Opinion

Felix Salmon

An unpleasant employment surprise

Felix Salmon
Apr 6, 2012 13:19 UTC

So that was unpleasant: I guess we’ve all just become so used to healthy jobs report that a weak one like this comes as a nasty shock. And it is a bad report: for all that the margin of error is high, and the unemployment rate (which, remember, is basically the one number which matters politically) fell, the Establishment Survey was riddled through with weakness, both in terms of February’s numbers and in terms of revisions to December and January. Even weekly earnings fell.

So there’s bad news here, which is that judging by this one report, some of the steam might have gone out of the recovery. And there’s a little bit of good news too, which is that it’s just one report, not a trend, and that it has a very wide margin of error; that the economy’s still creating jobs, even if it’s not creating them as fast as we had hoped; and that it wasn’t all that long ago that a +120,000 headline figure would have been taken as something decidedly encouraging. So the expectations baseline has moved significantly upwards, and in many ways it’s the expectations baseline, rather than the numbers themselves, which drives investment.

The markets always care a lot about the non-farm payroll figures, but this report will ultimately have almost no effect on either politics or policy. Politics because the Household Survey showed unemployment falling, and policy because it’s actually pretty much what the Federal Reserve expected. As far as the real-world ramifications of this are concerned, they’re small and mainly related to the fact that long-dated Treasury bonds now yield about 0.1% less than they did yesterday. Which is important if you’re a fixed-income trader, and isn’t if you’re not.

So if you’re taking today off, there’s not a whole lot to worry about here. Go off and enjoy your long weekend. But be sure to go back to work next week!

COMMENT

Bush and Obama did well to prevent financial system collapse but otherwise both follow the failed policies of the nanny state: we shall create jobs by destroying the value of savings and investment, by making the future of currencies, international prices, and public regulations as uncertain as possible, by demonizing the productive, by taxing the successful, by showering money on worthless projects on failing and irrelevant public and quasi public institutions and, incidentally, funneling a little cash towards those who will doubtless be glad to use it to meet their existing obligations. What a way to generate growth.

We may get some anyway, perhaps enough to re-elect Bush-Obama.

Posted by johnwerneken | Report as abusive

The employment recovery is real

Felix Salmon
Mar 9, 2012 13:44 UTC

I can’t remember the last time there was this much excitement and anticipation surrounding a payrolls number — and it’s another solid report. There were 227,000 new jobs created in March, and the already-excellent numbers from the previous two months being revised upwards: the figure for last month is now officially 284,000, a truly excellent number.

The really good news here is that this isn’t even really good news, at least from a market perspective. For a while there, the recent spate of upbeat jobs reports only served to raise worries that the other shoe would soon drop and we’d run into big downward revisions or monthly mean-reversion. Increasingly, however, this is looking like a real trend: the recovery in the American jobs market is going as well as anybody could reasonably expect. It’s still not enough to get the unemployment rate down to an acceptable level in the near term, of course: there’s still a jobs crisis in this country. But we’re moving in the right direction.

At this point, if we have a weak month between now and the election, it’s going to be the bad figure which looks like an aberration: only a sequence of two or three consecutive weak payrolls reports will really convince economists and the market that the recovery is going off the rails. It’s taken far too long to get here, but we’re finally moving in exactly the right direction, at an eminently healthy clip. Or, to put it another way: you can start breathing easier again, come the first Friday of the month. All those good job numbers were real, after all. And maybe next month the pundits won’t be on quite as many tenterhooks as they were this time around.

COMMENT

I think employment nowadays are more and more server. It’s a serious problem that goverment should pay much more attention to and take some measures to solve the problem. I am happy to hear of the news.http://www.karenmillendressfactory. com

Posted by feitian | Report as abusive

Fantastic news on jobs

Felix Salmon
Feb 3, 2012 13:56 UTC

What mean reversion? This is two fantastic jobs reports back-to-back, with the second even better than the first.

You thought the December jobs report was great? I certainly did — but it’s been revised, now, and it’s even better than was first reported. And the January report is positively glowing.

Unemployment was just 8.3% in January, marking three successive months where it fell by 0.2 percentage points. This time last year, there were 13.9 million unemployed; that figure has now dropped by 1.2 million people, or 8.3%. That’s really impressive for an economy which is hardly booming. And it’s a real decline, too: the employment-to-population ratio is just as high as it was a year ago, even as the total population has risen by 3.6 million people.

