The Employment Situation

Today's employment report includes news that the employment to population ratio is falling:

Brad DeLong: Dean Baker is first out of the gate with his take on these June job numbers:

Employment Rate Drops as Economy Sheds 62,000:

The employment to population ratio (EPOP) ratio fell to 62.4 percent in June, its lowest level in more than three years, as the economy lost another 62,000 jobs in June. This was the sixth consecutive month in which the economy lost jobs. The private sector lost 91,000 jobs in June. With the April and May numbers revised down by 76,000, the job loss in the private sector over the last three months has been 273,000, an average of 91,000 a month. The private sector has now shed 578,000 jobs since employment peaked in November. ...

pgl adds:

This from the BLS is really fascinating:

The employment-population ratio was 0.6 percentage point lower than a year earlier.

This ratio was 63.0% as of June 2007, was 62.6% as of May 2008, and now stands at 62.4%. So why didn’t the unemployment rate rise? It seems the labor force participation rate fell from 66.2% as of May 2008 to 66.1% as of June 2008. Then again – it was 66.1% as of June 2007.

That's not good news. In the past, a fall in the employment to population ratio has been a pretty reliable indicator (and one of the signs) of a recession:

There is lots of talk about another stimulus package. In that regard, I want to go back to my last Marketplace:

Have policymakers reacted properly? ...[F]iscal policy - the tax rebates we are about to get - was inadequate. Fiscal policymakers should have recognized that employment has tended to recover sluggishly in recent recessions and implemented policies that are known to create jobs. But they didn’t, and it’s too bad that one policy error, the failure of regulators to prevent the problems in the first place will be compounded be another, the failure of fiscal policy to come to the aid of unemployed workers.

If we decide another stimulus package is needed, and the graph above is compelling in that regard, can we make employment rather that Republican ideology about tax cuts one of the primary goals (and challenge Bush to veto it rather than caving with the mere threat of a veto)? It wouldn't hurt to think about infrastructure either. As noted here:

If we had included ... infrastructure spending as part of the initial stimulus package, then the effects would kick in on a sustained basis over time rather than as a one-time hit as with the tax cuts. Thus, this type of spending could have provided the continuous stimulus [the economy needs]...

Comments

[Mike D]

I'm very much in favor of spending money on public investment rather than stimulating private consumption, but as a matter of counter-cyclical fiscal policy, don't we run into timing issues here?

Isn't the lag time from recognition to 'half of the stimulus is felt' for discretionary fiscal policy something like 18 months?

[piglet]

Here's Dow Jones's take on it:

MARKET SNAPSHOT: U.S. Stocks Advance As Employment Report Comes As Expected

Hmmm.

[Robinia]

Real-deal stimulus is a 3-step; you have one (employment support) and two (infrastructure); three is revenue sharing with those state and local governments in need, to prevent layoffs due to diminished revenue collections.

[Patricia Shannon]

The employment ratios and unemployment rates would be higher if they took into account the fact that some people from other countries are moving back there because they can no longer get jobs here.

[save_the_rustbelt]

There are pros and cons to infrastructure:

Pro - highway and bridge projects are already planned and can be moved to contract fairly quickly, including maintenance

Con - water, sewer, levees, other highway - three years engineering lead time

We should get started ASAP, but not expect quick results.

[german_reader]

U6, America's true unemployment rate, 10.3% in June 2003, 9.9% in June 2007 and tendency rising. We are only at the beginning of the economic slow down.

( U6 - (seas) Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian laborforce plus all marginally attached workers ).

[2slugbaits]

Infrastructure spending would be great. The problem is that if it had been attached to the fiscal stimulus bill then we most likely would have ended up with neither the tax rebates nor the infrastructure spending. Welcome to the world of power sharing with Republicans. In BushWorld we should count ourselves lucky if we come away with only half a loaf.

[anne]

German Reader:

"U6, America's true unemployment rate, 10.3% in June 2003, 9.9% in June 2007 and tendency rising. We are only at the beginning of the economic slow down."

Right.

[Ryan]

Work-force participation rates declining aren't necessarily bad, but reflective of a large portion of our population entering retirement age, as well as a relatively low population growthrate. I am a bit weary of the WFP and UE numbers when looked at together.

[cm]

Ryan: Look at participation rates by age bracket. I don't think that people are retiring at all ages.

[Bob]

>> U6, America's true unemployment rate, 10.3% in June 2003, 9.9% in June 2007 and tendency rising. We are only at the beginning of the economic slow down.

And don't forget Bush's new birth / death model.

