The headlines today bemoan the continued loss of hundreds of thousands of jobs and the rise in unemployment to 9.7%. While none of this is good, the pace of job losses continues to slow. Recall that the economy lost 741,000 jobs in January, and the loss in August was only 216,000. A slower rate of loss is an essential first step on the road to recovery.
Digging into the numbers, I discovered that according to the household survey of jobs, the private sector lost only 83,000 jobs last month (whereas government jobs dropped a whopping 234,000, which could reflect job losses at states suffering from budget cutbacks). This is shown in the red line in the above chart. It's likely the first glimmer of a meaningful slowdown in job losses, at least in the private sector where jobs tend to be more productive and more reflective of what's happening on the margin to the economy's job-creating ability.
At times of transition like this, when the economy is moving from recession to recovery, the household survey tends to reflect the underlying reality better and sooner than the establishment survey. That's because the household survey doesn't rely on assumptions about how many jobs are being created in new startups like the establishment survey does. In a recovery, new jobs tend to be created in new and different ways that elude the scope of the establishment survey but are picked up by the household survey. Note how the household survey turned up in 2002, about one year before the establishment survey did.
The numbers are still bleak, but there does appear to be a glimmer of hope.
No V or U shape formation yet in nonfarm payrolls, which usually bottom several months after the NBER trough. Notice the recovery symmetry (excluding the prior recession).
ReplyDeleteAggregate weekly hours continue its record-setting decline.
Not much glimmer except with smoke and mirrors.
Scott,
ReplyDeleteYou wrote:
"Digging into the numbers, I discovered that according to the household survey of jobs, the private sector lost only 83,000 jobs last month (whereas government jobs dropped a whopping 234,000, which could reflect job losses at states suffering from budget cutbacks)."
I'll go one further than you on that Scott. The establishment survey stated that the private nonfarm sector lost 198,000 jobs last month. Put these two facts together and that implies that small, owner-operated, LLC/S-Corp-type businesses, not included in the establishment survey, probably added jobs last month. I find this to be somewhat encouraging.
Mark: That was the point I was getting at, thanks for making it clearer. It's funny that I have seen anyone else pick up on this important bit of information.
ReplyDelete