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One glance at these charts is enough to show that there’s still a very long way to go. Unemployment is far above where it should be; payrolls need to stay strong for a long time to make up for all the jobs lost during the recession; much more of the population needs to be working; and, most importantly, we need to do something about the stubbornly large ranks of the long-term unemployed.

But none of these things can be addressed in a single month: creating jobs takes time. And what we’ve been seeing over the past couple of months is an economy moving smartly in exactly the right direction.

And lookie here! If you check out Table A-5, and look at the unemployment rate for male Gulf War-era II veterans (that is, veterans of the wars in Iraq and Afghanistan), you’ll see that it’s fallen from 15.5% to 7.7% in one year. If that’s not great news, I don’t know what is.

So while there’s a lot of work to be done, let’s allow ourselves a bit of celebration today. For all the problems in the world — and the US economy could still be derailed if something nasty happens in Europe — things are moving very much in the right direction for the time being. Long may it last.

COMMENT

PS: I forgot to add, for those who are focusing on the word ‘fantastic, that besides possibly meaning superb or excellent (as most Americans might use it) it also means bizarre, fanciful, strange and unreal…

Posted by youniquelikeme | Report as abusive

Why jobs require cities

Felix Salmon
Feb 2, 2012 12:15 UTC

Many thanks to Mark Bergen for finding me this data; I asked him for it because I thought that maybe we could learn something from the way in which China has managed to keep employment growing steadily through some extremely turbulent economic times.

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What you’re looking at here is total Chinese employment from the All China database. Primary industry is commodities, basically, including agriculture; secondary industry is manufacturing; tertiary industry is services.

It comes as little surprise to see that agricultural employment has been falling steadily for 20 years. But it is surprising to see that if you take out the services sector, total Chinese employment has been going nowhere, and basically falling, for the same amount of time.

Caroline Baum, using a different data source, says that China lost 15 million manufacturing jobs between 1995 and 2002; according to these figures, employment in “secondary industry” was flat in those years, going from 156.6 million to 156.8 million before starting to rise again and reaching 218.4 million in 2010. (It’s worth pausing here to appreciate the sheer scale of this chart: each horizontal line is another 100 million workers.)

Meanwhile, the services industry — tertiary industry — has been on fire: it now employs 263 million people, more than are employed in secondary industry, and has doubled since 1992. All this, remember, in a country with more or less flat population growth, thanks to the one-child policy.

Of course it’s hard to find work in the services industry if you’re a rural peasant: tertiary industry is a fundamentally urban thing, which brings me to my second chart.

rural.jpg

It comes as no surprise to see that urban employment is growing incredibly fast — 13.7 million urban jobs were created in China in 2010 alone. What does come as a surprise is to see that urban jobs are still in the minority in China — which means that there’s a lot of room for growth going forwards.

In the U.S., we had a huge construction boom in the aughts, which was concentrated on building bigger suburban and exurban residential houses. That’s good for homebuilders and makers of granite countertops, but it doesn’t really boost the economy more broadly. The Chinese construction boom, by contrast, is building cities and roads and crucial infrastructure, which allows the service economy to keep on growing at a torrid place.

Realistically, there is very little chance that global manufacturing employment is going to increase in future at a rate which will provide jobs for a growing global population. If we’re going to find jobs in the U.S. and the rest of the world, they’re going to have to be found in exactly the area where China is finding them — tertiary industry, or services.

How do you create service-industry jobs? By investing in cities and inter-city infrastructure like smart grids and high-speed rail. Services flourish where people are close together and can interact easily with the maximum number of people. If we want to create jobs in America, we should look to services, rather than the manufacturing sector. And while it’s hard to create those jobs directly, you can definitely try to do it indirectly, by building the platforms on which those jobs are built. They’re called cities. And America is, sadly, very bad at keeping its cities modern and flourishing. 1950s-era suburbia won’t cut it any more. But who in government is going to embrace our urban future?

COMMENT

TFF – I agree with your overall vision of city design, with 1 tweak. Light rail makes sense sometimes, but I think that buses, in combination with bus/HOV lanes, are an important part of the mix that sometimes make more sense. Light rail is more effective if high enough ridership is there, but run more risk of being white elephant projects if built in areas that don’t justify it. Buses are easier to redeploy if future growth follows unanticipated patterns.

