Archive for the ‘unemployment’ Category

Glimmer of light

16 August 2012
No, I haven’t suddenly turned into an economic optimist, but this week’s new retail sales report is even better news than the media have noted. What’s they’ve noted is that retail sales in July rose 0.8% relative to June, which was better than expected. They’ve also noted that retail sales fell 0.7% in June, which kind of cancels it out. But the bigger and better news, I think, is in the yearly change: retail sales rose 4.1% compared with July 2011, which is a pretty healthy rate of increase. And retail sales for the three-month period of May-July 2012 were 4.3% above the corresponding period for last year.

Two components that caught my eye:

  • Sales of sporting goods, hobby, book, and music stores rose 10.6%. Perhaps not a very large part of GDP, but notable in that these goods tend not to be necessities. The surge in spending on these goods may point to growing consumer confidence that the consumer-confidence surveys (which tend to be focused on big-ticket purchases) do not pick up.
  • Nonstore retailers’ sales rose 11.8%. I assume this mostly means online sales from places like Amazon.com. Double-edged sword: good for consumers and those companies, probably bad for job creation as a whole, as I’d expect companies like Amazon.com to be a lot less labor-intensive than traditional brick-and-mortar stores. Which may have something to do with why the U.S. economy has been so crap at job creation over the past dozen years.

I should note that these numbers are not adjusted for inflation, but even after the adjustment they are still decent, especially considering that the Eurozone is basically in recession (0% growth in 1st quarter, 0.2% decline in 2nd quarter). The consumer price index rose just 1.4% y/y (July 2011 – July 2012) and not at all in July 2012, so this is a real improvement. Has the American consumer awakened?

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Keynesian jobs programs, R.I.P.

7 April 2012

So much for our supposed big-government Keynesian president: government jobs, the emblem of New Deal anti-depression policy, have actually gotten more and more scarce since President Obama took office. Since the recovery began in June 2009, the number of public-sector jobs has shrunk by almost 3%.

Most of that reduction has been at the state and local level, but it’s striking that the decline has been fairly continuous despite the  $787 billion two-year federal stimulus package in 2009-2011. As I’ve noted before, the stimulus bill took pains to ensure that nearly all of that temporary job creation would be for private contractors. And as I’ve lamented before, it’s rather hard to have effective fiscal policies when our current politics demonizes direct government job creation (i.e., giving people government jobs) as worse than doing nothing. This is all the more remarkable considering that direct job creation was the calling card of the most popular president of the last century, Franklin D. Roosevelt, whose New Deal programs created an average of three million government jobs per year in 1933-1940. One could even argue that the political success of those programs was a big part of the reason why conservatives oppose them so fiercely, at least whenever they’re contemplated by Democrats.

What’s also striking is that this pattern is in contrast to all three of the previous recessions (1981, 1990, 2001), when public-sector employment actually grew. Notably, all three of those past recessions were under Republican presidents — maybe it’s a “Nixon goes to China” phenomenon, where only conservative-seeming Republicans can get away with increasing government employment. (Then again, it’s possible that most of the action was at the state and local level, though I’d suspect that the 1980s military buildup accounted for much of the increase under President Reagan.) Most striking of all is that the ultimate Keynesian here was Ronald Reagan, who oversaw an increase of almost 4% in government jobs in the first 30 months of recovery, the most of any of these presidents. Graph from Josh Bivens of the Economic Policy Institute (hat tip: Andrew Sullivan):

Idle times

2 December 2011

Today’s new Bureau of Labor Statistics report reveals the instant cure for unemployment: Stop looking for work. I say that not as advice or to be callous, just to explain how it is that November’s meager job growth could coexist with a pretty sizable drop in the unemployment rate, from 9.0% to 8.6%.

Technically, the precise reason is that the low number of jobs added, 120,000 (which is well under the 210,000 needed to restore 5% unemployment in eight years) comes from the BLS’s survey of companies (the “establishment survey”), whereas the 8.6% number comes from its separate survey of households. But even in the household survey, the basic story is the same. The longstanding economic definition of unemployed is not merely “not employed” but “not employed yet actively looking for work.” And it looks like the bulk of the reduction in unemployment was from people who stopped looking.

In the household sample, total unemployment fell by 594,000, which looks great, except that employment grew by less than half that (278,000). “Not in the labor force” (i.e., not working and not looking) grew by much more (487,000). The labor force itself (employed plus unemployed) shrank by 315,000. It’s hard to blame people for giving up looking for work when there are currently 4.2 times as many unemployed as there are job vacancies. (The number was 1.8 when the recession began three years ago.)

