What the jobs data tells us
One month doesn’t mean much, but FWIW:
1. As of August, payroll employment had risen 4,142,000 from recession lows, and household employment had risen 4,133,000. Basically identical. In September payroll employment rose 114,000 and household employment rose 873,000, meaning it is up over 5 million from the recession lows.
2. The payroll number is more accurate, but the household number can occasionally pick up people employed at newer firms. My hunch is that the actual number was around 150,000 – 200,000.
3. There have been lots of significant revisions in earlier payroll numbers, up 386,000 a few weeks ago, and then today another significant upward revision to earlier data. We aren’t quite as jobless as we thought we were. On the other hand:
4. GDP numbers (real and nominal) are getting revised lower, with RGDP rising only 1.3% in the latest quarter, and NGDP at 2.77%. We aren’t as productive as we thought we were. The Great Stagnation intensifies. On the other hand:
5. Wages aren’t as sticky as we assumed. People have asked why we don’t have more wage adjustments occurring, to create new jobs. Obviously the jobs revisions show that more of this occurred than we realized, and the lower GDP numbers also show that our labor markets are more flexible than we assumed. It’s really, really hard to create jobs when NGDP is growth at less than 4% (as it has been over the past year) but we are managing to do so—about 1.8 million the payroll survey or 2.8 million in the household survey. Lower wage demands are gradually equilibrating the labor market.
So there’s something for everyone. The horrible productivity numbers support Tyler Cowen’s argument that we have a stagnating economy. But the ability to create significant numbers of jobs despite horrible nominal income growth shows (as the market monetarists claim) that we remain below full employment and are still getting labor market adjustments via slower wage growth. The natural rate of unemployment is currently elevated, but I doubt it’s over 8%
PS. The report signficantly helps Obama, as the Intrade market shows his election odds rising 2.6 points to 68.6.
PPS. This link has lots of data. Asian-American unemployment is 4.8%. How do you say “full employment” in Chinese?
Tags:
5. October 2012 at 08:43
Well, if we just jigger the labels a little (call it a ‘financial recession’), we’re doing fine, say Moritz Schularick and Alan Taylor;
http://www.voxeu.org/article/fact-checking-financial-recessions
———–quote———-
By this reckoning the US has done quite well, steering out of the to-be-expected financial recession range based on the inherited level of excess credit, especially if the shadow system is considered. Most importantly a deep financial recession was avoided at the outset, and this level effect remained intact.
Seeing this US outperformance it may be tempting for readers to map the paths into policy shifts. The extraordinary, coordinated central bank and fiscal actions of 2008-09, both globally and in the US (Fed liquidity and QE1 programs and the ARRA stimulus); and then the arguably premature tapering of such policy supports (Fed dithering over QE/twist programs, and the phase out of ARRA with no further stimulus). We think such conjectures represent fertile ground for future research.
Credit bites back
To assume that this US recovery would resemble previous “normal recession” is to use the wrong benchmark. Such forecasts risk overstating growth, lending, interest rates, investment, and inflation. Our work shows that the leverage run-up was unusually high going in, so as in the past it is unsurprising that a painful deleveraging dynamic is taking its toll on the way out.
This time actually is different – and worse – in one very clear and measurable dimension. Now, as in past debt overhangs for more than a century, credit has exerted a crucial influence on the course of the business cycle.
————endquote————
That was easy.
5. October 2012 at 08:46
Wait, how about saying “full employment” in Hindi? (And in case anyone was wondering, I’m as pro-immigrant, pro-tolerance, and pro-infinite diversity in infinite combinations, as they come).
5. October 2012 at 09:18
I was proven wrong, as I did not anticipate unemployment dropping below 8 percent before the end of the year.
5. October 2012 at 09:22
Patrick, Yes, and didn’t Australia also have a big debt surge? Where’s there recession?
Jim, And Filipino.
5. October 2012 at 11:54
[…] is worth, this nicely under 8% number doesn’t mean the economy is getting better at all, as Scott Sumner pointed out, the economy is still sluggish and in the so-called “The Great Stagnation” since RGDP […]
5. October 2012 at 13:40
“Wages aren’t as sticky as we assumed. […] Lower wage demands are gradually equilibrating the labor market. […] But the ability to create significant numbers of jobs despite horrible nominal income growth shows […]”
Or are people dropping out of labor market “equilibrating the labor market”?
Employment to population ratios show zero signs of recovery. [ http://data.bls.gov/timeseries/LNS12300000 ] It’s three years of identical numbers in 58.2%-58.7% range in some combination of seasonal and random fluctuations.
