Friday, November 8, 2013

Jobs continue to grow at a 2% annual pace

The October jobs report handily beat expectations (204K vs. 120K), but that only means that the economy was not weakening in recent months as many had feared. The important trends that have been in place for the past three years—2% annual growth of private sector jobs, and no increase in part-time employment—remain intact. The economy continues to grow at a modest pace.



These two charts show the monthly changes in private sector jobs and their 6-mo. annualized rate of growth. As should be apparent, jobs growth in this recovery has been quite similar to what we saw in the previous recovery. The private sector has been generating new jobs at the rate of about 2% per year, while the public sector—thank goodness—has been shedding jobs. (Though I would add that public sector jobs have been roughly flat over the past year.) That kind of jobs growth is only enough to give us 2-3% annual real growth in the economy (real growth is approximately equal to jobs growth plus productivity growth, which has averaged about 1% per year over time), which continues to be disappointing. Jobs growth will need to accelerate from here before we can get optimistic about a significant improvement in the economy.


The popular belief that the only jobs growth we have is coming from part-time jobs is a myth, as I explained in detail here. As the chart above shows, there has been zero growth in part-time employment ever since the recovery started. The ratio of part-time to total jobs has been falling since that time, just as it has during every recovery. There is nothing going on here that is unusual.


What is unusual—and disturbing—is the ongoing decline in the labor force participation rate, shown above (the last data point reflects the government shutdown and will probably be reversed next month). The decline in the participation rate began in earnest in 2009, and demographics cannot explain such a sudden change. What did change in 2009 were two government programs designed to pay people for not working: food stamp eligibility was significantly expanded, and unemployment benefits were extended in unprecedented fashion. This most likely contributed to people's decision to drop out of the labor force, though I suspect there are other factors at work as well.


The government shutdown last month only showed up in the household survey (red line), where jobs declined by a huge 735K, with the bulk of that declining coming from public sector jobs. This will likely be reversed next month.

Today's report adds to the body of evidence which suggests there is little or no reason for the Fed to continue its QE program.

24 comments:

Junkyard_hawg1985 said...

The household survey shows that a total of 105,000 jobs have been created in the past YEAR. That is terrible.

Benjamin said...

I agree with Scott Grannis that the sudden (in 2008) and now seemingly permanent five percent drop in labor participation rates---from 62-63 percent to 57-58 percent---marks a real decrease in the size of the US economy...a sad defeat for America...

Soaring in this time have been monthly disability checks through SSDI and VA. Incredibly, now more than 12 million Americans get a monthly "disability" check from the US government (8.9 million on SSDI, and 3.7 million on VA).

I would guess a monthly disability check is more of a work disincentive than food stamps...though wiping out food stamps, in a nation of fatties, also make sense...

I think this problem can be sopped by thinning th ranks of "disabled" getting checks--I would suggest whacking the VA and SSDI programs by twp-thirds each---and getting the Fed to step on it big time.

More QE?

I do not see why not. Inflation is sinking, not rising, and headed under 1 percent. Inflation has been defeated. get over it.

The threat now is deflation perma-recession.

The fascinating question is whether QE needs to become a permanent tool in the Fed arsenal, and what that means for the federal budget...if we can keep the grubby hands of pols of both parties off the lucre, there could be some real tax breaks for productive working Americans....



Benjamin said...

Astonishing fact of the day (from Pragmatic Capitalism).

Barack Obama is on pace to preside over the only Presidency in the post-war era to average negative government employment growth. Since 2009 when he took office the total size of the government workforce has declined by 706K jobs. That’s about 3.1% of the government workforce. That’s not a huge number, but let’s put that into perspective. During Ronald Reagan’s first 5 years in office the government created 623K jobs which expanded the size of the government workforce by 3.8%. Ronald Reagan was a huge creator of government jobs. In fact, over the course of his entire presidency the size of the government workforce expanded by 9%.
--30--

I think the above statement is a little unfair; most of the jobs cuts have come at the state and local level, not Obama's doing....

Still fascinating how history and perspective are often at variance....

Benjamin said...

More food for thought: Ryan Avent, The Economist, notes that economic expansions are not internal, and 10 years is the longest US one on record since WWII.

Okay, what we will almost certainly get is another recession--while interest rates are already near zero.

The Fed will be out of conventional ammo Day One of the next recession.

Unless, that is, the Fed now targets much higher rates of inflation, perhaps in the 4 percent range. But it won't.

So,,,if you are betting on higher interest rates...you may wish to think that over. We are a recession away from being right back at ZLB.



William McKibbin said...

The US employment to population ratio hit a 30-year low in October 2013 -- the jobs being created in the US are hardly enough to keep up with population growth (the US population is expanding at a rate of approximately 200,000 per month) -- something is very wrong with the US economy -- for whatever reason, Main Street USA's economic plight has become irrelevant to fiscal and monetary-policy makers -- most of the US population earns its living along Main Street USA, which remains mired in economic depression as measured by long-term declines in real working wages, real home values, and the employment to population ratio -- follow the link below for more about the horrific jobs report that was just released:

http://wjmc.blogspot.com/2013/11/us-employment-to-population-ratio-hits.html

Given that Main Street USA has nothing to gain by staying aligned with Federalism, I would not rule out regional violence, especially in cities -- again, something is very wrong with the US economy -- Main Street USA has been disserted by Federalism, leaving vast expanses of the US vulnerable to takeovers by violent gangs of marauding refugees formed from the ranks of the unemployed, especially in cities such as Detroit -- I have been warning Americans to take cover and to keep a watchful eye out for the four horsemen of the apocalypse -- darkness is descending upon parts of America...

William McKibbin said...
This comment has been removed by the author.
William McKibbin said...