Rather than focus on the official unemployment rate or broader measures like the U-6 unemployment rate (now 15.6%; includes discouraged job-seekers and involuntary part-timers), I prefer to focus on the employment-to-population ratio, which is a simpler measure that avoids messy distinctions (e.g., actively vs. passively looking for work vs. not looking at all but might take a job if offered). The employment-to-population ratio has hardly changed at all since September 2009, fluctuating narrowly around its current value of 58.5%. (By comparison, it was 62.0% at the worst of the 2001 recession hangover.)

One could wax metaphysical about work as a bourgeois construct and argue that people are finding spiritually rewarding alternatives to work, but that doesn’t seem to be the case for all that many people here. The BLS report shows that 6,595,000 adult Americans are currently not working and not looking but want to work now. That number (seasonally adjusted) has never been larger — not even at the trough of the recession in mid-2009 and not even when the unemployment rate was over 10%.

If the labor force keeps on shrinking, the official unemployment rate could fall fast, but that’s probably not how we want to get there.

UPDATE 3 DEC. 2011: Brad DeLong does the number crunching I was too lazy to do and produces a specific breakdown of how much of the unemployment rate decline came from labor force shrinkage (25 basis points, or 0.25 percentage points) and how much came from employment growth (15 basis points). So if nobody had left the labor force, the unemployment rate would have fallen to 8.85%.

The ones that never knock

9 October 2011

Stay in school, kids. At least till you’re 25, or maybe for as long as you can. That’s the message of the wildly different unemployment rates for college graduates age 20-24 versus age 25 and over.

The September 2011 unemployment rate for college graduates was 4.2%, which sounds pretty good, even though it’s more than double what it was before the recession. However, that’s for college graduates age 25 and over. I reported this a couple days ago but didn’t have a separate rate for younger college graduates, since that wasn’t in last Friday’s BLS employment report. But the data do exist. The New York Times mentioned today that the jobless rate for college grads under age 25 averaged an eye-popping 9.6% over the past year. Before the recession it was just 3.7%. Which sent me scurrying to The Google.

The latest BLS Current Population Survey shows that the rate was 8.1% as of last month — trending down, but still historically high and only a percentage point less than the overall unemployment rate. And this is just by the official definition of unemployment, which doesn’t include discouraged job-seekers who’ve stopped looking, involuntary part-timers, or college grads working in “high school” (or less) jobs that don’t require a college degree. Evidently it’s a lot easier to keep a “college job” than to land one.

Staying in school past college seems almost necessary, too, considering that median pay for moderately young (age 25 to 34) college grads with bachelor’s degree is almost 10% lower than it was a decade ago.

As bad as it is for young college grads, it’s vastly worse for those with less education. Unemployment rates for 20-24 year-olds by educational attainment:

  • some college, no degree: 12.9%
  • high school diploma or GED: 22.4%
  • no high school diploma: 28.5%

With hordes of unemployed young people, thousands of them engaged in mass protests in Wall Street and other locales, this country is reminding me a lot of Europe in the early 1980s. Which makes a bunch of classic English punk and post-punk songs timely again. I’ll go with this one:

As good as it gets, and still lousy

7 October 2011

The best that can be said about today’s BLS employment report is that it revealed 202,000 new jobs, which is in the right ballpark for how many jobs the economy needs to generate each month for the next eight years in order to get back to a normal unemployment rate. The bad news is that only 103,000 of those jobs are from last month. The other 99,000 are from revisions to July and August, which push those months’ net-new-jobs totals up to 127,000 and 57,000. So the average employment gain for the last three months is less than half of what we need to be on that eight-year recovery track.

It gets worse. Quoth the BLS: “Since April, payroll employment has increased by an average of 72,000 per month, compared with an average of 161,000 for the prior 7 months.” So now we’re down to about one-third of the needed monthly job creation to be on that eight-year recovery track.

NPR’s Planet Money reports that the job market is bad across all demographic groups, even the college educated. While college-educated people age 25 and over are the only group with an unemployment rate below 5%, the BLS historical tables show that the current rate (4.2%) is more than double what it was four years ago (2.0%). And the employment-to-population ratio of this group has fallen almost 3 percentage points (to 73.0%) over the same span.

