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from MacroScope:

A worker is a terrible thing to waste

How bad is the U.S. employment situation? The Labor Department’s tally for March, which showed only 120,000 new jobs were created, raised doubts about the sustainability of a recent pick up in job growth. But to get a broader sense of what things are really like it helps to put things in a longer-term perspective.

Even with the 3.6 million new jobs created during the recovery, some 5 million more are needed just to make up for all of the jobs that were lost during the Great Recession. At March’s pace, it would take nearly four more years to get there – and that’s not accounting for population growth.

If job growth remains at tepid clip of around 150,000 a month, it would take five years for the jobless rate, which registered 8.2 percent in March, to fall to 6 percent, according to Atlanta Federal Reserve Bank economist Julie Hotchkiss.

Dean Baker at the Center for Economic and Policy Research says that, while the March figure very likely reflects some payback for the stronger activity seen during the earlier months of an unusually warm winter, the long term outlook remains bleak.

The weaker job growth in the March data is primarily an artifact of the weather. However the 212,000 average job gain over the last three months is not especially strong. It implies a return to full employment some time in 2019.

from MacroScope:

Mid-Atlantic headwinds for U.S. employment

Ed Krudy contributed to this post

The Philadelphia Fed’s Mid-Atlantic manufacturing survey covers a pretty small chunk of an already shrunken U.S. factory sector. Still, analysts at Harris Bank have found that the survey’s employment component has been a pretty solid leading indicator of the monthly payrolls figures.

If the trend persists, then February’s report could be a bit of a letdown following a surprisingly robust gain of 243,000 jobs last month. The Philly Fed’s employment index dropped sharply in February to its lowest level since August.

According to Jack Ablin, Harris Bank’s chief investment officer:

For the last several months, the Business Outlook survey has been a keen predictor of the monthly change in the Bureau of Labor Statistics’ non-farm payroll. The survey came close to nailing last month’s 243,000 gain, even though economists expected a 140,000 pickup on average. Should the survey’s predictive power continue, investors could be disappointed with February’s BLS report. The Philly Fed survey implies roughly 50,000 net new non-farm payroll jobs added in February. Positive yes, but it would be a big momentum killer. Stay tuned. The payroll report is not due out until March 9th.

from MacroScope:

America’s extended-stay job hunt

A new survey from job placement firm Challenger, Gray & Christmas offers good news and bad news for U.S. job seekers. While some Americans have become more optimistic about their employment prospects, others have grown even more frustrated at their inability to find work.

The results were based on a random sample of 600 callers to Challenger’s yearly job-search advice hotline. Here are some key findings:

- Over the two-day event, the firm’s professional counselors helped more than 1,000 job seekers, 77 percent of whom were unemployed. That is down only slightly from the previous two years, when 81 percent of callers were out of work.

- Callers were more optimistic than a year ago: nearly 30 percent estimated they would find a new job within three months, up from 18 percent in 2010.

- Even as the percentage of optimistic callers surged from a year ago, so did the percent of those predicting it would take more than a year to find employment. Ten percent of the job seekers felt the job search would last more than 12 months, compared to four percent who anticipated a prolonged job search last year.

- The percentage of callers expecting the job search to last 7 to 9 months increased rom six percent a year ago to 14 percent this year. The percentage expecting a 10- to 12-month job search surged to 12 percent, after peaking at 2.4 percent in 2010.

-Among the unemployed callers, 37 percent have been out of work for one to six months. Another 14 percent have been jobless for 7 to 12 months. As an indication of how tight the job market remains, the remaining 50 percent of callers had been jobless for a year or more, with 60 percent of these longtime job seekers out of work for two years or longer.

from MacroScope:

Exaggerated claims

7,231,514. That was the real number of Americans receiving jobless benefits on last count – not the 381,000 new weekly applications that made the headlines.

It’s always heartening to get good news on the job market. Still, it’s easy for fully employed Wall Street analysts to get carried away with optimism after relatively minor improvements in the data.

