Friday, May 3, 2013

Jobs growth is still moderate

A month ago, I downplayed the weakness in the March jobs report (Jobs report more noise than signal), suggesting that future revisions could easily wipe out the apparent weakness, which seemed suspect. That's exactly what happened with the April report. Thanks to sizable revisions to the past few months and a stronger-than-expected April gain, jobs growth is once again back to where it has been for the better part of the last few years. Jobs are growing at a moderate rate of about 2% per year, or roughly 190K per month. Nothing has changed: we're still in a disappointingly slow-growth recovery, but it is definitely a recovery and there is no sign of any emerging weakness.


The above chart compares the level of private sector nonfarm employment as measured by two different methods: the widely-followed Establishment Survey and the lesser-known Household Survey. The latter is notoriously more volatile than the former, but the two tend to track each other over time and now is no exception. The private sector has added between 6.5-6.8 million jobs since the post-recession low in employment according to these surveys. In the past two years, the establishment survey shows that private sector job gains have averaged 194K per month.


The above chart shows the 6-mo. annualized growth rate of private sector jobs according to the establishment report. Here we see that the current growth rate is not very different at all from what it has been the past few years. It's also about the same as we saw in the last economic expansion phase in the mid-2000s. Nothing remarkable has happened, except that there are still several million fewer people working today than there were at the peak in 2008. It's a tepid recovery, but a recovery nonetheless.


What stands out most about this recovery is the huge decline in the labor force participation rate (the proportion of the population that is either working or looking for work), shown above, which began in earnest in the latter half of 2009 and shows no sign yet of reversing. If the participation rate were back at 66%, where it was before the Great Recession hit, there would be at least 10 million more people in the labor force; instead, they have given up looking or decided to retire.


The chart above is another way of looking at the dramatic shortfall in the growth of the labor force.


The chart above compares the unemployment rate, which is now down to 7.5%, with the burden of government spending, measured as federal spending relative to nominal GDP. The correlation between the two is impressive, to say the least, especially since 2008. There are two things going on here: 1) lower unemployment means less spending on automatic stabilizers, and 2) a smaller burden of government  frees up resources for the private sector, which is then more able to hire people.

On balance, the April jobs report maintains the status quo ante. There have been no major changes to the health of the economy, which likely continues to grow at a sub-par, 2-3% rate.

45 comments:

JM said...

I always love the government spending vs. unemployment rate graph. Do you know what the actual correlation number between the two figures are?

William McKibbin said...

Job growth is terrible -- moreover, once the US begins to demobilize the military and cut government employment, upwards of 1 million new unemployed will join the roles (Japan and Europe do not have to deal with an imminent demobiliaztion, which is instructive) -- the US economy is in serious trouble folks...

Joseph Constable said...

The solution to keeping people employed in the military industrial complex is to keep defense spending high. The people at Raytheon, Lockheed Martin, Boeing, etc., do lots of original research and design and engineering. This is more beneficial than paying them unemployment and welfare.

Benjamin said...
This comment has been removed by the author.
Benjamin said...

New all-time highs on S&P 500 and DJIA.

Check out DJIA when Clinton was elected, when he left office, and same for Bush jr. and Obama.

It makes you wonder....

John said...

"The chart above compares the unemployment rate, which is now down to 7.5%, with the burden of government spending, measured as federal spending relative to nominal GDP."

Federal spending as a percentage of GDP goes up when GDP goes down. So federal spending graph correlates to the business cycle.

I know you're implying that federal spending drives up unemployment, but I think you're ignoring some basic arithmetic in order to make an ideological point.

John said...

It all depends on how you cook the numbers. Yes, employment as a percentage of population has declined sharply from 2009 (the year Obama took office), but it also declined from 2001-2004 after the Bush tax cuts. The current labor force participation rate is about where it was in 1983, and much higher than it was in 1970.

Do you suppose demographics could have something to do with it?

