The Employment Report

Calculated Risk on today's employment report:

Employment Declines Sharply, Unemployment Rises to 7.2 Percent: From the BLS:

Nonfarm payroll employment declined sharply in December, and the unemployment rate rose from 6.8 to 7.2 percent... Payroll employment fell by 524,000 over the month and by 1.9 million over the last 4 months of 2008. In December, job losses were large and widespread across most major industry sectors.

Click on graph for larger image.

This graph shows the unemployment rate and the year over year change in employment vs. recessions.

Nonfarm payrolls decreased by 524,00 in December, and November payrolls were revised down to a loss of 584,000 jobs. The economy has lost over 1.5 million jobs over the last 3 months alone!

The unemployment rate rose to 7.2 percent; the highest level since January 1993. Year over year employment is now strongly negative (there were 2.6 million fewer Americans employed in Dec 2008 than in Dec 2007). This is another extremely weak employment report ...

Brad DeLong:

And U-6 at 13.5%: And U-6--unemployed plus discouraged workers plus unable to fond a full-time job--is now at 13.5% of the labor force--and BLS "discouraged workers" are a big undercount of the concept...

More from Calculated Risk:

Over 8 Million Part Time Workers: From the BLS report:

In December, the number of persons who worked part time for economic reasons (some-times referred to as involuntary part-time workers) continued to increase, reaching 8.0 million. The number of such workers rose by 3.4 million over the past 12 months. This category includes persons who would like to work full time but were working part time because their hours had been cut back or because they were unable to find full-time jobs.

Click on graph for larger image.

Not only has the unemployment rate risen sharply to 7.2%, but the number of workers only able to find part time jobs (or have had their hours cut for economic reasons) is now over 8 million.

Of course the U.S. population is significantly larger today (about 305 million) than in the early '80s (about 228 million) when the number of part time workers almost reached 7 million, but the rapid increase in part time workers is pretty stunning.

Others: Menzie Chinn pgl, spencer, cbpp, Justin Fox, RTE, RTE2, Felix Salmon, Greg Ip.

Comments

[kthomas]

"...but the rapid increase in part time workers is pretty stunning."

Not really. Not at all.

[Ben]

You don't need to buy medical insurance for temps. I'm surprised there aren't more "consultants".

[stunney]

The following surely proves that Bush made a disastrous error in not eliminating ALL taxes on the wealthiest 1 percent of Americans. 'Proves, as in 'proves to the WSJ Editorial Board'...

http://blogs.wsj.com/economics/2009/01/09/bush-on-jobs-the-worst-track-record-on-record/

Posted By WSJ Staff On January 9, 2009 @ 12:04 pm In Employment | 55 Comments

President George W. Bush entered office in 2001 just as a recession was starting, and is preparing to leave in the middle of a long one. That’s almost 22 months of recession during his 96 months in office.

His job-creation record won’t look much better. The Bush administration created about three million jobs (net) over its eight years, a fraction of the 23 million jobs created under President Bill Clinton’s administration and only slightly better than President George H.W. Bush did in his four years in office.

Here’s a look at job creation under each president since the Labor Department started keeping payroll records in 1939. The counts are based on total payrolls between the start of the month the president took office (using the final payroll count for the end of the prior December) and his final December in office.
Because the size of the economy and labor force varies, we also calculate in percentage terms how much the total payroll count expanded under each president. The current President Bush, once taking account how long he’s been in office, shows the worst track record for job creation since the government began keeping records. –Sudeep Reddy

[Ben]

This is for anne:

"The per-year effect of the [Obama stimulus] plan on GDP is 150 x 1 + 240 x 1.5 = $510 billion. Since it takes $300 billion to reduce the unemployment rate by 1 percentage point, this is shaving 1.7 points off what unemployment would otherwise have been."

We're heading into double-digit unemployment, if we aren't already there, which I suspect we are. We'll see when the numbers are revised next month. Certainly, by the time the spendorama gains traction, we'll be over 10%.

Also, negative GDP will cause an acute acceleration of unemployment, bankruptcies, foreclosures, etc.