The employment-to-population ratio is really where the worst news is. Even the expanded unemployment rates, which include discouraged job-seekers and/or involuntary part-timers, have shown some improvement over the past two years. But the improved unemployment rates seem to be entirely an artifact of people dropping out of the labor force. The labor force is actually slightly smaller today (154 million) than it was in mid-2009, at the trough of the recession. The economy has added about 1.6 million jobs since the employment trough of October 2009, but that hasn’t been been enough to keep pace with population. The current employment-to-population ratio (58.3%) is actually slightly lower than that of October 2009 (58.5%), even as the main unemployment rate has fallen from 10.1% to 9.1%.

Along those lines, the BLS’s “Alternate Measures of Labor Underutilization” are instructive. The official (U-3) unemployment rate counts only the jobless who say they are actually looking for a job. The U-4 unemployment rate includes “discouraged workers,” i.e., jobless people who are not looking but would take a job if one came along. The U-5 unemployment rate adds in “marginally attached workers,” who are a similar state of joblessness. Yet the U-5 unemployment rate (10.5%) is only 1.4 percentage points higher than the official rate, which suggests that most of the unemployed are either (1) still looking for work or (2) really not even thinking about it, i.e., have found life, or despair, or something,  outside the labor force.

The oft-cited U-6 unemployment rate, which is by far the highest, includes part-time workers who cannot get full-time work. This one is 16.5%, so most of the addition comes from the involuntary part-timers. So 6.0% of the labor force is involuntarily working part time. How does 6% compare with other times? The BLS data here go back only to 1994, so it’s hard to be definitive, but about 3% seems to be the norm. That’s what it was for most of 1994-2007, including even the recession and slow recovery of 2001-2003. That’s right — the involuntary-part-time employment rate is double what it was in the last recession and “jobless recovery.” It edged up to 4% in 2008, above 5% in 2009, reached 6% in September 2010 and has hovered around there ever since. That’s a lot of involuntary part-time jobs, and it adds another dimension of lousiness to the current depression. Also, if those are the kind of jobs this economy is creating, it’s no wonder that many people would rather hold onto their unemployment benefits, which, depending on their previous jobs, might pay more. But that’s a subject for another post.

Better than nothing

26 September 2011

. . . is how I’d describe this month’s major developments on the fiscal and monetary policy front, namely Pres. Obama’s new jobs proposal and the Fed’s decision to reallocate its Treasury bond portfolio so as to try to push long-term interest rates down.

The Fed’s decision is simpler, so I’ll start with that one. Last Wednesday the Federal Open Market Committee kept its fed funds rate target unchanged at 0-0.25% and announced that it would sell most of its short-term T-bill portfolio and replace it with longer-term T-notes and T-bonds. This is quite a bit less than the “QE3” (quantitative easing, round 3) that many in the market were hoping for, as it does not involve a net increase in the Fed’s Treasury holdings, and the stock markets took a tumble that afternoon. The media quickly dubbed the Fed’s move “Operation Twist,” after a similar action in 1961. Nobody expects this move to have more than a marginal impact, not when mortgage and other long-term interest rates are already at historic lows, but it’s hard to argue against a positive marginal impact, purchased at so little cost. A Wall Street Journal editorial notes that the 1960s Operation Twist lowered long-term interest rates by about 0.20 percentage points, and “Some experts said that was enough to make the program effective; others deemed it a failure.” It seems to me that any reduction in unemployment from this move, however small, is welcome news at a time of 14 million unemployed.

The President’s new jobs bill is a more complicated animal. (Note that they’ve dropped the term “stimulus package,” apparently out of belated recognition that “jobs bill” is simpler and sounds more appealing and also because the $787 billion stimulus of 2009 is unpopular. I’ve been over this one before: leading estimates are that it saved a few million jobs, which is good, but it was supposed to save all of them, and that obviously didn’t happen. Thus it is unpopular.) The main complication is that it has no chance whatsoever of passing, given knee-jerk opposition to all things Obama in the Republican-controlled House and the Republican-filibuster-strength minority in the Senate. This despite the fact that, as Obama said, that virtually everything in it has been supported by Democrats and Republicans alike. (To be fair, not much in it has been supported by Republicans recently, i.e., since Obama became president.)