Jobless claims figures are a case in point. True, new weekly applications for unemployment benefits fell to a 3-1/2-year low earlier this month, even if the latest report showed a larger-than-expected rise to 381,000. The trend, coupled with a moderately positive run in payroll employment growth, is encouraging. Yet it is important to remember that fewer layoffs do not necessarily imply more jobs are being created, as Eric Green at TD Securities notes:

Lower firings do not mean more hirings, but with job growth calculated on a net basis, it does mean better reported job growth. We have already seen this on the household survey which has averaged over 300k the past four months. Next week we expect private payrolls to rise 190k pushing job growth back to the strength seen earlier this year.

Green’s forecast is on the rosy side, and it excludes a government employment sector that is likely to remain a drag on the labor market in coming months. Economists polled by Reuters on median expect the economy to have added 148,000 new jobs in December, with private payrolls climbing by 160,000. The jobless rate is seen rising back again to 8.7 percent after a rather steep decline in recent months – one traceable in part to a rather ominous rise in discouraged workers. That pattern is part of a chronic problem of long-term joblessness that some economists worry could plague the country for years to come.

It is a problem Federal Reserve Chairman Ben Bernanke has flagged repeatedly, most recently in an August speech at the central bank’s annual Jackson Hole symposium:

Our economy is suffering today from an extraordinarily high level of long-term unemployment, with nearly half of the unemployed having been out of work for more than six months. Under these unusual circumstances, policies that promote a stronger recovery in the near term may serve longer-term objectives as well. In the short term, putting people back to work reduces the hardships inflicted by difficult economic times and helps ensure that our economy is producing at its full potential rather than leaving productive resources fallow. In the longer term, minimizing the duration of unemployment supports a healthy economy by avoiding some of the erosion of skills and loss of attachment to the labor force that is often associated with long-term unemployment.

from James Pethokoukis:

Battle of the job recoveries: Reagan vs. Obama

Chart via the Minneapolis Fed:

from Rolfe Winkler:

Economic calcification, Japanese edition

Japan's labor market is desperately troubled. For years, the number of temporary workers has been on the rise as Japanese employers find it harder to afford full-timers. Like the rest of the Japanese economy, the labor market needs the flexibility to deflate. But the government won't allow that to happen. The latest example is a proposal to ban manufacturers from hiring temporary workers (Otsuma/Hagiwara, Bloomberg):

The government is preparing legislation “that will stop manufacturing firms from employing temps and encourage them to hire full-timers,” [Health and Labor Minister Akira] Nagatsuma said yesterday on a business program....

Japanese companies have cut jobs to remain profitable in an economy struggling with deflation and as a strengthening currency erodes export earnings. Unemployment [recently at 5.1%] rose to a postwar high 5.7 percent in July...

Effectively, the Japanese government is trying to put a price floor underneath the labor market. But banning "temporary" work won't help full-time employment; it will just mean less employment overall.

Japan's plan is not unlike measures being employed to prop up the U.S. housing market. The problem with price floors is that in preventing markets from clearing, they prevent transactions from happening. Fewer transactions means less economic activity. It means fewer jobs.

The numbers in the chart are for illustration purposes only, but the numbers from the Japanese labor market demonstrate suggest precisely this kind of economic calcification:

The proportion of [Japanese] college students with job offers tumbled 7.4 percentage points from a year earlier to 62.4 percent, an Education Ministry report showed last month, the steepest drop since the survey started in 1996.

from James Pethokoukis:

Is the US economy suffering from hysteresis?

That is, has the economy snapped in such a way that it can't bounce back to its previous form? This might be true in the labor market. Mark Thoma takes a shot at the issue:

The 400,000 number used above assumes that employment will return to its pre-recession levels, but if  structural changes in the economy result in a lower normal level of employment, something many economists believe is a real possibility, then labor markets are even further off than indicated above. Personally, I believe that normal employment post-recession (i.e., after resources have moved out of housing, auto production, and finance and found new homes in other industries) won’t be far away from where it was pre-recession, but during the transition period, the rate of employment will be lower than pre-recession levels.

Me: Just how long will that "transition period" be? I think he is too flippant about the challenges of moving resources out of autos, housing and finance.  Wow, the hopes for clear energy must be awfully high!