(to be paid for in the future)
7 January 2011 - by Fabius Maximus
Summary: The US economy continues its slow “recovery.” It’s not an organic recovery, as it results from three years of massive fiscal and monetary stimulus — powerful medicine, with serious side-effects (to be felt in the future). Lost in our delusions, we confuse this with actual health. Richard Koo, who predicted this, remains unknown (at the end are links to his work).
Contents
(1) The Recovery!
- The Recovery!
- The Current Numbers: December 2010
- For more information
(a) Wall Street and the media obsess over tiny changes in the monthly employment reports, which are often statistically insignificant. Like the December gains. These surveys are not that accurate, and changes of a few thousand mean nothing among 300 million Americans. Instead we should watch the levels and trends. What improvement in jobs has this recovery brought us since it started in June 2009? Here are the results for the past 12 months (December 2009 – December 2010, seasonally adjusted, in thousands), from today’s Employment Report.
A few trillion dollars in government stimulus doesn’t buy as much recovery as it used to.
- Civilian non-institutional population 16 or older: +0.8%
- Civilian labor force: +0.3%
- Employed: +0.9%
- Unemployed: down 4.8% (mostly though people dropping out of the labor force)
- Not in the labor force (neither working nor looking): +1.7%
(b) What about unemployment?
The Census provides six measures of unemployment, depending on definitions of the labor force and unemployed. The four most widely used (U-3 to U-6. None are easily comparable to those of the great depression (the government began measuring unemployment in the 1940′s; earlier numbers are rough estimates).
(c) Check your work!
HOUSEHOLD DATA — Table A-15. Alternative measures of labor underutilization [in Percent] Measure of Unemployment Seasonally adjusted Dec
2009Apr 2010 Jul 2010 Aug 2010 Oct
2010Nov
2010Dec
2010U-3: Total unemployed, as a percent of the civilian labor force. The official unemployment rate. 09.9 09.9 09.5 09.6 09.7 09.8 09.4 U-4: U-3 plus discouraged workers, as a percent of the civilian labor force 10.5 10.6 10.2 10.3 10.4 10.5 10.2 U-5: U-4 plus other persons marginally attached to the labor force, as a percent of the civilian labor force 11.4 11.3 11.0 11.0 11.5 11.2 10.9 U-6: U-5 plus total employed part time for economic reasons,
as a percent of the civilian labor force17.2 17.1 16.5 16.7 17.0 17.0 16.7 NOTE:
Persons marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months.
Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work.
Persons employed part time for economic reasons are those who want and are available for full-time work but have had to settle for a part-time schedule.
As my teachers said, always check one’s conclusions with different methods. First, look at the Social Security employment taxes in November: down 0.9% year-over-year. This is a reliable measure of American wage income (i.e., jobs and pay).
Second, look at new claims for unemployment: the 4 week average is 410 thousand new claims per week, down from the average this year of roughly 463 thousand/week. That’s accurate real-time data, and indications of a slow recovery.
The birth/death model, their guessing at small business activity, was small in December: only 24 jobs added to the non-seasonally adjusted loss of 357 thousand jobs (the loss is typical for December).
(d) Conclusion
Do we have a recovery? Yes, but very slow in terms of jobs and wages. A wide range of economic data still suggests that the recovery stalled in Spring 2010 as the stimulus faded and resumed in late Fall — on the announcement of new stimulus programs.
(2) The Current Numbers: December 2010
Some aspects of employment are leading indicators, some are lagging indicators. Broadly speaking, employment is one of the major metric’s of the nation’s health, both economic and social.
These are the numbers from the Census’ Household Population survey (tables A and A-1) for December, released 7 January 2011. IMO the household survey gives a more reliable real-time picture than the establishment survey (CES). After the benchmark revisions, 6-plus months later, the CES provides the definitive historical record. Unfortunately, the initial results bear only a slight resemblance to the final results. They’re largely modeled from a few early responders. And the early responses do not include small businesses, the center of the current downturn.
Here’s the story for November. All rounded to the nearest million. It’s almost identical to the numbers for the past few months.
The median duration of unemployment is 22.4 weeks (up from 20.4 in December 2009; the mean is 34 weeks (up from 29 weeks; table A-12). The mean is large due to the six million workers who have been unemployed for 27 weeks or more. The level of long-term unemployment during this downturn is a post-Depression high .
- 239 million – the civilian non-institutional population, adults 16+ years old (17 million are 16-19 years old).
- 154 million of these are in the labor force (6 million are ages 16-19).
- 139 million have jobs (4 million are ages 16-19)
- 27 million of those jobs are part-time jobs; 9 million of those with part-time jobs would prefer full-time jobs.
- 14 million of the labor force are unemployed: 1 million quit, 9 million were fired, 5 million entered or re-entered the labor force.
- 1 million have become discouraged and stopped looking.
Much has been made of the declining ratio of workers to population. For example, the fraction of men over 16 who have jobs is a post-Depression low. Get used to it. This ratio can only fall further as the boomers age.
(3) For more information
Predictions of Richard Koo:
Other posts about employment:
- About the US economy. Where we are. Where we’re going.
- News from the front lines of the economic wars
- America passes a milestone!, 20 January 2010 — More jobs in government than manufacturing
- Yes, it is a “mancession”, with men losing more jobs than women. Just like all recessions., 5 October 2009
- Update on the “mancession”, 2 December 2009
- A look at the engines of American job creation, 12 January 2010
- An ominous trend: number of Americans working for the government vs. those making things, 5 March 2010 — Update to the Oct 2009 post.
- The coming big increase in structural unemployment, 7 August 2010
- The coming Robotic Nation, 28 August 2010
- The coming of the robots, reshaping our society in ways difficult to foresee, 22 September 2010
- Economists grapple with the first stage of the robot revolution, 23 September 2010
- Arithmetic of decline: America’s lost decade for jobs, 27 November 2010
