Few Thoughts on Today’s U.S. Jobs Numbers

July 2, 2010

A downshift in U.S. employment growth occurred longer ago than generally realized.  Over the forty years from January 1949 until January 1989, jobs expanded at a 2.2% annualized rate.  Among the last four presidencies, only Bill Clinton’s stewardship saw a faster rate of job creation, 2.4% per annum.  Jobs went up 0.6% per annum when George Bush Senior was president and 0.1% per annum over the eight years when George W. Bush was in power.  Over the 17 reported months so far on Obama’s watch, jobs have declined at a rate of 1.6% per annum.

Neo-conservative economists mock the view that an inverse relationship might exist between lower rates of consumer price inflation and labor market performance.  The much weaker growth of jobs developed in an era of disinflation and falling interest rates.  True, it began during the presidency of Ronald Reagan, when jobs grew at a near-trend rate of 2.1% per annum.  However, people forget that the worst period for inflation, the Carter years, also saw rapid employment growth of 3.1% per annum.  After 3.1%, 2.1% doesn’t look so respectable.

Jobs advanced 147K per month on average in the first half of 2010, a vast improvement after declines of 175K per month in the second half of 2009, 615K per month in 1H09, and 493K in the second half of 2008.  In only five of the 20 prior half years from 1H00 to 2H09 did job gains average more than 149K, and not one of those saw employment increase as much as 220K per month.

There is a dark side to the lower-than-projected 9.5% unemployment rate in June.  The jobless rate is calculated from the civilian household survey, where the labor force (working or actively seeking work) fell by 652K in June after a drop of 322k in May.  That’s an astonishing 974 thousand people dropping out of the labor force in just two months.  That kind of behavior just doesn’t happen when people have a glimmer of optimism about finding work.

A dip in weekly hours worked back to 34.1 and stalled improvement in new jobless claims (466.5K on average in the latest four weeks versus 468K in the four weeks to last December 12) provide further proof of a very sick U.S. labor market.  So does the combined 121K of new private-sector jobs growth in May and June.

Finally, talk about a 7.5 million jobs gap to be closed — such being the deficiency between the present level and the cyclical high in December 2007 — way understates the magnitude of this social problem.  I prefer to measure the deficiency from the hypothetical level of jobs if they had continued to climb along their long-term trendline after end-2007.  Coincidentally, jobs rose 1.8% per annum in the 1980s and the 1990s.  Applying that growth rate to the end-1999 level of nonfarm payroll jobs puts the current trend-appropriate level of jobs at 157.7 million, 27.2 million greater than the actual level.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

Tags: ,


Comments are closed.