PS: Regarding more QE, absolutely not -- QE has only benefited "too big to fail" banks, and companies who are using their accumulated earnings to buy back vast quantities of stock -- QE has nothing to do with "stimulus" at this point -- what I would advise fiscal policy-makers to consider would be an immediate 2-year moratorium on personal income taxes for anyone earning less than $300,000 annually -- working citizens need to keep more of the scarce dollars they earn in order to reengage as consumers of durable goods -- let's face it, the top 1% are unlikely to consume more goods and services than they do already -- the only way to get America back on track is to end the Federal pillage of Main Street USA -- a 2-year tax moratorium on personal income taxes for everyone earning less than $300,000 annually is simple medicine that would put dollars (that are hard-earned by workers) immediately into the hands of consumers eager to buy goods and services en mass -- in the meantime, austerity continues to devastate Main Street USA in detail...

William McKibbin said...

PPS: A 2-year tax moratorium would also require the Federal government to drastically reduce spending, probably by amounts of at least 50% -- folks, hard times are coming to America -- take cover...

Hans said...

Ben Jamin, that thread by Mr Roche was, I am sorry to say, complete crap...

He is speaking of all governmental unit staffing and not just federal but then compares two American presidents and staffing changes...

Presidents having little or no influence over local hiring whatsoever...

Hear is the real story regarding federal staffing since January of 2008..

http://blogs.investors.com/capitalhill/index.php/home/35-politicsinvesting/7190-private-jobs-down-46-million-from-january-2008-federal-jobs-up-114

Benjamin said...

Hans-

I agree with you...but in the larger picture, we are seeing less public sector workers....

as you probably know, every public sector worker---especially those in fire, police and the uniformed federal military---is a pension-health care time bomb for taxpayers.

Obama deserves no credit...I say Obama is a mediocre President, and he only ranks that high in comparison to his predecessor.

William McKibbin said...

Benjamin, most first responders are not on the Federal payroll, but rather on some state or local payroll -- the pillaging of Main Street USA by Federalism has been devastating as well for many uniformed workers on those payrolls -- I am fine with paying for uniformed workers at all levels of government -- however, all non-uniformed salaried jobs should be eliminated, including politicians -- all government workers who receive paychecks should wear uniforms -- those who do not are non-essential personnel and their jobs should be outsourced -- that includes teachers, administrators, and politicians -- and let's face it, we the people need to know who is a public servant -- thus, public employees should wear their uniforms with pride and call the people they serve "sir" and "maam" -- and yes, the FBI should be put into uniforms -- so should the secret service as well as all government healthcare workers.

Remember that government spending must be cut by at least 40% to save America -- these imminent cuts will require new thinking about what is an essential government service.

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

All very true, Ben Jamin, however, Mr Roche offered no such clarification allowing for one to deduce that this was a presidential issue...

Local staffing was only reduced because these governmental units where not able to operate in the red...

BOCO, would look good in a military type uniform!!

sgt.red.blue.red said...

Scott Grannis said: " ... to people's decision to drop out of the labor force, though I suspect there are other factors at work as well. ..."

Mark Cuban suggested this (about slow growth and people exiting the labor force) almost two years ago:

Why The Economy Won't Get Better Anytime Soon

Benjamin said...

Hans--

I will leave you with a supreme irony: In general, the GOP is for reduced entitlement spending, but is mute on federal agency spending.

But think about it: The big dudes of entitlement programs are Medicare and Social Security. Your paycheck is taxed, and you put money in a pot and if you are lucky you get back what you put in. The feds just administer the money they don't eat it. Noisome, but you do get you money back, at least some of it, or maybe even more than you put in.

For federal agency spending, your income is taxed, and you never get it back. It goes into a parasitic black hole called Washington DC.

The GOP says it is against...entitlements?

Would to you expect it to be the other way around?

Benjamin said...

Fun headline of the day:

Only 5 enrollments completed in D.C. Obamacare exchange
Politico - ‎Nov 8, 2013‎
Only five people have fully completed the enrollment process in the D.C. insurance exchange, according to information compiled by lawmakers from four of the insurance companies participating in the exchange.
--30--

I guess we can stop worrying about Obamacare. It ain't going to happen....

marmico said...

food stamp eligibility was significantly expanded...and [was] extended in unprecedented fashion. This most likely contributed to people's decision to drop out of the labor force

Let's zero in on Grannis' home turf, California Congressional District 44. In 2011, 81% of families receiving SNAP benefits had at least one person working at some point in the year. An additional 16% of families receiving SNAP benefits had a household member at least age 60+.

Describe precisely the relationship between SNAP and the labor force participation rate in your district?

Hans said...

Ben Jamin you are correct in this quote and it is the reason why I am now a Tea Leaf..

"I will leave you with a supreme irony: In general, the GOP is for reduced entitlement spending, but is mute on federal agency spending."

They are part and parcel of the Beltway and are resistant to any change...The status quo is all that matters..

Spending on federal nanny agencies needs to crush...

BTW, the five whom sign up for CommieCare, was the Obomba family..

marmico said...

Be a Tea Leaf, Hans.

This blog should have multiple flashing charts.

1. When McKibben posts to himself four times in a row; and,

2. When "William" posts the "Shaeffer Intelligience" Report".

Benjamin said...

Hans--

We agree...I would love to vote for a pro-business, non-jingoistic party...that would stay out of my personal, professional and political life....

Maybe in my next life....

Still, I am continually amazed that more GOP'ers do not recognize their party is (effectively) for higher income taxes and for lower payroll taxes when they blah, blah about cutting entitlements but never about cutting agency spending....

Hans said...

Marmico, I approve of your post!

Ben Jamin, the GOP is not the party it use to be..

It needs to be fumigated and hand washed...

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