all due respect to Casey’s standard case I, quite frankly, think that focusing on crowding out during a recession makes little sense. There is plenty of slack in labor markets and there is plenty of slack in industrial capacity. If markets were clearing we would see the two getting together.

So bottom line – 400K+ jobs is a nice bump to future demand but 20K private sector jobs is a poor showing for current demand.