[anne]

Interesting, whether on a year to year change basis or for December to December the percent increase in part-time workers is the most since records were compiled in 1956, with the December to December percent increase of 73.7% seasonally adjusted being vastly more of a change than ever recorded. *

* http://www.bls.gov/webapps/legacy/cpsatab5.htm

[anne]

Ben,

I finally understand the complaint and I agree. We are not however in double-digit unemployment as of December by the standard definition, though unemployment-underemployment is at 13.5% and far higher than recorded since records were initially compiled in 1994. This job market is simply scary, and the worries and complaint about a potential lack of traction of a stimulus seem completely justified.

Here is the reference:

http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/

January 6, 2009

Stimulus Arithmetic (Wonkish But Important)
By Paul Krugman

[Stuart Ullman]

Anne

Wow.

For those of you who didn't bother to look this up, I took it back to 1955, and in that time the highest previous jump in December to December "part time for economic reasons", seasonally adjusted, was about 24.5% from 1980 to 1981. There have been a smattering here and there of 20% jumps ('59 to '60, '72 to '73, '81 to '82). There's never been a jump anything like 73%. Even if you take the biggest TWO YEAR gap, '80 to '82, that was only 49%. In the last two years, from 2006 to 2008, the jump was 91.9%

I'm not sure what that means, but it got my attention. As Anne says: interesting.

[Beezer]

I've maintained for quite a while that even the traditional unemployment figures will reach double digits. And there's just about nothing we can do about it in the very near term.

Boosting unemployment benefits, food stamps etc., and knocking off the payroll tax will put more income down to labor, which might save some businesses from going under.

In the longer term, one year or more, fiscal stimulus is likely to be the main engine for restoring jobs, and if done correctly with the long term in mind, will set the stage for all the necessary infrastructure changes this country absolutely must accomplish.

This means that we are in for another two to three years of recession/no growth. So be it. What's more important is that, in 10 years, we will have a balanced economy not dependent upon fossil fuels and where personal/truck transport is electric.

Even after that is accomplished, we face severe problems regarding our natural resources. That's another whole kettle of fish--assuming we have fish left. Water pollution and scarcity are going to be big problems.

The positive is that as each item gets addressed, all items benefit. It's really not a one job at a time deal. They are, in fact, directly related.

[Beezer]

Even if our GDP doesn't rise a nickel in ten years, if in ten years folks all have health care, can eat healthy food, live closer to work (maybe the comp in the study it's so close), have more free time and are well educated, we will have made tremendous progess.

Maybe our measurements of progress need to be refined.

[ken melvin]

Got to be frustrating times for economists.

[kthomas]

The same group of honorable thieves will just syphon off the money. There's no long-term without reform and JUSTICE, and our new President better understand that before these honorable thieves sell him down the river.

[Stephen Kriz]

All those tax giveaways to the wealthy and to oil companies really spurred economic growth, didn't they? Woo-hoo! That Dubya is one economic genius, ain't he???

[anne]

Stuart Ullman says...

Anne

Wow.

For those of you who didn't bother to look this up, I took it back to 1955, and in that time the highest previous jump in December to December "part time for economic reasons", seasonally adjusted, was about 24.5% from 1980 to 1981.

[What then does a 73.7% jump mean? A way of preventing actual layoffs, at least for a time?]

[Patricia ShannonP]

When I first saw Anne's reference to the increase in part-time workers, I thought it was 7+%, not nice, but hardly surprising. When I Stuart Ullman's response, I went back and saw it was an astonishing 73.7%

Looking at the non-seasonally adjusted table, we have for people working part-time for economic reasons:
For Dec. 2007 : 4,750,000 people
For Dec. 2008 : 8,250,000 people

[anne]

The problem can be found most clearly I think in terms of job creation these 8 years, through which an average of 31,300 jobs have been created monthly an astonishing short fall from civilian labor force growth which has been 140,600 monthly over the last 15 years. We created 10.5 million too few jobs to keep up with labor force growth these last 8 years.

What I wonder now is how much job growth is covered not by private industry but government each month.

