September 05, 2003

Expected Bad Labor Market News

From Labor Statistics Commissioner Kathleen Utgoff:

...Nonfarm employment declined by 93,000 over the month [of August compared to July].

Posted by DeLong at September 5, 2003 06:43 AM | TrackBack

Comments

Expected? By Brad DeLong maybe. From Bloomberg:

U.S. Unexpectedly Loses 93,000 Jobs; Jobless Rate Declines to 6.1 Percent

"...Today's report is ``a big disappointment,'' said Chris Low, chief economist at FTN Financial in a radio interview with Bloomberg News. ``You've got enough momentum in the economy to add jobs but not enough confidence among businesses to hire.''

Just 10 of the 64 economists surveyed by Bloomberg News expected a decrease in August employment. Credit Agricole economist Vincent Lahuec's forecast for a decline of 30,000 was the lowest in the survey. Payrolls were forecast to rise by 20,000 after a previously reported decrease of 44,000 in July, according to the median estimate."

http://quote.bloomberg.com/apps/news?pid=10000006&sid=a974kfn7.pR8&refer=home

Posted by: Pooh on September 5, 2003 07:24 AM

Groshen and Potter are looking pretty good right now. They made it into the Washington Post today, by the way, which is not bad for a Fed study.

Interesting contrasts between this year and last, in a sad sort of way. There was a pretty steady slowing in job loss through 2002 (till the holiday shopping season, anyhow). The average monthly job loss was 39k. This year, the average loss is 54k. Last year, the factory sector accounted for all the loss and more, shedding 97k jobs per month. The rest of the economy made up the difference. This year, the average monthly loss of factory jobs is ... 54k, just like the economy as a whole. The rest of the economy, as one can see, has stopped adding jobs. So rather than the employment situation getting better, job losses are greater and the damage is spreading. (Thus the sudden shift in productivity leadership out of the factory sector.) More evidence of this comes from the employment diffusion index - a measure of the number of industries putting on employees. The diffusion index fell to 38.5% fom 41.5% in July. Oh, and the only reason the jobless rate fell is because households reported a 147k rise in employment, a 240k difference from the usually more reliable establishments survey. I would ignore it. Brad, care to guess at the Q3 productivity reading? Let"s see, GDP growing at over 5%, aggregate hours falling around 1.7% - another 6.8% productivity reading? Finally, the pace of hourly wage gain slowed to 0.1% from a pretty steady 0.3% in recent months. Icky.

Posted by: K Harris on September 5, 2003 07:53 AM

In our current housing bubble, prices are relatively high. Doesn't this make productivity apparently go up? The workers take just as long to build the house whether ir sells for $200,000 or $300,000. This would seem to increase productivity in the housing sector on paper without really increasing productivity. The cost of the mortgage does not increase appreciably because of the drop in interest rates.

In other sectors where there is deflation, workers are making 500 gig hard drives instead of 50 gig hard drives. Productivity will stay the same if the 500 gig drive now sells for what the 50 gig cost previously or go up if a slightly higher price can be had.

Refineries are producing the same amount of gasoline but getting more per gallon.

Is a lot of what is attributed to productivity increase actually inflation in certain sectors?

It is not realistic that these productivity increases are sustainable over the long term.

Posted by: bakho on September 5, 2003 08:52 AM

The problem is not structural. The problem is that we are failing to take advantage of superb productivity growth with proper fiscal stimulus that would spur demand and raise GDP growth enough to lead to job creation. Demand is the weak point, not structural change in the market for workers.

There should have been NO surprise, with productivity growth at 7.2% last quarter and GDP growth at 3.1%, we should have expected a poor poor jobs report. Wall Street analysts treat the labor market as though the only jobs that cou7nt are their own jobs. A decent fiscal policy that was not all tax cut for the rich would spur demand. Fat chance!

Posted by: anne on September 5, 2003 08:55 AM

President Bush
9/04/03

"Finally, people are more likely to find work if businesses and their workers can be certain that the lower tax rates of the last years will stay in place. Today you don't have that confidence they'll stay in place, and there's a good reason -- because under the laws that were passed, tax relief is set to expire."

If only we could count on those tax cuts for the rich, jobs would rain from the sky. I see.

Posted by: anne on September 5, 2003 08:58 AM

K Harris wrote: "Groshen and Potter are looking pretty good right now. They made it into the Washington Post today"
Here's the link:

Casualties Of the Recovery
Jobs Cut Since 2001 Are Gone for Good, Study Says
http://www.washingtonpost.com/wp-dyn/articles/A27825-2003Sep4.html

Posted by: Mats on September 5, 2003 09:35 AM

Productivity really really really is growing rapidly. The figures are not distorted, the growth acceleration began in the middle 90s.

The need at this point is not to argue with the fine productivity or terrible employment figures, but to push for enough demand growth to generate a rise in job creation. We are 22 months in the recovery from recession, but we are still shedding jobs. We lost 140,000 jobs in July and August.

Lesson: fiscal policy that tells us a lowering of taxes on stock dividends is good for middle class retired households and will generate jobs for those younger is hooey. We have fiscal policy designed to make the richest richer, and jobs are not trickling or rainging down from that policy.

Posted by: anne on September 5, 2003 09:36 AM

K Harris

"I really dislike the idea of the output gap being applied to a rapidly restructuring economy like that of the United States."

Yes, but though you dislike the idea there really is an output gap for the United States. That is why I am so disheartened by absurd fiscal policy that has so little to do with boosting demand and so much to do with rewarding rich friends of this Administration.

Posted by: lise on September 5, 2003 10:00 AM

Bakho,

Price changes should wash out of the "real" statistics. Changes in housing quality and size, for instance, will show up as changes in output, but price changes should not. Similarly, an increase in hard drive size should show up as a quality increase, which is measured as a rise in real output. The price, if handled properly, will be irrelevant to real GDP estimates.

Anne,

How do we (you) know that job declines aren't structural? I have my quibbles (already posted around here somewhere) with some of the points Groshen and Potter made, but I don't know how one can be confident about the structural vs cyclical issue midstream. What is the source of your confidence? Additionally, what Wall Street economist is sounding callous about job losses? There is certainly a tendency toward positive rather than normative statements, but I am not aware of any Wall Street economist acting as if jobs, or workers, don't count. Politicians? Yeah, but that's not new. Remember John Sununu saying he didn't care what kind of chips US workers make, potato or micro, as long as they are kept busy?

Posted by: K Harris on September 5, 2003 10:28 AM

K Harris

Your comments are superb! Let me again examine the entire issue rather than be too sure. I am reading Stephen Roach on productivity just now. What bothers me is how predictable the numbers have been. Darn!

Anne

Posted by: anne on September 5, 2003 11:01 AM
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