Specifics: The American Jobs Act (its official name) has a price tag of $447 billion, most of which apparently would be spent during the next 12 months, so roughly the same yearly amount as the 2009 stimulus. More than half of that is a $240 billion cut in payroll taxes, including a reduction in the payroll tax paid by workers, a cut in the employer share for small businesses, and a tax holiday for new employees. The next biggest item is $140 billion for infrastructure and local aid, notably transportation, retaining and rehiring teachers and first responders, and modernizing public schools. The last area is $62 billion for unemployment insurance extensions, tax credits for hiring the long-term unemployed, and subsidized employment for low-income individuals.

All of this seems reasonable, maybe too reasonable. In a less toxic political environment, this proposal would pass, but just like the 2009 stimulus, it would be way too small to fill America’s jobs deficit. The payroll tax has already been cut to 4.2% (down from about 6.2%), and the jobs bill would cut it to 3.1%, or about $11 on every $1000 of income.  Small potatoes. And while poorer workers would surely spend their payroll tax cut, upper-middle class and upper-class workers would probably save much of theirs. The current payroll tax cut is set to expire at the end of this year, and Republicans aren’t crazy about it (they prefer permanent tax cuts aimed at “job creators” in the top tax brackets) but don’t want to be cast by Democrats as favoring tax increases for the little guy, so a further extension of the 4.2% payroll tax rate seems likely.

The payroll tax holiday and ($4000) tax credit for hiring the unemployed should also be expected to have a positive but marginal impact on employment. The number one question in any prospective employer’s mind is “Can I sell the extra output that this person would produce?” Tax holidays and tax credits make a Yes more likely, but only if the product demand is strong enough to almost warrant hiring the person in the first place. Still, we economists live at the margin, and as with the Fed’s Operation Twist, anything that creates jobs at minimal cost is a positive thing.

And now on to costs. This is the main area where I have a problem with the president’s proposal. Obama says the program is fully funded, when really that’s the last thing we should be worrying about during a depression.The more you offset the new spending and tax cuts with spending cuts and tax increases elsewhere, the less stimulus you have. Obama said the program will be paid for by additional spending cuts in the future, closing corporate tax loopholes, and reinstating the “millionaire’s tax” on personal income. (Note: We last had a $1 million tax bracket in 1940, in nominal terms. Adjusting for inflation, we last had a $1 million tax bracket in 1973.) If the spending cuts are sufficiently far off in the future, like when the unemployment rate is back below 6%, they should do little macroeconomic damage. Ditto the closing of tax loopholes — which probably have little to do with hiring anyway — and the millionaire’s tax. As far as I can tell, those tax increases — and some others that I would support, like taxing hedge fund managers’ salaries as ordinary labor income instead of at the lower capital gains rate — would take effect immediately. While I don’t buy the Republican rhetoric about every rich person being a Job Creator, I still don’t think raising taxes in a depression is a good idea. It can wait.

Yes, it’s a depression (cont’d)

7 August 2011

Get a load of this chart, from Calculated Risk. It shows job losses in the 11 U.S. recessions since 1948. Our Little Depression is in a class by itself:

Job losses in all U.S. recessions, 1948-2011


(Hat tip: James Fallows.) A few things to take away:

  1. The maximum decline (6.4%) of jobs in the current slump was the worst of any of these recessions.
  2. Even after 18 months of so-called recovery, the current employment decline (5%) is larger than the maximum decline in all but one of the other recessions.
  3. At this point after the start of every other recession (except, ominously, the previous one in 2001), it was over and employment had fully recovered its peak level.

Summing up: It has now been 43 months since the last employment peak, and employment is still down 5%, a bigger job loss than in every recession since 1950. By this time after every other postwar recession (but one) began, employment had fully recovered.

If this isn’t a depression, then economists and the media have redefined depression to mean “something that occurred in the 1930s.”

Hope and jobs

24 December 2010

Optimism is breaking out among economic forecasters. I admit, I share their optimism, as should be clear from my recent posts. My optimism is bolstered by the latest Index of Leading Economic Indicators, which rose in November for the fifth straight month and by the most (1.1%) in eight months.

Two of the big banks cited in today’s New York Times article (first link) predict 4% real GDP growth for 2011, i.e., fast enough to actually reduce the unemployment rate. Unfortunately, as Princeton’s Alan Krueger suggests in the article, that would only be enough to make a modest dent in the unemployment rate. Does the Times still run those “Remember the neediest” taglines, I wonder?