Scott Grannis said...

John: Demographics certainly could be contributing to this trend, but demographics do not change as fast and as abruptly as this trend has.

Edward said...

Cannot compare to Bush years since he padded numbers with huge increases in government jobs (+1,750,000), which Obama subsequently cut down by half. (-720,000).

John said...

Looks like Edward is on to something: there's been a sharp drop in government employees since about 2010, when it really dropped off a cliff. More at the Hamilton Project.
http://www.hamiltonproject.org/papers/a_record_decline_in_government_jobs_implications_for_todays_economy_an/

William McKibbin said...

A great way to spur employment in the private sector would be to eliminate public sector alternatives in detail -- my plan would be to implement savage cuts (at least 40%) in spending for the military-industrial complex, the medical establishment, and Federal employment -- our nation cannot afford what we spend on these programs, and the beneficiaries need to be weaned off this public waste -- likewise, Social Security and Medicare would be cut via means testing whereby only citizens who have exhausted their qualified retirement plan assets would be permitted to collect Social Security and/or Medicare benefits -- the cuts I am proposing are intended to cut government spending by at least 40% immediately -- if these cuts cannot be passed, then I would propose that the US be dissolved and a new Constitution drawn up that strictly forbids taxation and public spending for anything except uniformed public services -- we need to get started with all of these cuts now...

William McKibbin said...

PS: Everyone should watch this video, and then ask, what do you personally stand for: a) big government; b) the military-industrial complex; or c) limited government and personal liberties -- my bet is that all but those with a stake in the status quo will choose the course of limited government and personal liberties -- more at:

http://wjmc.blogspot.com/2013/05/libertarians-confront-democrats-and.html

William McKibbin said...

PPS: Still more at:

http://www.lp.org

William McKibbin said...

PPPS: My guess is that Scott Grannis is a Libertarian at heart (correct me if I am wrong) -- follow that lead...

Edward said...

With US income inequality at the level of Uganda, what you propose would most certainly lead to violence in the streets and possibly a real socialist take over of our institutions.

John said...

Scene: Your wife comes home crying. You ask her what's the matter. She says her boss told her to put out or get out.

Libertarians think this is none of the government's business. But all or at least a big portion of regulations, if reasonable, respond to a variation of that scene.

That is, people with more money and power abusing the rights of those with less. Sometimes it's a factory owner who builds a plant that's unsafe for workers - and collapses. Sometimes it's a power plant that dumps mercury in the atmosphere.

We've been down the Libertarian road before. There was a time in this country when if somebody committed a crime against you, you had to go out and hire a cop.

We live in a mixed economy, containing a public and private sector. It's mixed for a lot of good reasons, demonstrated over more than two centuries.

Getting things into optimum balance is tough as the world changes.

Scott Grannis said...

John: you really don't understand the libertarian point of view, and you don't appreciate the power of free markets and limited government to deliver peace and prosperity.

Edward: The best way to boost the income of those at the bottom (thus reducing income inequality in the best manner) is to limit the size of government; reduce government subsidies, reduce marginal tax rates, and reduce regulatory burdens. Reduce all those things that make it so difficult for those at the bottom to rise to the top. Right now the poor face punishingly high effective marginal tax rates which trap them in poverty.

John said...

Scott, IO asked you earlier to give an example of a nation that conducts its economy the way you advocate. You came up with a few "boutique" countries like Bermuda. You said if there was a place doing it right you'd be living there.

If your philosophy works so well, don't you think some nation would be using it?

Edward said...

