June 02, 2003

Notes: Employment Forecasts

Briefing.com expects this Friday's numbers to show a further 50,000 loss in payroll employment, and a stable unemployment rate.

Reports from Briefing.com: The labor market remains in transition and showed very clear signs of severe weakening in Feb/Mar.  A heavy hit to Q4 was followed by volatiliity and a sharp downward turn in early 2003.  The news from manufacturing hit another rough spot as the string of declines has stretched to 33 months and sums to 2.3 mln fewer workers.  Private service sector payrolls have shown declines in 5 of the last 7 months.  Military reservists have added to the confusion given the BLS inability to measure the payroll effect.  Announced layoffs, business cost cutting and the economic recession have pummeling the payroll data as the removal of military reservists add another downward force in 2003.  The monthly movement is volatile due partly to corporate spending restraints and strong labor productivity.  The lagging unemployment rate will continue to follow a path higher even as payrolls return to growth.  Hourly earnings are running at a 3% pace as compensation costs are of lesser concern given weak unit labor costs (compensation offset by productivity gains).  The workweek is a key indicator of labor demand and a leading indicator of payroll growth but has only been holding in a range rather than lengthening...

Posted by DeLong at June 2, 2003 10:53 AM | TrackBack


We have lost 250,000 jobs in the last 3 months. Another 50,000 lost would come to 300,000 in 4 months. More than 2.5 million jobs have been lost since the recession began. This strikes me as severe, but I keep reading and hearing economists and stock market analysts telling of an industrial rebound just about here. Where is the rebound? Where does the demand come from to drive a rebound?

Posted by: lise on June 2, 2003 12:28 PM

A weaker dollar, perhaps? Bloomberg flavors one of its stories today with the anecdote of International Steel exporting to Europe for the first time in "decades", suggesting that is due largely to a price advantage from a weaker dollar. The dollar was weaker against euro precursor currencies within a single decade, so I have my doubts about the specific case, but not about the advantages of dollar weakness, if it persists. The same story, by the way, cites Barry Bosworth at Brookings saying dollar weakness may do enough for the economy to help Bush in the next election far more than the tax cut did (I think Bosworth was neglecting political contributions from high rollers who just go a windfall, but what do I know).

On the point of the employment data, May jobs data may not offer much insite on the economy. At least not for those who make snap decisions in financial markets based on the outcome (not the point here, I know). BLS is making a total of 4 major changes to its jobs data estimating program in a single month. We'll see how that works out.

Posted by: K Harris on June 2, 2003 12:46 PM

The steel case is confusing. The Administration adopted protective tariffs against imported steel because of alleged dumping. Recently, however, the world trade court ruled the tariffs illegal. Are we really suddenly so competitive we are selling steel to Euro countries? What of the Japanese?

Anne pointed out that the dollar is losing value against the Euro [also against the Canadian and Australian dollars] but not against Asian currencies. Can we look to a large trade effect?


The figure above shows that, while the U.S. dollar declined by almost 26% in nominal terms against the euro from its peak in February 2002, it fell only 17% against an index of major world currencies such as the euro, the yen, and the British pound (after adjusting for inflation). More importantly, the dollar actually increased slightly after adjusting for inflation compared to the currencies of other important U.S. trading partners, such as China. The main reason for this increase is that many of these countries fix the value of their currencies against the U.S. dollar, often keeping them artificially low to support exports to the United States....

Posted by: lise on June 2, 2003 01:07 PM

Not to hammer on steel too much, but wouldn't China have the same advantages as the US in export opportunity if the Yuan is tied to the Dollar?

China is by far the largest producer of steel in the world, the US is the 3rd or 4th (depending on how you count the EU). Both export only a small percentage of their steel.

Germany, by contrast, exports a very large percentage of its steel.

www.worldsteel.org (A really cool website!)

Posted by: Saam Barrager on June 2, 2003 02:05 PM

Do any of you know if productivity data is adjusted in the same manner as GDP growth?

DeLong's Employment forecast post reminded me of last week's WSJ front page article regarding employment and one of the key points is that when productivity is growing faster than the economy as a whole (which is happening for the 1st time in a significant manner coming out of a recession post WW2) then its basically impossible for unemployment to go down. (unless of course hourly pay dropped more, but that's not happening)

So I was just wondering if both are adjusted for inflation in the same way, otherwise they aren't so directly comparable.

Posted by: alex on June 2, 2003 03:54 PM

So much attention is paid to unemployment numbers. These are certainly important stats, but average household wage/earnings should be observed as well.

That stat. gives an important economic perspective. Many of those who are now employed have, no doubt, lost higher paying jobs and have, out of desperation, taken lower paying jobs. They are employed. However, their purchasing power and their debt to earnings ration has fallen (perhaps even being negative).

It will be interesting to take a look at these figures over the next year or so.

Posted by: arslan on June 3, 2003 12:20 AM


Productivity data are derived from GDP data, so the units involved are the same. By the way, the wage issue you mention figures into the dynamic, but not into the accounting. If productivity is rising faster than GDP, there will be no increase in hours worked, regardless of wage performance. It's an accounting issue.


I suspect the trade deficit in the short term will be overwhelmed by the oil account. Ex-oil, it seems right to consider volume of trade in estimating the dollar"s impact on the deficit, but trade weighting takes care of a lot of that. The only thing a static trade weighting won't do is look ahead at growth trends. If our trade with countries engaging in dollar pegging is rising faster than the whole, the today's trade weighting will probably overestimate the effect of dollar decline in the future - the weighting will change. The other thing to note is a pretty high correlaton between Canadian and Mexican currency movements vs the rest of the world with that of the US$ vs the rest of the world. The limnk between Canadian and Mexican economic performance and trade with the US is very strong, os the feedback between the C$ and peso and trade is probably strong, too.

Posted by: K Harris on June 3, 2003 05:36 AM
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