I’m cynical about the bias of local politicians – more ribbon cutting photos from light rail than bus system expansions. It’s not a phenomenon unique to light rail – see convention centers and sports stadiums.

Posted by realist50 | Report as abusive

Unmitigated good news on jobs

Felix Salmon
Jan 6, 2012 14:09 UTC

File this one under “unmitigated good news”: America’s employment situation turns out to have been rosier, at the end of 2011, than anyone had dared hope. There were 200,000 more people in work last month than there were in November, and the unemployment rate — by far the single most politically-important macroeconomic statistic — fell to 8.5%, the lowest rate in three years. All data series are noisy, of course, and we’ll surely see volatility in this one over the course of 2012. But it really does seem that there’s a bit of fire in the American belly right now, and that things are going to continue to get better over the course of this year unless and until some new crisis comes along.

The cheer is spread all over this report. The broadest measure of underemployment, U-6, fell sharply to 15.2%, again a new three-year low, and down two full percentage points in two years. The unemployment figures more generally are now beginning to look as though they’re in a downward trend, rather than every good month being offset with a subsequent disappointment. I’m not worried about an economy falling below stall speed any more — there’s a world of difference between this report and the gruesome one we were initially presented with four months ago. Back then, it seemed like nothing could get Americans back to work: now, with political gridlock as far as the eye can see through 2012, it seems that America has got used to nothing and is has worked out how to grow anyway.

Of course, the long-term problems remain long-term problems, including the number of people unemployed for more than six months or a year, and the overall percentage of the population which actually has a job. None of those numbers moved significantly, and none are likely to any time soon. They’re not things which get changed by a monthlong bout of hiring: they’re deeply engrained in the economic structure of the country, now, and are likely to prove stubbornly resistant to change.

But for the majority of us who are working now or who have had a job in recent months, things are looking relatively rosy. Average weekly earnings rose to $799.46, continuing a steady upward rise. And there’s even hope that the painful public-sector layoffs might be coming to an end: while we now have 280,000 fewer government employees than we did a year ago, that number was pretty much unchanged in December. (Or maybe it’s just that even the government has a little heart, and doesn’t like laying people off right before the holidays.)

Is this a fantastic report? No: as Betsey Stevenson says, an economy on fire could and would add 400,000 jobs a month, rather than 200,000. But no one’s kidding themselves that this economy is on fire. The main thing is that it’s growing, that things are moving in the right direction, and that we’re well above stall speed. If we stall, remember, there’s no safety net: the chances of any kind of fiscal stimulus in 2012 are exactly zero. So we’re on our own, here. And, happily, we seem to be doing OK.

COMMENT

Would be much more interested in comparing December 2011 to past Decembers….there is always a lot of temporary hiring around the holidays.

Posted by mfw13 | Report as abusive

The global youth unemployment crisis

Felix Salmon
Dec 22, 2011 17:16 UTC

When Occupy Wall Street launched, there were hopes and fears that it would recapitulate the Arab Spring. Those hopes and fears sprang largely from a simple fact: that both OWS and the Arab Spring are characterized in large part by angry, unemployed young people.

As we come to the end of 2011, it’s worth taking note of the fact that stunningly high youth-unemployment numbers are increasingly a global phenomenon — and that this is a new thing, which postdates the financial crisis, and which doesn’t seem to be improving anywhere.

Here are the numbers for a few key Eurozone countries: you can see not only that Spain and Greece have almost unthinkably high youth unemployment approaching 50%, but also that Ireland, in particular, has seen its youth unemployment rate go through the roof since the crisis, from below 10% to over 30%.

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And don’t think that the US is any better, it isn’t. The US measures youth unemployment once a year, in July, and that series looks like this:

fredgraph.png

The thing to note here is not just the absolute level — youth unemployment is now 18.1%, and for blacks it’s 31% — but also the sharp rise. Countries differ in how they measure unemployment, but however it’s measured, it’s going up alarmingly, and the level in the US is in exactly the same ballpark as the levels we saw in the Middle East which caused the Arab Spring. We’re lower than Egypt and Tunisia, but we’re higher than Morocco and Syria:

imf_youth_unemployment.jpg

The Economist had a great article on youth unemployment in September, saying that its negative repercussions “will be felt for decades, both by those affected and by society at large”. In peripheral European countries, youth unemployment causes a massive brain drain, and in all countries there’s a clear link between youth unemployment and the crime rate. In turn, if a higher crime rate leads to a higher incarceration rate, then a significant chunk of a whole generation essentially loses the opportunity to have a successful career, since having prison on your resume tends to be very harmful indeed for job prospects.

