What you’re looking at here is the plight of the long term unemployed in the wake of the Great Recession. If you look at the economy before the recession (the blue line), it works pretty much as you think it would: as the number of job openings goes up, the long term unemployment rate goes down. But then the crisis happened, and now we’re in a Bizarro world where the long term unemployment rate goes up even as the number of job openings increases.
Today’s jobs report is an unambiguously positive one: America had 236,000 more jobs in February than it had in January, and the unemployment rate is down to 7.7%, the lowest it’s been since 2008, before Barack Obama was even sworn in. (Although, it’s still nowhere near the 6.5% at which the Fed will start thinking about tightening monetary policy.) Things are getting better, US fiscal policy notwithstanding, and it’s great to see construction in particular, especially non-residential construction, finally making a substantial positive contribution to the numbers.
This month’s payrolls report is one only a statistician could love. The official press release contains three whole pages on the subject of revisions and rebenchmarking, on top of the box on the front page: the very clear message is that we’re starting a new year, and that it’s a very bad idea to compare the January numbers to the December numbers.
This is the US unemployment rate, from Calculated Risk. Today’s jobs report was a very positive one: not only did job creation exceed all expectations, but unemployment fell too, to 7.7%. For the first time, the unemployment rate is lower than it was when Barack Obama took office, in January 2009.
Charles Fishman has an upbeat cover story in the new Atlantic, talking about how manufacturing is making its way back from China to America. As the world demands an ever-more nimble manufacturing sector, able to produce smaller quantities of goods more quickly, it makes sense to make those goods here rather than be forced to spend a month shipping them over from China, especially with shipping costs rising. On top of that, Chinese manufacturing costs are rising too: inputs from labor to natural gas are getting much more expensive. (Natural gas costs four times as much in China as in the U.S., while James Fallows reports that a typical Foxconn salary is now $400 a month, three times what it was six years ago.)
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.
Last month, I wrote a bit about what you might call the bidirectional causality between the unemployment rate and incumbent political fortunes. On the one hand, unemployment affects happiness, and willingness to vote for the current president. But on the other hand, the rate itself is a political weapon, to be used in, for instance, Republican claims of how many successive months America has had unemployment above 8%.
Tim Kane, at the Hudson Institute, has a new paper out with a simple title: “The Collapse of Startups in Job Creation”. His paper is basically a slightly politicized version of the charts put out by the Bureau of Labor Statistics last month, under the headline “Entrepreneurship and the U.S. Economy”. The first two charts are particularly striking. The first one looks at the number of startups in America — companies less than one year old.