[anne]

Well, a quick estimate shows that through the Bush years 18,300 government jobs were created monthly which means that private job creation was, wow, less each month. I have to take down the precise figures, but private job creation has been absurdly low. *

* http://www.bls.gov/webapps/legacy/cesbtab1.htm

Patricia:

Looking at the seasonally adjusted table, we have for people working part-time for economic reasons:

http://www.bls.gov/webapps/legacy/cpsatab5.htm

For Dec. 2007 : 4,638,000 people
For Dec. 2008 : 8,038,000 people

[S Brennan]

If only we had the foresight to cut ALL taxes on the upper income group this never would have happened!

Good times.

WE MUST KEEP CUTTING TAXES!

Bad times.

WE MUST KEEP CUTTING TAXES!

anything in between.

WE MUST KEEP CUTTING TAXES!

Hell, we've been cutting taxes since 1978 and we have never been better...right? Another thirty years of this diet and we will be on "America...the biggest loser".

Can people ever start talking about employing people to plan and build our future...FDR did and it worked.

[RW]

Based on anecdotal evidence at least, I'd guess that some proportion of those part-time workers are at least as interested in access to affordable health insurance as they are to income per se.

[anne]

Total nonfarm private employment through the Bush years increased by 1.29 million or less than 13,500 jobs a month. Government employment increased by 1.71 million or a little more than 18,800 jobs a month. * (These are December 2000 to December 2008 seasonally adjusted figures.)

* http://www.bls.gov/webapps/legacy/cesbtab1.htm

[anne]

Correcting:

Total nonfarm private employment through the Bush years increased by 1.29 million or less than 13,500 jobs a month. Government employment increased by 1.71 million or a little more than 17,800 jobs a month. * (These are December 2000 to December 2008 seasonally adjusted figures.)

* http://www.bls.gov/webapps/legacy/cesbtab1.htm

[rawdawgbuffalo]

dang, looks as if there is No end in sight

[mmckinl]

Just maybe it is time to lower the workweek from 40 hours to say 36. We've done this before when we enacted the law and it has worked all these years.

By implementing Medicare for All employers could then give 10% raises too compensate for the raise in pay ...

By reducing the work week 10% that would give us at least 6-8% more jobs right away!

[Patricia ShannonP]

With a reduced work week, people could get more sleep, which would cause medical bills to decline.

[benamery21]

MMckinl: These numbers are already based on a 35 hour week

RW: this is not a count of all part-time workers, it is of those who answered that they would like to work more hours but were not doing so for economic reasons (the underemployed) and also doesn't include those who have multiple part-time jobs if they manage to get more than 35hours per week.

The Seasonally adjusted employment to population ratio is now at its lowest level since 1986 at the same time that the number of involuntary part-time workers has doubled

[mmckinl]

