Update on Current Situation – October Jobs Report and 3rd Qtr GDP

Two of the more important (U.S.) economic measures were reported in last week and half.  Yesterday the October jobs report came in.  The week before we got the flash report on 3rd quarter GDP.  Both measures were better than feared, not quite as good as consensus expectations of many forecasters, and overall still a disappointment.  First let’s look at the numbers and then I’ll comment. CalculatedRisk, as usual, reports the facts on the jobs report:

From the BLS:

Nonfarm payroll employment continued to trend up in October (+80,000), and the unemployment rate was little changed at 9.0 percent, the U.S. Bureau of Labor Statistics reported today.

The following graph shows the employment population ratio, the participation rate, and the unemployment rate.

Employment Pop Ratio, participation and unemployment ratesClick on graph for larger image.

The unemployment rate declined to 9.0% (red line).

The Labor Force Participation Rate was unchanged 64.2% in October (blue line). This is the percentage of the working age population in the labor force. The participation rate is well below the 66% to 67% rate that was normal over the last 20 years, although some of the decline is due to the aging population.

The Employment-Population ratio increased to 58.4% in October (black line).

Note: the household survey showed another strong gain in jobs, and that is why the unemployment rate could decline with few payroll jobs added – and the employment population ratio increase.

Percent Job Losses During Recessions

The second graph shows the job losses from the start of the employment recession, in percentage terms. The dotted line is ex-Census hiring.

Now we reach back to October 27 and CalculatedRisk again:

From the BEA:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.5 percent in the third quarter of 2011 (that is, from the second quarter to the third quarter) according to the “advance” estimate released by the Bureau of Economic Analysis.

The acceleration in real GDP in the third quarter primarily reflected accelerations in PCE and in nonresidential fixed investment and a smaller decrease in state and local government spending that were partly offset by a larger decrease in private inventory investment.

The following graph shows the quarterly GDP growth (at an annual rate) for the last 30 years. The dashed line is the current growth rate. Growth in Q2 at 2.5% annualized was below trend growth (around 3%) – and very weak for a recovery, especially with all the slack in the system.

So what’s happening.  Nothing much, really.  That’s the problem.  The economy is effectively going sideways.  Yes, we continue to grow, but the rate of growth is so slow that we aren’t really seeing any improvement in conditions.  For all of 2011 we have grown at a rate below the long-term historic trend of 3.0%.  We are struggling to keep up with population growth and not really doing anything to “put people back to work”.  hat’s not a recovery.  That’s society throwing 5% of our workforce off the bus 3 years ago and saying “so long” forever.  It should be unacceptable, especially when it’s possible to do much better.

Jobs And Unemployment Report For August 2011 – More Bad News, More Signs Economy Is Stalled, No Net New Jobs

This being the first Friday of the month, the latest U.S. employment report was released this morning.  Not good news.  In a nutshell:  no new net jobs created and the unemployment rate holds steady at 9.1%. It disappointed even the weak expectations of forecasters. The news continues to show an economy that has stalled without recovering and is in danger of relapsing to recession. CalculatedRiskBlog does it’s usual exemplary reporting of the latest monthly jobs and unemployment report:

From the BLS:

Nonfarm payroll employment was unchanged (0) in August, and the unemployment rate held at 9.1 percent, the U.S. Bureau of Labor Statistics reported today. Employment in most major industries changed little over the month. Health care continued to add jobs, and a decline in information employment reflected a strike. Government employment continued to trend down, despite the return of workers from a partial government shutdown in Minnesota.

The change in total nonfarm payroll employment for June was revised from
+46,000 to +20,000, and the change for July was revised from +117,000 to +85,000.

The following graph shows the employment population ratio, the participation rate, and the unemployment rate.

Employment Pop Ratio, participation and unemployment ratesClick on graph for larger image in graph gallery.

The unemployment rate was unchanged at 9.1% (red line).

When looking at the detailed numbers we find that the private sector created a net total of 17,000 new jobs.  Unfortunately this was entirely offset by government reducing employment by 17,000 jobs.  I suppose for Tea Party and Conservative types who blame government for most all economic ills and who fantasize about a society with no government, this is moving towards their ideal economy.  Somehow, I don’t see it that way.

Further details behind the numbers show that the number of private sector jobs was likely understated by 45,000 since during the survey week the 45,000 Verizon workers who were on strike were not counted as having jobs.  Those jobs will return in the report on September, assuming Verizon doesn’t lay off some of them.

Overall, the picture for recovering from the Great Recession has been turning bleaker.  We were never on a very robust path for recovery at all during the last 2 years.  However, now what modest slow momentum we had towards job recovery has stalled and job recovery has essentially flatlined.  At the current rate, we never recover the jobs lost in 2008-09 until at least a decade has passed, if that.  This is definitely starting to look like depression territory, not “recession”.  The following graph, also from Calculated Risk,


Percent Job Losses During Recessions

The second graph shows the job losses from the start of the employment recession, in percentage terms. The dotted line is ex-Census hiring.

The red line is moving sideways – and I’ll need to expand the graph soon.

The current employment recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemploymentrate (only the early ’80s recession with a peak of 10.8 percent was worse).

