labor markets
Hot off the virtual press is the Employment Report for March. The key numbers are:
- Total nonfarm employment was up 162,000, with 48,000 accounted for by the hiring of temporary workers for Census 2010.
- Nonfarm employment growth in the prior two months was revised upward by a combined 62,000 jobs.
- Manufacturing employment was up 17,000, with 45,000 jobs added over the past three months.
- Temporary help services added 40,000 jobs over the month and over 300,000 jobs since September.
- Total unemployment stayed at 9.7 percent, with net job gains in the household survey offset by increases in the labor force.
- The composition of the unemployed shifted toward those unemployed for longer than 26 weeks.
I say that this report is good enough for now because this is what the labor market looks like when it starts to bottom out and slowly recover -- overall job growth turns small and positive, cyclically sensitive sectors like temporary help services grow more rapidly than most, and it is tough to make progress against the unemployment rate because the number of job seekers may go up in tandem with total employment. I was at CEA in 2003-4 as the labor market went through the bottom of its last cycle, and I am having a little deja vu.
According to The Washington Post, this was the reaction of House leaders to President Obama's proposal to use tax credits to expand employment:
The administration also wants to put an additional $100 billion toward an immediate jobs bill. One of the most significant ideas would award tax credits worth as much as $5,000 per new hire to employers that expand their payrolls this year. By the administration's calculations, the tax credit would create 600,000 jobs at a cost to the government of about $33 billion.
That is my reaction as well. If the Federal government could administer a problem this intricate, I doubt we would be in the shape we are in. We are over two years into these discussions of stimulus and bailouts, and it is disappointing to continue to see these gimmicks being discussed. What are we going to have next, "Cash for Coworkers?" The basic lesson does not seem to have sunk in -- when you are relatively poor, you must be more careful with your money, not less. You should be spending your money only on what you need and not spending it on what you don't.
At the Economix blog on Thursday, Catherine Rampell posted a must-read analysis of the composition of the unemployed population. But I think her conclusion is too pessimistic. She writes:
Whatever the underlying cause, the result is disconcerting: compared with previous recessions, many more of the employment gains in this recovery will have to come from new jobs.
That is much easier said than done.
Workers whose entire occupations — not just the previous payroll positions they held — are disappearing (think: auto workers) will need to start over and find a new career path. But the new skills they will need take a long time to acquire.
Even if the employment gains in this recovery will have to come from new jobs, it is not necessarily the workers whose entire occupations are disappearing that will have to fill the new jobs in emerging fields.
From the BLS this morning, everything you would like to be heading down moved up, and everything you would like to be heading up moved down. The top line number was a net loss of 263,000 jobs in September, with the unemployment rate rising to 9.8 percent. Digging a bit beneath the headlines, the labor force participation rate fell to 65.2 percent and the employment to population ratio fell to 58.8 percent. Recent media attention has focused on U-6 (found in Table A-12 of the release), which is an alternative measure of the unemployment rate designed to include marginally attached (including discouraged) workers and those employed part-time for economic reasons. It rose to 17.0 percent. Here's the historical time series of U-6, decomposed into the official unemployment rate plus the individual increments:
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| From CGG |
Paul Krugman makes a number of good points about yesterday's employment report, particularly regarding what we can infer from the 0.1 percentage point decline in the unemployment rate:
Basically, though, what you need to bear in mind is that these [employment and unemployment measures] are imperfect measures, subject to a fair bit of noise. When the trend in the labor market is very strong in either direction, the measures move together. But when you have the kind of scene we have now — the employment situation is drifting down, but not plunging — occasional mixed signals are likely. No big deal.
The basic story is that things are sort of stabilizing — but they’re definitely not improving yet.
I think this morning's news release of initial unemployment claims contains some good news -- enough incremental reduction in new claims that we might be able to declare that the series peaked back in early April at a 4-week moving average of about 658,750. Here's the last 40 years of the series:
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| From CGG |
The news is not good. A double dose, in fact. First up, weekly unemployment claims:
In the week ending Sept. 20, the advance figure for seasonally adjusted initial claims was 493,000, an increase of 32,000 from the previous week's revised figure of 461,000. It is estimated that the effects of Hurricane Gustav in Louisiana and the effects of Hurricane Ike in Texas added approximately 50,000 claims to the total. The 4-week moving average was 462,500, an increase of 16,000 from the previous week's revised average of 446,500.
Even the 443,000 without the impacts of the hurricanes is a sign of a very weak labor market. As I've noted before, over the past 20 years, claims haven't gotten this high without going higher.
Let's take a break from lamenting the problems of the capital market this morning and turn our attention to scams in the labor market. The New York Times comes through big for us with this fine piece of investigative journalism, "A Disability Epidemic Among a Railroad's Retirees." In a nutshell, retirees of the LIRR appear to be gaming the Disability Insurance program within Social Security. The factors leading to this are the usual culprits:
The answer, according to government records and dozens of interviews, stems from a combination of factors, including highly unusual L.I.R.R. contracts that allow longtime workers to retire with a pension as early as age 50, federal rules that let railroad retirees claim disability for jobs they no longer hold, and an obscure federal agency called the Railroad Retirement Board that almost never says no to a disability claim.
A weak and weakening labor market. The Bureau of Labor Statistics' report on the Employment Situation for August shows:
The unemployment rate rose from 5.7 to 6.1 percent in August, and non-farm payroll employment continued to trend down (-84,000), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. In August, employment fell in manufacturing and employment services, while mining and health care continued to add jobs. Average hourly earnings rose by 7 cents, or 0.4 percent, over the month.
Since the payroll employment peak in December 2007, employment has fallen by 605,000 jobs or 0.44%. The unemployment rate began its upward drift in early 2007, from a low of 4.4% to its current value of 6.1%. The most comprehensive unemployment rate that the BLS tracks (U-6, which also includes marginally attached workers and those employed part-time for economic reasons) is now at 10.7% (up from its low of 7.9%). That's the highest it has been in 14 years.
Steven Pearlstein's column, "Our Inequality of Outcomes," in Wednesday's Washington Post prompted me to think more about "one of the most depressing graphs I've ever seen" (see this earlier post):
Real earnings crashed in the 1970s, continued to decline through the mid-1990s, and rebounded through the mid-2000s. The rebound is only about half of the earlier declines. Pearlstein wonders about why the last several years have been flat, given higher productivity growth over the last decade or so.
Here's annual productivity growth over a similar time period (with period averages prior to 1973, 1973-1996, and 1996-2007):