Much as I think recovery is already underway and will pick up steam in 2011, I can’t stop thinking that this recovery, like most recoveries in the past several decades, is likely to leave millions of Americans behind. Will the new Congress care? My main hope is that Republicans’ love of all things voucher will extend to relocation vouchers for the unemployed, to encourage them to move from places like Detroit and Upstate New York to where the jobs are.

P.S. The second link, from 24/7WallSt.com, includes a helpful discussion of the Conference Board’s index of ten Leading Economic Indicators, namely what they are and how some of them might be more like coincident or lagging indicators. The index is still useful, but there’s a reason why nobody is able to extract airtight forecasts from it.

If we make it through December

3 December 2010

The BLS unemployment report for November is out, and it ain’t pretty.  Less than a third as much job creation (+39,000) as expected, not nearly enough to absorb new entrants into the labor force, so the official unemployment rate edged up to 9.8%.  (The comprehensive U-6 unemployment rate was unchanged at 17.0%.)

The private sector added 50,000 more jobs, and the government shed 11,000 jobs.  It is a bit hard to disentangle private sector jobs from the government, in view of the fact that the $787 billion stimulus went mostly to the private sector as opposed to new government jobs, but it is rather remarkable how little the government is doing in terms of direct job creation.  At the federal level this comes down to politics — in this conservative age, creating 3.5 million temporary government jobs, as the New Deal did each year, is considered a bad thing.  Indirectly creating or saving 3.5 million jobs, as the Obama Administration credits the stimulus with having done, is politically viable (or was in early 2009) but hard to prove, which is probably why the stimulus is unpopular with most of the public.  At the state and local level, of course, it comes down to balanced-budget requirements — with tax revenues down for the count, everyone’s cutting government payrolls to try to close the budget gap.  (Without emergency federal aid to make up the difference, the recession gets magnified at the state and local government level.)   If I eyeballed the numbers correctly, employment is down for the year at all three levels of government.

The only good news I noticed in the report was that the number of temp workers, a leading economic indicator of employment, increased for the fourth straight month.  (And even then, the increase is smaller than in several months earlier this year.)  Another leading indicator, weekly hours worked, did not improve, instead holding steady at 34.3 hours.

Now, the unemployment rate is a lagging indicator, and there are positive signs of recovery elsewhere, but that’s cold comfort to the nation’s 15 million unemployed. Seems like we’re back to where Merle Haggard  was in 1973, especially with Republicans in Congress so far refusing to extend unemployment benefits for the long-term jobless:

Keep on working

8 November 2010

Some thoughts on last Friday’s BLS employment report, otherwise known as “the good one”:

The employment report is pretty good news indeed, especially as regards job creation in the private sector.  151,000 jobs were created overall (in the private and government sectors combined), about twice as many as market analysts had projected.  The increases in the length of the workweek and in overtime hours are also welcome news, as these are considered leading economic indicators.  (This is because companies often cut the hours of their workers during a recession and extend the hours of their workers in the early stages of a recovery rather than take on the overhead costs of hiring new workers.  As the recovery gains steam, they’ll actually hire new workers.)

Alas, the increase in employment, though much larger than expected, is still not large enough to reduce the unemployment rate, still at 9.6%.  The increase in employment was offset by new entrants into the labor force, not all of whom found work. All of this happened without any big changes in the labor force participation rate or the more comprehensive U-6 unemployment rate, which is still around 17%.

The increase in weekly paychecks is particularly good news, as Chris Isidore of CNN/Money notes.  Isidore points out that the increase comes not so much from higher hourly wages as from longer workweeks.  He mentions that 318,000 fewer workers are involuntarily working part-time instead of full-time jobs, compared with last month, and that is a big positive deal for a lot of people.

However, the increase in average weekly hours is not all that big; 318,000 is not that big a number compared with total employment (131 million).  The 1.8% month-to-month increase in average weekly hours was the largest in 26 years, as Isidore notes, but that too is less of a big deal than it might seem.  It’s an increase from 33.7 hours to 34.3 hours.  If you’re rounding to whole numbers, as I like to do to keep things less “statsy,” you’d miss the increase entirely.

A number worth trumpeting, as Isidore does, is the 3.5% year-to-year increase in average weekly wages, from September 2009 to September 2010. That’s especially good considering that inflation over the same span was about 1%, which means a 2.5% increase in real weekly wages.  A real wage increase of that magnitude was normal once upon a time (1947-72 and the second half of the 1990s), but for most of the past 40 years real wages have grown very slowly or hardly at all.  We’ll take it.