The payroll data released this morning suggest the beginnings of a recession. But considering that the 2001 recession was the mildest on record, and so far the economy has lost only a fraction of the jobs that were lost in 2001-2002, it's a bit of a stretch to say the economy is really hurting. Private sector jobs are declining at the rate of about 1% a year, but productivity (the amount produced by those who are working) has been rising by 2-3% a year, so the net result is that the economy is probably still growing at least 1% a year. It might get worse, but I still don't see the seeds of destruction that so many are worried about.
Friday, October 3, 2008
Jobs are declining, but the economy is still growing
The payroll data released this morning suggest the beginnings of a recession. But considering that the 2001 recession was the mildest on record, and so far the economy has lost only a fraction of the jobs that were lost in 2001-2002, it's a bit of a stretch to say the economy is really hurting. Private sector jobs are declining at the rate of about 1% a year, but productivity (the amount produced by those who are working) has been rising by 2-3% a year, so the net result is that the economy is probably still growing at least 1% a year. It might get worse, but I still don't see the seeds of destruction that so many are worried about.
Scott,
ReplyDeleteWhy the crossover between household survey and establishment survey in late 2002-early 2003?
It's not really significant. Each survey is conducted using different methodologies. They tend to respond in different ways to the stage of the business cycle, with the household survey tending to turn up the soonest as a new expansion period begins.
ReplyDeleteNeed clarification of the term, "Productivity." Some would say that increased productivity means American managers using cheaper labor, overseas. Obviously this increases a company's productivity if cost per unit is your measure.
ReplyDeleteProductivity could be simplified by dividing US GDP (total output) by total US workers. Over the long haul, productivity averages about 2%, and the number of workers grows about 1% per year. Total output grows by the sum, 3% on average. Using cheap labor overseas helps makes US firms more productive since it lowers costs for everyone. It hasn't hurt total employment. Unemployment, at 6% is still relatively low.
ReplyDelete