I’ve been reflecting over the disappointing August jobs numbers (no surprise there, I guess). In my earlier post, I made this point:
Over the past five months, when job growth has been slower, average monthly gains were 87,000; over the prior five months, they were 211,000, a notable deceleration. In fact, the more recent pace is consistent with trend, or slightly below trend, growth in GDP we’ve seen in recent quarters.
In this regard, it’s that earlier, accelerated trend that’s more suspicious. Why were we generating job growth numbers that most economists would associate with considerably higher GDP growth than was actually occurring?
Seasonal factors explain part of the difference. The unseasonably warm winter meant the BLS probably over-adjusted upwards in the winter and visa versa in the spring and summer. But productivity trends may also be in play.
Basically, if output is pretty constant and payrolls are moving up and down more than you’d expect, it could be that weaker productivity explains the payroll uptick and stronger productivity explains the downtick. To no small extent, this is, as President Clinton would say, arithmetic, because output growth – hours growth=productivity growth. But it’s worth a look.
Though I really, seriously wouldn’t make too big a deal out of these quarterly numbers, which tend to be jumpy, they do tell that story, with pretty stable GDP growth at trend, and shifting productivity growth negatively correlated with the movements in payrolls.
Sources: NIPA, BLS