Scott, I am very aware of that argument and in many ways espouse it. However, where William is correct is on the massive excesses of the military industrial complex. Every regime/civilization in history has ended on that premise, from the eastern roman empire to the French monarchy (famine due to wars of Louis XIV opened the door to the revolution) to the soviets. As for Medicare, allowing the government to negotiate drug prices with drug companies would be a 1st step (as every other nation in the world gets to do and one reason we face such a high % of GDP without even covering everyone). But cutting benefits, which are already the lowest in the western world is not the solution. This is the only protection the masses have in old age, take that away in any form and you will have another revolt in this country (the only way we escaped it the 30's was thanks to the much vilified policies of FDR, but he kept the communists and fascists at bay). One important part of the solution is not a free for all, never has worked in history, but actually a massive undertaking to engage in a complete overhaul of our infrastructure, from energy, to roads to transportation. If we can spend billions, trillions, on wars and bank bailouts, we can certainly do this. And yes, address global warming along the way in a manner tat would actually benefit us economically as well. The Chinese will be ahead of us in 10 years on green energy (by necessity at this point), the future of this century. This is an argument I cannot have with older people stuck in the fossil fuel century (which by the way was subsidized by the government at first). No civilization has not grown, or shifted from one form to another without a collective effort (government help of private industry). The private sector will never have that kind of muscle. As for solutions that are brought forth that were well adapted to the 80's economic landscape, they are not in touch with the issues we face now, which are deflation and a huge demographic shift. The game has changed now that we have exhausted the baby boom explosion of post WW2, much like the 14th century population explosion due to favorable agricultural conditions (end of mini ice age), which subsequently shriveled for 2 centuries (plague, wars and excessively unequal distributions of goods and food etc..) I will close this rant, forgive me, I have much more t say, but I think I probably lost comfortable retirees at this point.

Edward said...

Please forgive the grammar, this was hastily written due to time constraints.

Scott Grannis said...

Edward: I do not share your trust in the ability of government to undertake massive projects in an efficient manner. I know of no example where industrial policy has been successful. For all I know, the Chinese may be wasting huge amounts of money on green energy. The prosperity the world enjoys today is overwhelmingly the by-product of free markets. Government bureaucrats and politicians can never be smarter than free individuals and free capital markets.

Scott Grannis said...

John: I suspect that little by little, more and more countries will figure out and implement policies that are more conducive to growth and prosperity. The big stimulus spending of 2009 (the ARRA) was a laboratory experiment that proved how futile government efforts to stimulate an economy are. This will influence economists and policymakers for many years to come.

John said...

Scott: Again, thank you for including dissenting opinions on your blog. You're a classy guy.

Edward said...

No infrastructural change at any time and anywhere was built on private sector alone. That s wishful thinking, I'm afraid. There is not enough time left for private industry on its own to reverses the ravages of climate change about to befall our planet. I am not some cuckoo tree hugger, trust me. But being close to the industry, I can assure you that it's going to get nasty in the next 20 years, and far more than folks realize. Japan and many European countries have already taken dramatic steps, we need to move fast as well, and that involves government spending, just like every civilization has done in the past. Every single one. And it will benefit our economies as well. We might not be around to see the fruits of that endeavor, but our grand kids will thank us (or despise us if we do not act). This is not time for radical experiments in free markets.

Edward said...

And I want to dissociate my arguments from the current monetary policy( forcing many to chase yields in far riskier propositions than the demographics can support)

Scott Grannis said...

Re global warming: are you aware that there has been no global warming for the past 15 years, despite the ongoing increase in CO2 concentration in the atmosphere?

Edward said...

Scott, all those arguments are well answered, in both laymen and scientific terms (you can choose the level) and debunked at the following site: http://www.skepticalscience.com/argument.php

An understanding of ocean/earth temperature science is needed, but suffice it to say that the evidence is staggeringly in favor of the global warming camp.

Scott Grannis said...