And as far as total future national income and wellbeing is concerned, we’re causing huge amounts of damage here:

Youth unemployment leaves a “wage scar” that can persist into middle age. The longer the period of unemployment, the bigger the effect. Take two men with the same education, literacy and numeracy scores, places of residence, parents’ education and IQ. If one of them spends a year unemployed before the age of 23, ten years later he can expect to earn 23% less than the other. For women the gap is 16%. The penalty persists, though it shrinks; at 42 it is 12% for women and 15% for men…

Unemployment of all sorts is linked with a level of unhappiness that cannot simply be explained by low income. It is also linked to lower life expectancy, higher chances of a heart attack in later life, and suicide.

As for the particular case of America, one big effect of the lack of jobs for young people is a significant rise in student-loan debt. The Economist drily notes that “as they build up debts, not all these students will be improving their job prospects”.

The global financial crisis had many causes, and there’s a lot of blame to go around. But the one group which is almost entirely blameless is the group being hit the hardest, over the long term, by the crisis. And I worry very much about how the global economy will fare in decades to come as this cohort of workers, angry and deeply scarred by the post-crash economy, is tasked with driving economic growth.

COMMENT

You talk Global but don’t mention africa, asia or latin america. Very well done.

Posted by Latamer | Report as abusive

Chart of the day, employment edition

Felix Salmon
Dec 2, 2011 15:08 UTC

gateway.jpg

Today’s employment report counts as a win for the White House. Markets care about payrolls; politicians care about unemployment. And so does the country as a whole: the severity with which the BLS website crashes on the first Friday of the month is a direct function of the change in the headline unemployment rate, which, wonderfully, fell to just 8.6% last month.

But while numbers matter in election campaigns, it’s people who vote. And they vote based on their own personal experiences, rather than on macroeconomic statistics. And the fact is that if you’re a person in America, the likelihood that you have a job was unchanged this month: the employment-to-population ratio ticked up just one tenth of one percentage point.

When employed people become unemployed, that’s bad news, and immediately visible in the unemployment rate. When unemployed people leave the labor force entirely, that’s equally bad news, but it’s a tougher measure for the public to connect with, since at that point they’re no longer counted in the unemployment rate. Everybody knows what “unemployment” is; the population which cares about the “employment-to-population ratio”, by contrast, is wholly comprised of wonks.

The plunge in the employment-to-population ratio over the course of the Great Recession is going to be its biggest and most lasting legacy. We’re now back to the levels last seen in the days before most women worked, but we live in a very different world now. In the late 1970s, a woman without a job was much less likely to consider herself unemployed than in the early 2010s. And when she casts her vote in November, the degree to which she’s happy or unhappy with the current administration is going to be much more connected to her actual employment status than it is to whether she’s officially showing up in the unemployment rolls.

Over the next few months, we’ll get a better sense of the signal-to-noise ratio in the 8.6% number. I’m hopeful that we’ve seen the last 9 handle in the headline unemployment data series, and if I’m right, then the optics of the unemployment rate are, at the margin, good for Ds and bad for Rs. But the unemployment rate is not a particularly good gauge of how well the economy is functioning, or how many people have jobs. And I’m very pessimistic that the employment-to-population ratio is going to get back above 60% even over the medium term. It’s certainly not going to get there before the election.

It’s no coincidence that after the employment-to-population ratio plunged, we saw the rise of first the Tea Party and then Occupy Wall Street. Social unrest will not go away so long as more than 40% of the US population is jobless. Some part of that 41.5% is too young to work; some part is too old; some part is in jail; and some minuscule part is simply too rich to care. But at heart, it’s a massive dead weight dragging down the hopes and prospects of hundreds of millions of Americans. And they’re not going to take it quietly.

COMMENT

saralonde, as best I can tell they are counting civilian non-institutional population age 16+.

FifthDecade, if you read their “technical notes” they explain that there are two separate reports — in the household survey, each individual is counted once. In the establishment survey, they will be double-counted.

