Jobs Report, Second Impressions: the Good, the Bad, the Ugly

January 6th, 2012 at 10:30 am

Re the job situation:

The Good:

–Payrolls expanded in every month last year, the first time we’ve seen that for a while, adding 1.6 million jobs overall and 1.9 million in the private sector (continued public sector job loss is one of the bads).

–The figure shows the annual growth (December/December) or loss of jobs over the last three business cycles: 1990s, the 2000s, and the nascent recovery that’s underway.  The difference in job losses between the great recession and the prior two (1990-91 and 2001) is the first thing that jumps out at you.  We’ve just got so much more ground to make up.  But (hey—this is supposed to be the good part!) we are starting to make it up.  Too slowly for sure, but the figure shows we’re climbing out of the trench.

Source: BLS

[The other thing you see in this figure is just how weak the jobs recovery of the 2000s was—compared to the 1990s, there were precious few years of job growth—and pretty anemic ones, at that.  So, one question posed by this chart is whether we’re at the beginning of a 90’s or 2000’s type of jobs recovery…and what policies will help generate the latter pattern over the former.]

–Unemployment is trending down.  It peaked at 10% in Oct of 2009 and hit 8.5% last month.  However, no small part of this decline is due to people leaving the labor force (see below).

–The underemployment rate is down 1.4 ppts from a year ago, from 16.6% to 15.2%, driven in part by the decline of almost 800,000 in the number of involuntary part timers (i.e., part-time workers who want full time jobs).

The Bad:

–Levels vs. Trends: On many of these labor market variables, the trend is our friend, the level bedevils.  We’ve got some slow momentum going in job growth, but we’re still millions of jbos below the pre-great-recession peak.  The jobless rate is down 1.5 percentage points off of its peak, but 8.5% is way too high on the level.

–Job Quality: Many of the jobs we’ve added over the past year have been in low-paying sectors, like restaurants, bars, and retailers (part of the 200K gain last month, e.g., included 42,000 jobs for couriers/messengers, presumably related to holiday deliveries).  On the other hand, manufacturing’s picked up lately, up 225K over the year.

–Labor Force Participation: This is the most notable bad we face right now.  The share of the working-age population either working or looking for work remains depressed, surely because a lot of people gave up the job search in an inhospitable environment.  This makes the decline in unemployment look better than it really is, because once you leave the job market you’re not counted among the unemployed.  It also means that once things pick up, some of those folks are going to get drawn back into the job search and that puts upward pressure on the jobless rate.  I expect this to occur this year.

–Long Term Unemployment: Still a huge problem, with over 40% of the jobless unemployed for at least half a year.  Again, it’s a testament to the mismatch between labor supply and labor demand, with the latter improving but still far too weak to meet the needs of those seeking work.  And please, don’t blame extended UI (unemployment insurance) benefits for either this bad or the last bad (lower labor force participation).  Re the former, we’ve just got too many jobseekers chasing too few jobs.  Re the latter, you have to look for work when you’re on UI, and that rule is enforced pretty strictly.

–Public Sector:  The state and local government sector continues to shed jobs, down about half-a-million over the last two years.  They’re cutting budgets and taking it out of their workforces, and remember, these are teachers, police, sanitation workers—folks whose work is essential to our communities (education jobs at the local level are down 190K over the past two years).

The Ugly:

That would be Congress.  As I said earlier, policy makers need to sustain and build upon the gains we’ve achieved thus far.  Fiscal support is fading and the private-sector engine of job growth is still somewhere around first or second gear.  Whether we slog along or build to a more robust recovery is at this point a function of whether these guys create more self-inflicted wounds, like failing to extend the payroll tax cut and UI benefits beyond two months.  Or whether they respond to any forthcoming problems we can’t see yet—if Europe or oil or who knows generate new headwinds, it’s hard to imagine this Congress helping to offset them.

Stay tuned…

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8 comments in reply to "Jobs Report, Second Impressions: the Good, the Bad, the Ugly"

  1. Michael says:

    While the Republican Congress is certainly blameworthy, surely some tiny smidgeon of blame goes to Barack “the deficit is bad and unemployment is 9%” Obama.

  2. Fargus says:

    One other thing to note is that over the timescale of the chart, the only time the public sector has been a drag on overall job growth is in 2009, 2010 and 2011. In the scope of this chart, total employment always topped private employment except in those years. That’s a bad trend.

  3. D. C. Sessions says:

    adding 1.6 million jobs overall and 1.9 million in the public sector (continued public sector job loss is one of the bads).

    I think you meant “in the private sector.”