benamery21 says...
MMckinl: These numbers are already based on a 35 hour week

~~~~

Then lower the work week to 32 hours !

[anne]

http://krugman.blogs.nytimes.com/2009/01/10/romer-and-bernstein-on-stimulus/

January 10, 2009

Romer and Bernstein on Stimulus
By Paul Krugman

[Figure] Is this enough?

OK, Christina Romer and Jared Bernstein have put out the official (?) Obama estimates * of what the (American Association of Retired Persons) American Recovery and Reinvestment Plan would accomplish. The figure above summarizes the key result.

Kudos, by the way, to the administration-in-waiting for providing this — it will be a joy to argue policy with an administration that provides comprehensible, honest reports, not case studies in how to lie with statistics.

That said, the report is written in such a way as to make it hard to figure out exactly what’s in the plan. This also makes it hard to evaluate the reasonableness of the assumed multipliers. But here’s the thing: the estimates appear to be very close to what I’ve been getting.

The key thing if you want to do comparisons is to note that I made estimates of the average effect over 2009-2010, while they do estimates of effect in the fourth quarter of 2010, which is roughly when the plan is estimated to have its maximum effect. So they say the plan would lower unemployment by about 2 percentage points, I said 1.7, but their estimate may actually be a bit more pessimistic than mine. They have the plan raising GDP by 3.7 percent, but that’s at peak; I thought ** 2.5 percent or so average over 2 years, again not much difference.

So this looks like an estimate from the Obama team itself saying — as best as I can figure it out — that the plan would close only around a third of the output gap over the next two years.

One more point: the estimate of what would happen to the economy in the absence of a stimulus plan seems kind of optimistic. The chart above has unemployment ex-stimulus peaking at 9 percent in the first quarter of 2010 and coming down through the year; the CBO estimates *** an average unemployment rate of 9 percent for 2010, so the Obama people are more optimistic than the CBO, and a lot more optimistic than I am.

Bottom line: even if I use the Romer-Bernstein estimates instead of my own — there really isn’t much difference — this plan looks too weak.

* http://otrans.3cdn.net/45593e8ecbd339d074_l3m6bt1te.pdf

** http://www.nytimes.com/2009/01/09/opinion/09krugman.html

*** http://www.cbo.gov/ftpdocs/99xx/doc9957/01-07-Outlook.pdf

[anne]

http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/

January 6, 2009

Stimulus Arithmetic (Wonkish But Important)
By Paul Krugman

Bit by bit we're getting information on the Obama stimulus plan, enough to start making back-of-the-envelope estimates of impact. The bottom line is this: we're probably looking at a plan that will shave less than 2 percentage points off the average unemployment rate for the next two years, and possibly quite a lot less. This raises real concerns about whether the incoming administration is lowballing its plans in an attempt to get bipartisan consensus.

In the extended entry, a look at my calculations.

The starting point for this discussion is Okun's Law, the relationship between changes in real GDP and changes in the unemployment rate. Estimates of the Okun's Law coefficient * range from 2 to 3. I'll use 2, which is an optimistic estimate for current purposes: it says that you have to raise real GDP by 2 percent from what it would otherwise have been to reduce the unemployment rate 1 percentage point from what it would otherwise have been. Since GDP is roughly $15 trillion, this means that you have to raise GDP by $300 billion per year to reduce unemployment by 1 percentage point.

Now, what we're hearing about the Obama plan is that it calls for $775 billion over two years, with $300 billion in tax cuts and the rest in spending. Call that $150 billion per year in tax cuts, $240 billion each year in spending.

How much do tax cuts and spending raise GDP? The widely cited estimates ** of Mark Zandi of Economy.com indicate a multiplier of around 1.5 for spending, with widely varying estimates for tax cuts. Payroll tax cuts, which make up about half the Obama proposal, are pretty good, with a multiplier of 1.29; business tax cuts, which make up the rest, are much less effective.

In particular, letting businesses get refunds on past taxes based on current losses, which is reportedly a key feature of the plan, *** looks an awful lot like a lump-sum transfer with no incentive effects.

Let's be generous and assume that the overall multiplier on tax cuts is 1. Then the per-year effect of the plan on GDP is 150 x 1 + 240 x 1.5 = $510 billion. Since it takes $300 billion to reduce the unemployment rate by 1 percentage point, this is shaving 1.7 points off what unemployment would otherwise have been.