Posted by TFF | Report as abusive

Hope in the jobs numbers

Felix Salmon
Nov 4, 2011 13:13 UTC

There’s some encouraging news buried in this month’s employment report; you just can’t see it by looking at the headline numbers. Black unemployment is plunging, down to 15.1% in October from 16.7% in August. The number of long-term unemployed fell by 366,000 to 5.9 million, which is a decline of 2.2 percentage points. The broad U-6 unemployment rate fell by 0.3 percentage points, to 16.2%. And note those upward revisions to previous months, too: August’s zero is now +104,000, September was revised up to +158,000, and the twelve-month average is +125,000. Not good enough, but pointing in the right direction.

No one’s opening any champagne this morning: the levels here are still atrocious. But at least there’s reason for hope that the economy is still above stall speed; I, for one, am much more sanguine about the prospects for a double-dip recession than I was a couple of months ago. If the jobs situation isn’t getting worse, that means America’s still growing, and that the recession’s still over. And it’s a lot easier to accelerate a recovery than it is to turn around a decline.

Easier — but not easy. Not when the central bank and the executive both look powerless. The base-case scenario is still that things are going to be very bad through 2012. And of course if Europe implodes, they’ll be worse. Still, the economy has managed to gain 342,000 jobs in the past three months. And that’s not nothing. Even if you adjust for population growth.

COMMENT

@BertC, the unemployment rate supposedly measures, “The percentage of the total labor force that is unemployed but actively seeking employment and willing to work.” While the definition isn’t explicitly tied to unemployment benefits, there may nonetheless be a connection in that people whose benefits have expired gain nothing by declaring themselves to be formally unemployed. (And after 99 weeks of actively seeking employment, they might reasonably be discouraged.) When interpreting the unemployment rate, be careful to understand what it does and doesn’t measure.

“Hmmm……342,000 vs. 4.8 million.”
But this is apples and oranges. The 342,000 is a *net* addition of jobs. If 4.8 million jobs were destroyed, then 5.1 million jobs were created.

That isn’t enough to absorb the growth in the workforce, however. If we weren’t seeing so many “discouraged workers” as their 99 weeks of benefits expire, then the unemployment rate would be slowly rising.

Posted by TFF | Report as abusive

Unemployment’s here to stay

Felix Salmon
Oct 7, 2011 13:04 UTC

There’s no particularly good news in these numbers. For every glimmer of good news, like the upward revisions to previous reports totaling 100,000 new jobs or so, there’s an offsetting piece of bad news, like the broad U6 unemployment rate jumping up to 16.5% from 16.2%.

And the number of people unemployed for more than six months is now 6.24 million — up by 208,000. The long-term unemployed — the least employable of the unemployed, and the most intractable problem in terms of getting America back to work — are now 44.6% of the total, up from 42.9% last month, and 41.8% a year ago.

It’s always a bit dangerous to try to meld the two surveys which make up the payrolls report, but I’m detecting a trend here: insofar as employers are hiring new people, they’re hiring new entrants into the labor force, rather than people making up the ranks of the unemployed. Maybe it’s recent graduates, maybe it’s former stay-at-home moms who were never claiming unemployment but who are now getting jobs. Maybe it’s immigrants. But the big picture is that employment growth is more or less keeping track with population growth, leaving no new jobs for the 14 million unemployed Americans.

It’s worth asking, in this context, whether Obama’s jobs bill would actually change that dynamic at all. It might help at the margin — if you’re working hard enough to burn through the fat reserves of highly-qualified graduates and moms and immigrants, you might eventually start cutting into the hard muscle mass of the long-term unemployed. But my gut feeling is that the effect of the jobs bill will be much bigger on employment figures than on unemployment figures.

Is there anything the government can do to bring unemployment down? Or is it now too late? If we are indeed in the early months of a double-dip recession, than I think it is too late: unemployment is more likely to go up than it is down from here. And even if the economy’s still managing to eke out modest growth, I don’t see much hope that the unemployment rate will come down to a remotely acceptable level any time soon. Realistically, America’s unemployed are here to stay. And we’re only just beginning to understand how that’s going to affect the political economy of the nation.

COMMENT

it seems to me that the “paradigm”of being an american is taking a much needed shift from self-gratification to creating change for the next generations. unsustainable world supply and demand has begun to be visible even to the most uninformed. that and taking away the intrinsic american “reality”that you can start with nothing and retire comfortably has been sold to the highest 5% of the land,the rest of us are no longer the working class but the new slave class.No political party can change what has been bought and sold,the 99% will have to bring back HOPE for a future.

Posted by latefordinner | Report as abusive
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