I have read plenty on the issue of global warming, pro and con. I acknowledge that global temperatures have risen in the past century or so. I am not sure that the anthropogenic theory of global warming adequately explains this. I believe there are many variables (probably too many too model and/or understand at this point) that could and can explain the warming. I do not believe that the science behind global warming is sufficiently robust to believe that we know how to stop it. I am not sure if warming is inevitable and/or catastrophic, and if it warrants exceptional measures to combat it. I think it's possible that our efforts might be better directed toward coping with warming rather than trying to stop it. I am extremely reluctant to grant government the huge powers necessary to attempt to stop global warming on the basis of science which is still questionable. I am not at all sure that mankind's CO2 emissions can be effectively reduced within any reasonable time frame by government actions. I note that economic progress and free markets have already resulted in a significant reduction in US CO2 emissions.

But one thing is clear to me: AGW is not settled science; there is plenty of disagreement in scientific circles. Also, even if there were a "consensus" among scientists that AGW is a valid theory, that is not how science operates. No one has yet come up with a theory that can accurately predict global temperatures.

John said...

Scott: The Libertarian free market utopia will remain a dream for many reasons, but here's a big one: through the Citizens United decision, the Roberts Supreme Court has ruled that businesses are effectively free to purchase protection from their government politicians.

Edward said...

Scott, there is no disagreement in scientific circles and academia as to the existence of global warming.

"Global warming deniers often claim that bias prevents them from publishing in peer-reviewed journals. But 24 articles in 18 different journals, collectively making several different arguments against global warming, expose that claim as false. Articles rejecting global warming can be published, but those that have been have earned little support or notice, even from other deniers.

A few deniers have become well known from newspaper interviews, Congressional hearings, conferences of climate change critics, books, lectures, websites and the like. Their names are conspicuously rare among the authors of the rejecting articles. Like those authors, the prominent deniers must have no evidence that falsifies global warming.

Anyone can repeat this search and post their findings. Another reviewer would likely have slightly different standards than mine and get a different number of rejecting articles. But no one will be able to reach a different conclusion, for only one conclusion is possible: Within science, global warming denial has virtually no influence. Its influence is instead on a misguided media, politicians all-too-willing to deny science for their own gain, and a gullible public." http://desmogblog.com/2012/11/15/why-climate-deniers-have-no-credibility-science-one-pie-chart

William said...

Scott said: "are you aware that there has been no global warming for the past 15 years?"

"March 2013 was the 337th consecutive month with global temperatures warmer than the 20th century average. March 2013 was the globe's 10th warmest March since records began in 1880, according to NOAA's National Climatic Data Center (NCDC).

http://www.wunderground.com/blog/JeffMasters/archive.html?year=2013&month=04
-------------------------------
It was another top-ten hottest year on record during 2012, which ranked as the 10th warmest year since records began in 1880, NOAA's National Climatic Data Center said today. NASA rated 2012 as the 9th warmest on record. Including 2012, all 12 years to date in the 21st century (2001–2012) rank among the 14 warmest in the 133-year period of record. Only one year during the 20th century--1998--was warmer than 2012.

http://www.wunderground.com/blog/JeffMasters/archive.html?year=2013&month=01

steve said...

great. from a post on job growth to more BS glbl warming nonsense. the libs are present and accounted for.

marmico said...
This comment has been removed by a blog administrator.
Bill Platteter said...

Scott,
Thanks for the great blog. You are one of the ones I took comfort from when the markets crashed in 2008. You were right on. I stayed the course and have now recovered everything +. On the global issue I am a retired geophysicist who worked for 3 major oil companies over the course of my career. I can assure all that the overwhelming majority of geoscientists do not support man made global warming. There is nothing in the geological record that should cause us any worry at all as CO2 has been very much higher in the past and somehow the planet has survived. But as you stated the most recent trend of no GLOBAL temperature increase for the last 15 years as CO2 ramps up has rendered the hypothesis invalid. It's a shame so much public money (taxes) have been wasted on this. Once again thanks for the great blog.

Scott Grannis said...

Bill: thanks for your comment

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sgt.red.blue.red said...

More on the 'global warming' non-event and scare in this May 8, 2013 Wall Street Journal article:


Harrison H. Schmitt and William Happer: In Defense of Carbon Dioxide
The demonized chemical compound is a boon to plant life and has little correlation with global temperature.