  4. Bud Meyers says:

    How does one leave the labor force, when they supposedly “stopped looking for work”? Or when their unemployment benefits expire?

    How does one re-enter the labor force (by looking for a job, but not actually being hired)? Or are they counted as part of the labor force only after they finally get lucky enough to find another job? (after they sign a W-4 form which is sent to the Social Security Administration).

    The Huffington Post said yesterday that “1.9 million have been out of a job for 99 weeks or longer.” Wrong, wrong, wrong! The media keeps repeating the Bureau of Labor Statistics’ myths!

    Over two years ago (106 weeks ago) we had 15.7 million people unemployed in October of 2009 when the unemployment rate was 10.2%, and they have all exhausted their jobless benefits since that time (99 weeks max).

    So 15.7 million Americans have been out of work for 99 weeks or longer (not 1.9 million as the HuffPo reported), because since then only 3.2 million jobs were created…and we also had another 6 million high school and college graduates since that time as well….and many more layoffs since that time.

    So where did 15 million unemployed Americans go? They ALL didn’t just “drop out” of the labor force and move in to their parent’s basement.

    They are no longer being counted and swept under the statistical rug.

  5. perplexed says:

    But is there really any rational, ethical excuse for this situation? In a country with a $15 trillion economy and almost $60 trillion in wealth, the entire cost of the output gap is simply imposed on a group that is absolutely powerless to avoid having to bear these costs? How is it that economists can even discuss a situation such as this one as a “job market.” The term itself is an oxymoron. If an actual “market” existed, it would respond to supply and demand forces and “clear,” just like any other competitive market. Any other situation where supply is precluded from access to the market would be treated as the market manipulation that it is. What would the response be if suppliers were able to keep 10% of agricultural goods completely out of circulation and then just claimed that “prices were sticky” when they shot up and refused to come down? Its time for economists to come clean about the fact that a “market” that doesn’t clear, is a “manipulated” market. While there may be defensible reasons to allow a “manipulated” market to exist, there is no good reason to justify imposing the costs of such policies to be extracted from a powerless minority that is more than willing to work, at prices that are less than the prevailing wage. If the government chooses to allow this manipulation to continue, the costs incurred should be born by the government, not the victims of the policies who have no effective way of avoiding the costs.

    While economists continue to debate the size of the “multiplier,” the wrath of the “bond vigilantes,” “expansionary austerity,” and the imminent arrival of the “confidence fairy,” tens of millions of people bear the entire cost, while 90% bear none of it. Its way past time to close this loophole and choose some other alternative, any other alternative. If “prices” are to be kept high, work weeks and benefits maintained the same, and the “markets” effectively closed to outsiders in this game of “musical chairs,” those entrapped by this system should be compensated and the costs born all. Mass unemployment is not the only available option, its the chosen one because the victims have no way to resist. Taxes can be imposed on “markets” that don’t adjust to help offset the costs. If the costs of the output gap were shared by everyone, resistance to solutions would be much easier to overcome. Its only the ability to transfer the costs to a powerless minority that allows it to continue. Truly an ugly situation.

  6. PapaSwamp says:

    Here is what should worry everyone …especially about the participation rate which counts only work age people.

    Demographically the US is getting older and baby boomers are retiring. Additionally US population growth is slowing dramatically….thus fewer people are in the work age population BUT participation rate continues to decline. In otherwords…even though there are fewer work age people to compete for jobs, the number of work age people actually participating in the employment pool continues to decline. This makes the situation twice as bad. There are close to 87 Million work age people NOT working. There are approximately 3.2 million job openings…this is the problem. The Not In Labor Force population continues to accelerate beyond the job creation level…escape velocity if you will.

    This is not a new trend…it began in May of 2000….the question that needs to be asked is , what happened then, to have us here now.

  7. Numbers Guy says:

    @Bud Meyers, the BLS calls 60,000 households a month. Among other things, people who are out of work are asked whether they are looking for work. It’s an urban myth that you automatically drop out of the labor force for statistical purposes once your unemployment benefits end.

    I’d also point out that, when it comes to U-6, the numbers have also been improving. I don’t know where you are getting 15 million people somehow having disappeared from the statistics. You need to find the Bureau of Labor Statistics website. All the numbers are there. You can start by searching U-6 on Google, and clicking from there.

    I don’t think anyone’s denying that the economy stinks, or that we’re in a deep hole. In my view, it’s a bad recession and would be a depression but for the current expansionary Fed policies, and what remains of the social safety net. But when it comes to the statistics, the Bureau of Labor Statistics does a good job. The problem is more with how people interpret and use the data.