Finally, compare this with the economic outlook. "Full employment" clearly means an unemployment rate near 5 — the CBO says 5.2 for the NAIRU, **** which seems high to me. Unemployment is currently about 7 percent, and heading much higher; Obama himself says that absent stimulus it could go into double digits. Suppose that we're looking at an economy that, absent stimulus, would have an average unemployment rate of 9 percent over the next two years; this plan would cut that to 7.3 percent, which would be a help but could easily be spun by critics as a failure.

And that gets us to politics. This really does look like a plan that falls well short of what advocates of strong stimulus were hoping for — and it seems as if that was done in order to win Republican votes. Yet even if the plan gets the hoped-for 80 votes in the Senate, which seems doubtful, responsibility for the plan's perceived failure, if it's spun that way, will be placed on Democrats.

I see the following scenario: a weak stimulus plan, perhaps even weaker than what we're talking about now, is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says "See, government spending doesn't work."

Let's hope I've got this wrong.

* Take the Okun's law equation :

Multiplier = a

Actual growth = potential growth - a x d(unemployment rate),
which implies
Potential growth = actual growth + a x d(unemployment rate).

** http://www.economy.com/mark-zandi/documents/Small%20Business_7_24_08.pdf

*** http://www.google.com/hostednews/ap/article/ALeqM5j6z3BcdWqtB2Un5otM0G5JpRoH_QD95HKNU80

**** Non-Accelerating Inflation Rate of Unemployment

[anne]

http://krugman.blogs.nytimes.com/2009/01/06/forecasts/

January 6, 2009

Forecasts
By Paul Krugman

A bit more information to go with my post on stimulus: * forecasters surveyed by the Wall Street Journal ** predict, on average, that unemployment will reach 8.1 percent by end 2009 and peak at 8.4% — that is, it will keep rising into 2010. That's a forecast of what will happen with the stimulus plan, not of what would happen absent stimulus, which would presumably be considerably worse.

Two points: 1. This suggests that the consensus is at least as grim as the scenario I laid out 2. This looks to me like an economy that could easily be spun by conservatives as a failure of Obama's policies.

* http://krugman.blogs.nytimes.com/2009/01/06/stimulus-arithmetic-wonkish-but-important/

** http://online.wsj.com/public/resources/documents/info-flash08.html?project=EFORECAST07

[anne]

http://krugman.blogs.nytimes.com/2009/01/10/risks-of-deflation-wonkish-but-important/

January 10, 2009

Risks of Deflation (Wonkish But Important)
By Paul Krugman

Feeling a bit deflated [Chart]

There’s been some talk abut risks of deflation, but there’s one alarming comparison I haven’t seen made. The figure above shows that the CBO is currently projecting an output shortfall from the current slump comparable to the slump of the early 1980s. Actually, it’s very close: if you compare the CBO’s projections of unemployment * from 2008 through 2012 with its estimate of the natural rate, we’re looking at cumulative excess unemployment of 13.9 point-years; that compares with 13.7 point years from 1980 through 1986. (If the natural rate — the unemployment rate that keeps inflation unchanged — is 5 percent, and the actual unemployment rate averages 7 percent over a year, that’s 2 point-years of excess unemployment.)

Now here’s the thing: the slump of the early 1980s produced the Great Disinflation, which brought the core inflation rate down from about 10 to about 4.

This time, however, we entered the slump with a core inflation rate of about 2.5 percent. If we experienced a disinflation comparable to that of the 1980s, that would mean ending up with deflation at a rate of -3.5 percent.

And bear in mind that neither the CBO nor the Obama team ** really explains where recovery comes from; it’s just assumed.

So tell me why we aren’t looking at a very large risk of getting into a deflationary trap, in which falling prices make consumers and businesses even less willing to spend. Tell me why this risk wouldn’t remain high, though lower, even with the Obama plan, which as far as I can tell is expected to reduce cumulative excess unemployment by about a third.

* http://www.cbo.gov/ftpdocs/99xx/doc9958/01-08-Outlook_Testimony.pdf

** http://krugman.blogs.nytimes.com/2009/01/10/romer-and-bernstein-on-stimulus/

[anne]

Notice now what these last 8 years have meant in terms of employment, in comparison with the preceding 8 years and with the needs of natural expansion of the civilian labor force:

http://www.bls.gov/webapps/legacy/cesbtab1.htm
http://www.bls.gov/webapps/legacy/cpsatab1.htm

The Bush experience in monthly job creation has been,

31,300 x 96 months = 3.0 million jobs created in all;

the Clinton experience was,

240,300 x 96 = 23.1 million jobs created in 96 months;

enough job creation to keep up with civilian work force growth would have meant,

140,600 x 96 = 13.5 million jobs created in 96 months.

[anne]

The precise data:

http://www.bls.gov/webapps/legacy/cesbtab1.htm

January 9, 2009

Employment Summary, 1992-2008

(Thousands) *

December 1992 (109,415)
December 2000 (132,485)

December 2008 (135,489)

Clinton ( 23,070) Total jobs created
Bush ( 3,004)

