The employment report, outsourced to PGL:
December Employment Report: Even Worse that the Lead Paragraph Suggests, by pgl: The BLS opens its report for December 2007 employment with:
The unemployment rate rose to 5.0 percent in December, while nonfarm payroll employment was essentially unchanged (+18,000)
So the payroll survey showed a very low increase in employment but I’m sure the White House will emphasize that reported employment still rose – even if not my much. But how come the unemployment rate rose from 4.7 percent as of November to 5.0 percent? If you were thinking this might be due to a surge in the labor force participation rate – think again. This rate fell from 66.1 percent as of November to only 66 percent as of December 2007. The labor force participation rate was 66.4 percent as of December 2006. The household survey indicated a 436,000 drop in employment – something I bet Lawrence Kudlow is not talking about right now even if had declared this to be a more reliable indicator.
The employment to population ratio therefore declined from 63 percent as of November to only 62.7 percent as of December 2007. It was 63.4 percent as of December 2006. Let’s just hope this dismal news gets the Federal Reserve to lower interest rates. Whether that will be enough to avoid a recession, however, remains to be seen.
Update: The WSJ reports comments by Dean Baker:
The rise in unemployment hit blacks and Hispanic workers especially hard, with both groups seeing a rise of 0.6 pp in their unemployment rates to 9.0 percent and 6.3 percent, respectively. There continues to be an unusual age pattern to employment trends. Employment for workers over age 55 rose modestly, while reportedly falling by 436,000 for workers under age 55. While this December decline is probably an anomaly, employment for workers under age 55 has fallen by 625,000 over the last year.
Felix Salmon says:
Payrolls: Still Best Ignored: The day after the Iowa caucus, with the media full of horse-race coverage of presidential politics, is a good [day] to miss the news of the monthly jobs report. ... The non-farm payroll report, which comes out on the first Friday of every month, is increasingly irrelevant, and anything which takes attention away from it is a good thing. ...
While Greg Ip at the WSJ says:
Household Employment Signaling Greater Weakness The Bureau of Labor Statistics’ survey of households has for the last year shown far weaker job growth than its larger and more closely followed survey of payrolls, even when the two define jobs the same way.
In December, nonfarm payrolls rose 18,000 while household employment plunged 436,000. But such monthly changes are hard to compare because the two surveys define employment differently. For example, the household survey counts the self-employed, while the payroll survey doesn’t. The payroll survey counts someone with two jobs twice, while the household survey counts him once. Moreover, the household sample is far smaller and thus more volatile. By design, its raw data is never revised, which imparts a false sense of reliability.
Still, once those adjustments are made, the picture remains the same. Household employment has risen just 100,000 since December 2006 and when the definition of employment is changed to match that of the payroll survey, the increase is just 375,000, according to the BLS. The increase in nonfarm payrolls was 1,270,000 in the same period. Some of that latter increase will be trimmed during the BLS’ annual benchmark revisions to be released next month. ...
Update: Finally, Bloomberg reports:
Edward Lazear, chairman of the White House Council of Economic Advisers, said the Bush administration will consider measures to stoke the economy.
U.S. Economy: Job Growth at Weakest Pace Since 2003: ''We have pushed economic growth policies throughout this administration and we're not going to stop doing that now,'' Lazear said in a Bloomberg Television interview in Washington. ''If there are necessary steps that need to be taken, the president will be considering those over the next few weeks.''
Unfortunately, it's stabilization policy, not growth policy, that's needed to combat a recession, and Lazear ought to know the difference. The two are not necessarily the same.
The administration has pulled this trick before - using stabilization arguments to justify permanent reductions in tax rates - here's Paul Krugman:
The Tax-Cut Con: ...During the 2000 campaign and the initial selling of the 2001 tax cut, the Bush team insisted that the federal government was running an excessive budget surplus, which should be returned to taxpayers. By the summer of 2001, as it became clear that the projected budget surpluses would not materialize, the administration shifted to touting the tax cuts as a form of demand-side economic stimulus: by putting more money in consumers' pockets, the tax cuts would stimulate spending and help pull the economy out of recession. By 2003, the rationale had changed again: the administration argued that reducing taxes on dividend income, the core of its plan, would improve incentives and hence long-run growth -- that is, it had turned to a supply-side argument.
These shifting rationales had one thing in common: none of them were credible. It was obvious to independent observers even in 2001 that the budget projections used to justify that year's tax cut exaggerated future revenues and understated future costs. It was similarly obvious that the 2001 tax cut was poorly designed as a demand stimulus. And we have already seen that the supply-side rationale for the 2003 tax cut was tested and found wanting by the Congressional Budget Office.
So what were the Bush tax cuts really about? The best answer seems to be that they were about securing a key part of the Republican base. Wealthy campaign contributors have a lot to gain from lower taxes, and since they aren't very likely to depend on Medicare, Social Security or Medicaid, they won't suffer if the beast gets starved. Equally important was the support of the party's intelligentsia, nurtured by policy centers like Heritage and professionally committed to the tax-cut crusade. The original Bush tax-cut proposal was devised in late 1999 not to win votes in the national election but to fend off a primary challenge from the supply-sider Steve Forbes, the presumptive favorite of that part of the base.
This brings us to the next question: how have these cuts been sold?
At this point, one must be blunt: the selling of the tax cuts has depended heavily on chicanery. The administration has used accounting trickery to hide the true budget impact of its proposals, and it has used misleading presentations...
I am not opposed to stabilization policy (though I'd prefer variations in spending over the business cycle to variations in the tax rate to stabilization the economy), but I am opposed to misleading presentations about the policy.