Reasoning about labor market from U3 just makes no sense, U3 unemployment rate wouldn’t even be relevant in any kind of market monetarist model, hours worked or employment to population ratios would be, and they show zero signs of recovery.
Prolonged depressed labor market removes people from labor force permanently “improving” unemployment rate. That’s the only effect observed here.
Treating “unemployment rate” as measure of labor market situation is just as bad an idea as treating interest rates as measure of monetary policy.
Your assumption that labor market is recovering is wrong, and by extension your proposed policy of not going all the way to previous NGDP trendline is probably also wrong since it’s based on faulty assumption of labor market recovery.
Radical action would be needed to recover pre-crisis employment rate.
5. October 2012 at 15:41
“Employment to population ratios show zero signs of recovery”
Why would they? As the population ages and baby boomers retire the ratio will continue its trajectory. There is nothing that can stop it (unless the flood gates of immigration were opened wide).
5. October 2012 at 17:45
Tomasz, See Benny.
5. October 2012 at 21:43
Benny,
Look at the graph Greg Mankiw just posted.
http://2.bp.blogspot.com/-nnG2clfvcPk/UG-qrAv3N-I/AAAAAAAABV4/MBeWUxxGizc/s1600/employment+pop+ratio.png
Our aging population doesn’t suddenly leave the labor force with such a discrete jump. I agree that employment-population should trend downward as baby-boomers retire, but we should at least be around 60-61% right now.
5. October 2012 at 23:23
Scott, see Becon, the #’s show much more than boomers.
We now have 1.3M on disability for mood disorders.
You can’t say minimum wage is too high, and not see effects from Food Stamps, disability, Obamaphone, etc.
REALITY requires admitting the U is worse because of drop outs who have dropped out for many reasons.
6. October 2012 at 00:51
I’m still waiting for Obamaphone to be trotted out in the debates, as well as Romney’s dog and the 47%. Also waiting for Romney to show up in person on Letterman – Matthew Broderick did the dress rehearsal with him a few nights ago.
6. October 2012 at 01:33
You guys should be looking at employment to population, ages 25-54.
http://data.bls.gov/timeseries/LNS12300060
It shows some improvement — perhaps we’ve recovered 1/4 of the recession losses — so it’s not as bad as the entire population, but it’s still bad.
P.S.
You’re welcome, PK.
6. October 2012 at 06:26
Benny, Scott: Even if it was true (and it’s not), switching people between categories “unemployed”, “out of work force”, “retired” while keeping the same hours worked to population and employment to population ratios does not indicate any adjustment in labor market whatsoever.
Also there was no “downward trajectory” to “continue” before recession.
Steve: 25-54 data is not what we want, since demographic group most affected by the recession is young people (in many eurozone countries >50% youth unemployment rate now). Does BLS have 16-64 or 18-64 data? I cannot find it. Also excluding people near retirement who can decide to “retire early” rather than stay “unemployed” shows no difference in labor market.
6. October 2012 at 06:40
Also this: [ http://marginalrevolution.com/marginalrevolution/2012/02/the-real-unemployment-rate.html ]
Adjusted for demographic decline in labor force, there’s still zero recovery (data is over half year old now).
According to an analysis [ http://politicalcalculations.blogspot.co.uk/2012/02/discouragement-of-american-worker.html#.UHBAeLvIIig ] people started dropping from labor force at just the time when 99 week unemployment benefits started expiring (and any benefits from claiming to be “unemployed” over “out of labor force” ceased to exist), so it’s as blatant a case of decline in labor force due to awful situation on the labor market.
(quote: “What we see is that the magnitude of a decline in unemployment some 103 weeks later is nearly equivalent to the increase in unemployment 103 weeks earlier. We also see that the corresponding peaks and troughs in the time-shifted data occur most often between in a range between 99 weeks and 108 weeks, which might be attributable to delays in individuals filing for jobless benefits after being laid off or in reporting the change in their job-seeking status.”)
Scott, just admit your premise was wrong and labor market is not recovering. Don’t turn into another I’ve-never-been-wrong Krugman.
7. October 2012 at 12:01
Tomasz, I’ve always claimed the recovery was weak, but Steve’s data is far more persuasive than yours. People leave the labor force for many reasons (retirement, disability, etc) that doesn’t mean they are “unemployed” and ready to go back to work. There are 5 million more people working. I’d like to see that be 10 or 15 million, but jobs are gradually being created. So I see no reason to revise my views.
BTW, if I thought the labor market was fine (as you claim) why would I insist we need much more stimulus?
24. February 2017 at 06:33
[…] http://www.themoneyillusion.com/?p=16790 […]