I don't know how long the link will be durable. If unavailable, contact me, and I will provide the article to you.

Edward said...

I will come back to my old party the day it becomes again the party of science. In the meantime, this just in from NOAA:

"Yesterday, carbon dioxide levels in Earth's atmosphere reached a major milestone: a daily average above 400 parts per million. The new high — the highest in human history — was recorded at two separate stations — one in Hawaii and the other in San Diego, California.
That number — expressed in parts per million — means that out of a million molecules of "air," about 400 are molecules of carbon dioxide. The measurement at the Mauna Loa, Hawaii air sampling station, which has been tracking carbon dioxide levels since the 1950s, was 400.03 on May 9. Last year at this time, the level was at 396.81. Ten years ago it was 378.50."
http://www.businessinsider.com/more-co2-in-earths-atmosphere-than-ever-2013-5#ixzz2SvNndlLb"

Scott Grannis said...

The rise in CO2 concentration is not nearly as scary as it sounds:

http://wattsupwiththat.com/2013/05/08/the-effectiveness-of-co2-as-a-greenhouse-gas-becomes-ever-more-marginal-with-greater-concentration/#more-85785

In short, the effectiveness of CO2 as a greenhouse gas becomes ever more marginal with greater concentration.

Edward said...

Ed Hoskins? I hope you are not serious. He only uses 2 locations, central England and Greenland.

http://blog.hotwhopper.com/2013/04/denier-weirdness-wuwt-says-watch-out.html

The reality: An enhanced greenhouse effect from CO2 has been confirmed by multiple lines of empirical evidence. Satellite measurements of infrared spectra over the past 40 years observe less energy escaping to space at the wavelengths associated with CO2. Surface measurements find more downward infrared radiation warming the planet's surface. This provides a direct, empirical causal link between CO2 and global warming. The greenhouse gas qualities of carbon dioxide have been known for over a century. In 1861, John Tyndal published laboratory results identifying carbon dioxide as a greenhouse gas that absorbed heat rays (longwave radiation). Since then, the absorptive qualities of carbon dioxide have been more precisely quantified by decades of laboratory measurements (Herzberg 1953, Burch 1962, Burch 1970, etc).

The greenhouse effect occurs because greenhouse gases let sunlight (shortwave radiation) pass through the atmosphere. The earth absorbs sunlight, warms then reradiates heat (infrared or longwave radiation). The outgoing longwave radiation is absorbed by greenhouse gases in the atmosphere. This heats the atmosphere which in turn re-radiates longwave radiation in all directions. Some of it makes its way back to the surface of the earth. So with more carbon dioxide in the atmosphere, we expect to see less longwave radiation escaping to space at the wavelengths that carbon dioxide absorb. We also expect to see more infrared radiation returning back to Earth at these same wavelengths.

http://www.skepticalscience.com/empirical-evidence-for-co2-enhanced-greenhouse-effect.htm

Scott Grannis said...

Are you saying that the effectiveness of CO2 as a greenhouse gas does not become ever more marginal with greater concentrations? That Hoskin is making this up? Even though the IPCC acknowledges this effect?

Edward said...

Please provide a link from IPPC of a report of logarithmical graph of diminishing return as CO2 concentration increase. Not a link from one of those blogs.

Scott Grannis said...

The section of the IPCC report that Hoskins references is here:

http://www.grida.no/publications/other/ipcc%5Ftar/?src=/climate/ipcc_tar/wg1/222.htm

Unfortunately, the evidence of the diminishing greenhouse effect of rising CO2 concentrations is well-disguised for this lay reader, as Hoskins predicts.

Scott Grannis said...

Here is a straightforward discussion of the diminishing greenhouse effect of increasing CO2 concentrations:

http://knowledgedrift.wordpress.com/2011/09/07/co2-is-logarithmic-explained-3/

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