Friday, May 2, 2014

Jobs continue to post 2% growth

The April jobs report released today handily beat expectations (+288K vs. 218K), but it doesn't alter the big picture: private sector jobs have been growing by about 2% per year for the past several years. That's enough to give us 2-3% overall growth, but not much more.

The private sector has been creating about 200K jobs per month during non-recessionary periods for quite a long time. 

This works out to a growth rate of about 2% these days, which we have seen on average since early 2011.

The great disappointment is the ongoing decline in the labor force participation rate, which hasn't been this low since 1978. This needs to turn up if we are to enjoy robust growth conditions. That probably awaits better policies out of Washington. Businesses are not very eager to create new jobs, and those who are unemployed are not very eager to seek out job opportunities. We need to revive the economy's "animal spirits" by increasing the incentives to work and invest. That could be done by simply reducing marginal tax rates, which in turn could be paid for by reducing the massive amount of deductions, subsidies, and loopholes in our seriously-bloated tax code. Once again, the solution to slow growth is to get the government out of the way of those who want to make money.

The good news is that the private sector of the economy has created some 9.2 million jobs since the post-recession low of early 2010. The bad news is that there should be many millions more jobs now that we are in the fifth year of job expansion. It's a bit disappointing that the economy is no longer shedding public sector jobs, which have been relatively flat for the past year. As I argued in an earlier post, the huge expansion of government intervention in the economy has been one of the main causes of the sluggish recovery. We'd do better to keep shrinking the public sector, but again, that requires a change in the way Washington thinks about the world. Government can't create productive jobs nearly as well as the private sector can.

Part-time employment has been relatively flat for the past 5-6 years, and has been declining relative to total employment. This is nothing unusual.

The unemployment rate fell mainly because of a large reduction (806K) in the labor force. This is not real progress.

8 comments: said...

Why was the labor force participation this low in 1978?

Which way was it trending then, and the underlying causes for it?

Scott Grannis said...

Good question. The participation rate started moving higher in 1966, at which time it was about 59%. By 1980 it had reached almost 67%. It them moved roughly sideways until 2008, when it started to decline significantly.

I'm not sure why the rate was trending higher for so many years, but I think it had a lot to do with women entering the workforce for the first time.

Anonymous said...

Yes, the rise of the LFPR for women rose substantially from basically the end of WWII until it peaked in 2000. Its fall since then is one of the reasons for the decline in the overall LFPR since 2000.


As for April's big drop in the LFPR, I seem to be the only one who has thought of this, but I can't help but wonder if the big drop had something to do with the large number of last-minute enrollees in Obamamcare in March. I've read many places that a lot of people hold jobs in large part because of the health insurance it provides, even though they don't necessarily need the jobs themselves. Think of someone who has a spouse with a job that pays decent but doesn't provide health insurance, so this person gets a job just to provide health insurance for their kids and themselves. Now, suddenly this person's spouse's employer is required to provide that spouse with health insurance. Does this person need to work anymore? No. So, they quit their jobs because they didn't need or want it in the first place, now that their spouse has insurance.

It seems too coincidental to me that, the month after a big, last-minute surge in Obamacare sign-ups, you get a big drop in the labor force. I think a lot of people probably decided they didn't need to work anymore.

Anonymous said...

Here's what I'm talking about:


"So the CBO released a report suggesting that the ACA would, among other impacts, likely cause over 2 million workers to leave the workforce. The simple reason for that is that there are millions of Americans, many nearing Medicare eligibility, who would prefer not to work but have to in order to keep their ... health insurance."

In this case the CBO is probably right, and the big drop in the labor force in April was probably the first hints of this phenomenon taking place.

McKibbinUSA said...

Scott mentioned bringing back the "animal spirit" to the US economy as the means to expanding growth, and I presume innovation -- I tend to disagree with this assessment -- by way of analogy, I view the "animal spirit" or "hype" approach to national economy as something that is akin to football or military operations -- certainly an "animal spirit" was crucial during the industrial age, and the leaders of that age certainly brought a "macho" approach to enterprise -- unfortunately, we live in a technological world today where the name of the game is not to "get motivated," but rather to play innovation games such as "science fair, legos, or erector sets" -- I have worked extensively in Asia over the past 10 years, and the executives I have worked with in Asia are almost always engineers not only by profession, but also temperament, skills, and capacities -- conversely, executives in the US are more often "sales types" with a strong inclination to inspire motivation and "animal spirits" that was integral to "winning" in the 21st century economy -- what the US needs now to begin its recovery is to dismiss "football" and "military leadership" as the grounding paradigms for industry, and instead begin to embrace science, technology, engineering, and mathematics (STEM) as the grounding temperaments to innovation and growth in the globalized 21st century economy -- I can hear Scott arguing now that Steven Jobs had an "animal spirit" -- well, not really -- let's face it, Steven Jobs and Bill Gates are not similar to Lee Iococca and Jack Welsh by temperament -- until the US can abandon the legacy thinking inherited from the 20th century (including the "rah, rah" approach to business), the US will find itself falling behind in the global economy -- just my view and contribution to the discussion...

PS: From where I sit, Main Street USA remains mired in economic depression as evidenced by long-term declines in real working wages, real home values, and the employment to population ratio -- I would add that other measures being forwarded as evidence of recovery are simply propaganda intended to bring the "rah, rah" spirit back to America -- unfortunately, Main Street happiness via prosperity will prove elusive until the US can find a path that tops all historical peaks in the measures above -- the 1978 peak at 67% labor participation was not an anomaly -- rather, the farce around us that some describe as a recovery is the anomaly -- again, just my view...

Benjamin Cole said...

And don;t forget, there are nearly 12 million Americans now collecting "disability" payments form the SSDI and VA.

The typical VA disability payment is more than a guy would get working at the current minimum wage.

And no, these are not guys injured in battle. There are 3.7 million vets collecting disability, but only 200,000 have been injuredin battle since 1960, says the Pentagon.

The number of vets collecting "disability" rivals the number of Americans collecting unemployment!

But, it is not PC to notice this.

Benjamin Cole said...

Below is table of unit labor costs. They are up 2.1 percent since the first quarter----of 2007, that is.

No, that is not annual.

That is it. 2.1 percent total. The annual rate is about 0.3 percent.

I do not know how the inflation hysterics come to their conclusions, but it is not on the basis of unit labor costs. Or commercial rents. Or commodities.

2007-01-01 100.852
2007-04-01 100.164
2007-07-01 99.352
2007-10-01 99.987
2008-01-01 101.972
2008-04-01 101.053
2008-07-01 101.685
2008-10-01 103.493
2009-01-01 100.158
2009-04-01 100.638
2009-07-01 99.890
2009-10-01 99.329
2010-01-01 98.224
2010-04-01 99.064
2010-07-01 99.045
2010-10-01 99.029
2011-01-01 101.463
2011-04-01 100.716
2011-07-01 101.457
2011-10-01 99.557
2012-01-01 101.345
2012-04-01 101.523
2012-07-01 101.054
2012-10-01 103.917
2013-01-01 102.988
2013-04-01 103.500
2013-07-01 102.963
2013-10-01 102.932

steve said...

the bond market is screaming WEAK ECONOMY! recently, a poll of something like 66 economists was unanimous in expecting yields on the 10 yr to rise over the next 6 mos. color me bullish bonds. economists have the worst track record of prognostication and when 100% are in agreement, virtually 100% chance they'll be wrong