Thats the cooked stat that he started cranking out when he got into office that has been padding the job creation numbers by almost 40%.

Pulled right out of thin air.

[Real Person from the Real World]

what was it I read recently? Starbucks was closing 600 locations? I forget the collateral dammage in jobs lost.... Well, looks like someone is getting hit, and while I have bought frappuchino in bottles at a warehouse store, I have never set foot in one of their cafes.... The coffehouse crowd was always the better heeled, and hip plugged-in younger tech crowd, not me. Well, looks like the economic pain is spreading. My employer is depressed, altho he seems clever enough to maintain a positive cash flow (I think). People always need IT staffing, right?

[Bob]

Employers cut jobs for 6th straight month

http://apnews.myway.com/article/20080703/D91MCJK80.html

clip -

Job losses in both April and May turned out to be considerably deeper than had been thought.

Payrolls dropped by 67,000 in April, versus the 28,000 previously reported. And, losses in May came to 62,000, rather than the 49,000 initially estimated.

So far this year, the economy has lost a total of 438,00 jobs, an average of 73,000 a month.

[cm]

Real Person: Do I smell gloating?

On the topic of staffing's commercial prospects, you guys are basically arbitraging labor market turnover. As that turnover declines because that many people are not leaving whatever jobs they have (perhaps for lack of better, or merely other, prospects), or "new projects" are put off, I'm sure it must affect your volume and perhaps your margins as the "ROI" on the client side drops and they negotiate harder or more deals fall through.

Is that in line with what you see?

[Real Person from the Real World]

Hey CM. We just see what rolls in. When some contract is extended, we would not know unless our guy is extended, and that would be a positive, but new business is tough to get. And I would suspect the economy is to blame.

Some of our best clients have been not as forthcoming on requirements or quick to snap up our submissions of late. Apparently my employer has been a bit greedy on what we give them at (buy cheap, sell dear). The guy I work for has costs, and squeezes or gouges as the opportunity provides, and more and more American managers are catching onto the game. That is the problem, I think.

[german_reader]

I've seen my mistake just now. The 9.9% U6 are indeed for June 2008 not 2007.

[Patricia Shannon]

RealPerson
I knew the economy was in trouble the middle of 2001 (well before 9/11). For one thing, when I was looking for work at the beginning of the year, there was very little. I was lucky to get a 6-month contract with the county government. A month or two later, my recruiter was laid off for lack of work! Shortly before 9/11, the county decided to lay off all its IT contractors, except for a couple who were needed to maintain the computer network, because of declining sales tax revenues. There went my hopes of getting a permanent job with the county, or at least long-term contract work. Despite the fact that my supervisor said he had less trouble installing the system I converted than he had ever had, I couldn't get a job in IT, and ended up working as a server at Waffle House for four years, until enough people started retiring, and younger people wised up and stopped going into IT. Companies were forced to start hiring old people. I was not the only person my age who went thru this experience.

[Real Person from the Real World]

Patricia, yeah, it was bad then (2001), but I was still taking classes in IT, my "new" career, before I ended up working for a foreigner now US citizen entrepreneur.

Icarus and his ilk are more about hate for the US than actual business competition. Recently there was an article in the NYT about how when they started a program to fingerprint foreign terrorists overseas, they found a lot of them had been in the US and had bad law enforcement records, so now there will be more work with foreign governments when it comes to troublemakers. People are jealous of what they see in movies as the luxurious lifestyle they think so many of us live. Others have grudges based on other perceived slights and "insults," fair or unfair.

Even my employer is ambiguous about his citizenship, while he constantly hobnobs with anyone he can, he networks under the table with the great brotherhood of ex-patriots from his homeland. All this is conniving is driving companies to set up Vendor Management Systems of various sorts which makes things really awful instead of better. One day someone may get something workable, right now, it is all experimental.

Many of the visa folk are just like the people that went overseas to make money in the days of the British empire. I see them as new merchantilists. Unfortunately, the genie is out of the bottle. Unregulated globalization has gutted the jobs market, and it will be the same whether we get Republicans or Democrats. Republicans will give into the likes of Bill Gates looking for the geniuses while the piddly foreign vendors get their piece of the action, and the Democrats will give in to the liberals who championed multiculturalism because America is so great to foreigners. while you want to be able to hire unique talents, as long as some foreigner vendors see the gold in vending cheap slaves to sell at market rates from their homelands, they will come. No one actually saves money, it just steals job experience. Some will stay to become US citizens.

We need to develop a policy on jobs, just as with energy. It will be too late for me and you maybe, but at some point, things will get so bad, something will have to be done, and someone some day, will do it right.