The details in the report also show more depressing (sorry for the pun) news:

  • U-6, an alternate unemployment rate measure that includes both traditional unemployed (no job but looking), part-time workers who want but can’t full-time hours, and some other marginally-attached workers has risen to 16.2%, a new high for this year.
  • There are 13.967 million Americans unemployed now.
  • Of those unemployed workers, 6.0 million have been without a job and looking for work for over 6 months.
  • The previous reported totals for both June and July were revised downward.

 

America Flatlines – Employment Report for June 2011

The “recovery” is flat-lining. The employment report for June shows the continuing bad news.  I’ll let CalculatedRisk give us the facts:

From the BLS:

Nonfarm payroll employment was essentially unchanged in June (+18,000), and the unemployment rate was little changed at 9.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment in most major private-sector industries changed little over the month. Government employment continued to trend down.

The change in total nonfarm payroll employment for April was revised from +232,000 to +217,000, and the change for May was revised from +54,000 to +25,000.


The unemployment rate increased to 9.2% (red line).

Percent Job Losses During Recessions…graph shows the job losses from the start of the employment recession, in percentage terms aligned at maximum job losses. The dotted line is ex-Census hiring.

The current employment recession is by far the worst recession since WWII in percentage terms, and 2nd worst in terms of the unemployment rate (only the early ’80s recession with a peak of 10.8 percent was worse).

This was very weak and well below expectations for payroll jobs, and the unemployment rate was higher than expected (both worse). A terrible report.

Although the Wall Street types and other analysts “expected” a better report, this really isn’t surprising. What it shows is the effect of fiscal policy. For over a year now, the actual effect of fiscal policy has been contractionary.  Despite the misleading rhetoric of the Republicans, the Tea Party types, and the President, government spending has not been increasing for at least a year.  The stimulus is over. It was done awhile ago.  And it wasn’t much of a stimulus anyway relative to the scale of the problem.  In fact, the federal government surge in spending in 2009, the so-called “stimulus” wasn’t really a stimulus.  It was an attempt to limit and delay the damage from massive state and local government spending cuts.

You would think that month-after-month of poor employment and job reports like we’ve seen this year would cause somebody in official Washington to be concerned.  You would be wrong.  Instead, the talk is all about how to cut spending further, faster, and deeper.  Apparently 9.2% unemployment rate, no real increase in the number of employed, and 545,000 new unemployed people is just fine and dandy with official Washington.

The Economy Is Stalling – Employment Report for May 2011

First the facts and then my comments.  Calculated Risk Blog reports from the BLS:

From the BLS:

Nonfarm payroll employment changed little (+54,000) in May, and the unemployment rate was essentially unchanged at 9.1 percent, the U.S. Bureau of Labor Statistics reported today. Job gains continued in professional and business services, health care, and mining. Employment levels in other major private-sector industries were little changed, and local government employment continued to decline.

The change in total nonfarm payroll employmentfor March was revised from +221,000 to +194,000, and the change for April was revised from +244,000 to +232,000.

The distressing news here isn’t so much the rise in unemployment rate from 8.9% to 9.1%.  Given the margin of error in measurement*, the unemployment rate has essentially been 9% for the last few months.  The distressing part is three fold.  First, the number of net new jobs created was only 54,000.  We need at least 150,000 and closer to 180,000 net new jobs each month to keep pace with population growth.  54,000 is simply not enough.  What’s worse, it’s a very significant drop from the March and April levels with no obvious explanation other than the economy overall is seriously slowing down.

The second distressing item is the revisions to the April and March numbers.  Normally previous months’ numbers are revised as the Bureau gets more and better data.  But revisions typically aren’t very large and may be either up or down.  But to have 12% and 4% downward revisions to the previous two months means the mild optimism folks were expressing two months ago was misplaced.

Finally, the most distressing part news, but totally unsurprising, is that local government employment (think teachers and police) continues to decline and be a significant drag on the economy as state, local, and the national government continue to think they can cut their way to prosperity.  They can’t.  There’s no history or empirical evidence that shows drastically cutting government spending in the middle of a significant slump will bring prosperity.  Quite the contrary, we have extensive theory and evidence that says cutting government spending in the middle of a slump will make the slump worse, make unemployment higher, and actually increase the government’s deficit.

So just how bad is this continuing failure to recover from the Great Recession of 2007-09?  Again Calculated Risk obliges with a great graphic.  This graph compares each official recession since the end of World War II.  It plots the percentage decline in total employment (the loss of jobs!) by month and then shows how long it took to recover employment.  At the rate we are “recovering” (it’s not really a recovery!), it will be many years before we again get back to the employment levels we had when this disaster began to unfold in 2007.  Without major changes in policy direction, we are definitely facing a lost decade for the U.S.

There are a total of 13.9 million Americans unemployed and 6.2 million have been unemployed for more than 6 months. Very grim numbers.

Overall this was a weak report and reminds us that unemployment and underemployment are critical problems in the U.S.

Percent Job Losses During Recessions

Percent Job Losses During RecessionsClick on graph for larger image in graph gallery.

This graph shows the job losses from the start of the employment recession, in percentage terms – this time aligned at the start of the recession. …

In terms of lost payroll jobs, the 2007 recession is by far the worst since WWII.

* for a more detailed explanation of how to read unemployment rate and employment numbers, see these four posts on the Employment Muddle Part I, Part II, Part III, Part IV.