(Actual averages)

Clinton ( 240,313) Monthly jobs created
Bush ( 31,292)

* Establishment data, seasonally adjusted.

[anne]

The data for private and government job creation, notice that government job creation has been stronger than private creation through these last 8 years:

http://www.bls.gov/webapps/legacy/cesbtab1.htm

January 9, 2009

Total Nonfarm Private Employment, 1992-2008

(Thousands) *

December 1992 ( 90,537)
December 2000 (111,681)

December 2008 (112,975)

Clinton ( 21,144) Total private jobs created
Bush ( 1,294)

(Actual averages)

Clinton ( 220,250) Monthly private jobs created
Bush ( 13,479)

* Establishment data, seasonally adjusted.

http://www.bls.gov/webapps/legacy/cesbtab1.htm

January 9, 2009

Total Nonfarm Government Employment, 1992-2008

(Thousands) *

December 1992 ( 18,878)
December 2000 ( 20,804)

December 2008 ( 22,514)

Clinton ( 1,926) Total government jobs created
Bush ( 1,710)

(Actual averages)

Clinton ( 20,063) Monthly government jobs created
Bush ( 17,813)

* Establishment data, seasonally adjusted.

[whaaa?]

@Beezer/S Brennan:

Beez, there is NO WAY a stimulus plan OF ANY KIND can help - it will be funded entirely through more US debt, which will draw on future earnings. You said you don't care about GDP going up a dime? It will plummet, as it should have plummeted the last 30 years, except that we used debt to fund consumer spending (70% of GDP).
Brennan: FDR didn't help the economy by spending the way he did after the Depression. It was the INDUSTRIAL PRODUCTION of WWII that pulled the country out of that calamity, not FDR's debt spending!
We are being silently robbed of our future as we 'stimulus-plan' ourselves into permanent debt servitude, or force a dollar collapse as foreign countries wake up to the fact that we cannot pay back our debts. It is very simple math, truly: debt can only be paid back with more debt until the lender realizes that the borrower will never make good. The wonders of lower taxes all these years? ...Funded by foreign governments because our dollar is held as reserve currency. When that stops, then so does GDP, because right now it is all debt-based. We've got to stop thinking that government stim-plans can pull us out of this mess. Our ability to borrow as a nation is being cut off, just like it is for consumers. Private business needs to produce, and Americans need to save - government cannot save us this time... they can only make it worse for us pull ourselves out of this later on.

[ken melvin]

Appears to me that the most effective and humane way to stimulate the economy is by ensuring adequate benefits to the U6 unemployed and other poor; an effective way to put a couple hundred billion a year into the economy.

[calmo]

Oh no.

First it goes to Morgan Stanley...for necessary asset repairs...not frivolous ones...and not just any ordinary asses, but shareholders who demonstrated their faith in the system and took the necessary risks, whose confidence is now in tatters, but whose hopes and aspirations can be buttrazzed by the few financial wizzards who brought them real shareholder value only a few short quarters ago.

Surely you jest, Mr melvin.

I cannot continue without getting very nasty and deleting respectable-gone-sour comment.
More disclosure needed by companies receiving gov aid, to allay anxieties of tax-payers ...that tax-payers are being treated like chumps...that while the actual components of the fiscal package are being drafted, argued, revised...the financial sector beneficiaries get no such scrutiny.

[cm]

calmo: That's right, it's close to impossible ever more difficult to maintain a reasonable frame of mind and not drift off into utter cynicism.

[calmo]

Thanks for staying with us Mezz...and sorta agree with some of your sentiments about those "useless liberal arts degrees", but I need to disclose that some of the brighter lights on the issues that concern us in these Econ blogs are coming from people who are just plain good readers...and writers, reflecting that capacity to read closely.
sorta.
Do I detect a striking cm? Sometimes the parentheticals help me get across what I want to say, and the preference of colliding (contrasting?) views is more or less explicit...the strikems are like little boots to those decidedly second inferior opinions. I think we should have underline too. (Is that a difficult addition?) The Oakland Policeman shooting the young black man, a tragedy by itself...by so much worse if this incident is not handled honestly.
I hope all is well with you and yours.

[ken melvin]

Liberal Arts? What the hell kind of education's that? Real men/women have degrees in things like business or computer programming, the sort of things that are the very bedrock of western/eastern civilization.

[cm]

ken melvin: I object to "computer programming" being paired up as a "bedrock" category (be that a rock (pea?) in your bed (under a layer of matresses)?) with "business" (or "administration" thereof). Promptly apologize to me (a software "engineer", who would perhaps decades ago be called a "programmer"), if you will.