Chart of the day, employment edition

By Felix Salmon
November 2, 2012

jobs.tiff

There’s lots of good news in today’s employment report: payrolls rose substantially in October, and the already-great numbers for August and September were revised upwards to boot. Even the uptick in the unemployment rate, from 7.8% to 7.9%, was actually positive in many ways. Americans are back looking for work, which bodes well for the next few months.

And then there’s the technocratic good news, too: the BLS isn’t just releasing numbers any more, it’s also releasing charts! Along with the standard payrolls press release this morning, there was also a PDF file which included the chart above.

This chart I think tells the big-picture story very well. Firstly, jobs aren’t political, they’re economic. They rise when the economy is doing well, and fall during recessions: the name or party of the president can only affect things at the margin.

Secondly, we’re still in very bad shape, employment-wise: there’s a long way to go before we get back to where we were before the crisis. And that’s in absolute terms: remember that the US population has been growing all along.

And thirdly, in case you needed any reminder, this recovery is long and painful. Look at the rate of employment growth from 2002 to 2006, and extrapolate it upwards to get an idea of what the capacity of the US economy is: where we could be, if we hadn’t been hit by the crisis. Then, look at the gradient of the current recovery: it’s not noticeably steeper than the trend-growth gradient. Which means, to a first approximation, that we’re just as far below capacity as we were when the recession ended.

This isn’t entirely bad news. For one thing, the recession has ended, thanks in no small part to the 2009 stimulus and to the unprecedented monetary operations being carried out by the Fed. And compared to, say, any country in Europe, the strength of the US recovery is decidedly impressive. But if you aspire to full employment — and that is one of the Fed’s two mandates, after all — then in one sense we’re just as far away from that goal as we were two years ago.

Markets and economists will and should react positively to today’s report, which is significantly better than most of us expected. But it doesn’t change the fact that the biggest problem facing the US economy is unemployment and underemployment. We need to get the unemployed and underemployed working again, and the longer it takes to do that, the harder the job becomes, given the well-documented ways in which long-term unemployment erodes skills and morale.

How much can politicians really do, on that front? I don’t know. But a front-loaded fiscal employment push would be great right about now, while massive spending cuts are precisely the opposite of what we need. And in a country where millions daily face the misery of being unable to find work, it would really be unconscionable to vote for anybody who thinks it would be a good idea to cut food stamps by $134 billion.

Every little vertical notch on that BLS chart represents 2 million employed Americans. We all want to see the lines go up and to the right, so that millions more Americans get jobs. But we also need to keep in mind just how depressed those lines are. The number of Americans without work is absolutely enormous right now. And so while we’re trying to create new jobs, it’s even more important that we ensure the well-being of those who don’t have employment yet.

Comments
6 comments so far

“And thirdly, in case you needed any reminder, this recovery is long and painful. Look at the rate of employment growth from 2002 to 2006, and extrapolate it upwards to get an idea of what the capacity of the US economy is: where we could be, if we hadn’t been hit by the crisis.”

This is VERY disingenuous. The reason the growth rate was decent from 2002-2006 is that we were unsustainably issuing debt to grow the economy. You cannot look at that growth and say “if only it didn’t collapse”, the collapse was baked into what was happening from 2002-2006.

This is what happens when you are always chasing growth and numbers instead of actually thinking about what is realistic.

Posted by QCIC | Report as abusive

Do you have a take on ADP’s changing of the guards from MacroAdvisers to Moodys Analytics? I thought it odd that, with the change came backward revisions that put ADP MORE out of step with BLS; opposite of its intentions, in making the switch.

Posted by GRRR | Report as abusive

FS wrote: “Look at the rate of employment growth from 2002 to 2006, and extrapolate it upwards to get an idea of what the capacity of the US economy is: where we could be, if we hadn’t been hit by the crisis.:

Ridiculous. Without that which caused the crisis, 2002-2006 would not have been what they were.

The entire story of this great recession cycle is that 2002-2006 was an out-of-bounds anomaly, with unsustainable demand pulled forward via increased current debt (to make up for stagnating real wages, but that’s beside the point). The housing bubble added $1-$1.5 trillion in annual demand, and the pop of that bubble removed $1 trillion per year of that artificial demand.

What would you have replace that demand in 2012? Felix, you should read Dean Baker on this point.

What was the sustainable GDP run-rate in 2004? Certainly lower than the 2004 GDP print.

tl;dr: You simply cannot extrapolate a mid-bubble trendline.

Posted by SteveHamlin | Report as abusive

Very interesting!

Posted by manhattanmiami | Report as abusive

QCIC: The rate of employment growth in the Bush years was middling to poor — a top-notch Bush month was still worse than an average Clinton month — and that was _even with_ the debt boom. If we actually wanted to join countries like Australia (slate.com/blogs/moneybox/2012/02/24/aus tralia_kissed_recessions_goodbye.html) in seeking to run a full-employment economy (even if that means slightly higher inflation), we could very easily be at the trend Felix describes, or possibly even ahead of it.

Posted by Auros | Report as abusive

Auros, that wasn’t what he was saying though.

Posted by QCIC | Report as abusive
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