Growth and Jobs and Why We’re Where We Are

October 24th, 2013 at 6:11 pm

Running out so more to say on this later—it is, um, kinda important.

But cutting to the chase, our too-slow job growth is a function of our too-slow GDP growth, and a big part of that is fiscal drag and other intangible nastiness emanating from our dysfunctional politics.  In other words, that stuff has a real cost.

The first figure uses a flexible trend to smooth out the noise in the monthly employment data.  We were adding about 200,000 jobs a month, on average, which ain’t great shakes either.  Now we’re down to 150,000/month.

jobs_trends

Source: BLS, my analysis

The next figure plots the annual percent changes in employment (y-axis)against the annual change in real GDP (x-axis; I just plotted Q2’s so you could see the dates).  The sad fact is that by this correlation, we’re actually doing a bit better than we should be.  That is, the 2013Q2 data point is above the regression line, meaning we’re getting a bit more job growth than we deserve.

JOB GROWTH AND REAL GDP GROWTH, 2007-2013

gdp_jobs

Sources: BEA, BLS

Real GDP grew 3% (yr/yr) in the first half of 2012 and at half that rate–1.5%–in the first half of this year.  There’s your deceleration in growth and jobs.  And I expect the second half of the year’s real GDP growth to clock in at a similar rate to that of the first half.

When I say “deserve” above, I of course mean that in strict statistical terms.  What we actually deserve is a Congress who, instead of rolling their sleeves up to get to right to work figuring out where to cut more spending, would put this austerity obsession aside and do something about growth that had a plus sign in front of it.

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3 comments in reply to "Growth and Jobs and Why We’re Where We Are"

  1. Per Kurowski says:

    Not easy but, if you are to have any chances of success, you need to get rid of capital requirements for banks which allow these to earn much much higher risk-adjusted returns on “The Infallible” than on “The Risky”. That only causes banks not to finance the risky future but only to refinance the more safer past.

    http://subprimeregulations.blogspot.com/2013/07/mr-president-mr-prime-minister-here-is.html


  2. JohnR says:

    Of course, that’s merely your interpretation! I, personally, know for a fact that we’re struggling economically because too many Liberals have pet cats instead of Goldfish. Until we find a way to close the Goldfish Gap and exterminate all the cats in this country, we’ll continue to suffer a lack of money. Unless the bad economy is due to our reluctance to administer daily Castor Oil doses to all our nation’s youth. Wait – it’s because of The Deficit! Yeah, that’s the ticket!


  3. Erik Hare says:

    I’ve been tracking this since the trough of job creation in 2010. There is some reason to believe that job creation is running ahead of economic growth in part because it was so far behind in the 2000s – meaning there is pent up demand for workers, especially in certain skill areas. It’s a possibility I’ve discussed before on my own blog.
    http://erikhare.wordpress.com/2012/01/09/growing-jobs-revisited/

    Thanks for discussing this important topic – I do think that finding a way to promote growth is going to be critical at the end of this secular bear market around 2017 or so. But if it’s done well we could be looking at a very rosy 2020s.


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