January 12, 2004
Employment Declines of a Magnitude Not Seen Since 1944-45

Louis Uchitelle writes about the employment sitch: Growth in Jobs Came to a Halt During December: Dropping out has been a characteristic of the recovery since June, reflecting the struggles of the unemployed amid companies' reluctance to add workers. As a result, the percentage of the working-age population participating in the labor force -- that is, employed or seeking employment -- fell to 66 percent in December from 66.5 percent in June, a withdrawal of roughly 1.1 million people. Reflecting this exodus, the employment-to-population ratio -- a measure of the percentage of the working-age population actually holding jobs -- has been dropping, as well. It has fallen nearly eight-tenths of a percentage point, to 62.2 percent, since the recession ended in November 2001, and 2.1 percentage points since the start of the recession in March of that year. Federal Reserve policy makers consider this ratio an important indicator of how many jobs can be added without upward pressure on wages or inflation. Mr. Bernanke has cited the weakness in the ratio as an important reason for keeping interest rates low. The decline in the ratio has been particular sharp among young people, African-Americans and Hispanics, and economists say it may...

Posted by DeLong at 12:03 PM

Edmund Andrews Says Bush Seeks Jobs

Edmund Andrews writes in the New York Times: News Analysis: Bush Seeks Ways to Create Jobs, and Fast: The stage had been set to celebrate the revival of jobs. With a phalanx of women entrepreneurs at his side and a billboard covered with the word "Jobs!" behind him, President Bush proclaimed his confidence about the economy here on Friday. But he made only passing reference to the latest news about employment. The reason was clear: Friday's report on unemployment in December was much weaker than either the administration or most independent economists had predicted. Job creation was virtually nil, and the unemployment rate declined only because the labor force shrank by 309,000 workers. Many of those were people who had simply become too discouraged to keep looking for work. The problem confronting Mr. Bush is that there is little he can do between now and the elections except wait and hope that the employment picture improves. And the administration is not likely to get much more help from the Federal Reserve, which has already reduced short-term interest rates to just 1 percent. "In terms of big levers to pull, they don't have anything," said Pierre Ellis, a senior economist at...

Posted by DeLong at 11:58 AM

January 10, 2004
Employment and the Labor Force

Between unemployment's April 1979 low point and its July 1980 peak, the American employment-to-population ratio fell by one percentage point--from 59.8% to 58.8%--while the unemployment rate climbed by 2.1 percentage points. Between unemployment's July 1981 low point and its December 1982 peak, the employment-to-population ratio fell by 1.9 percentage points--from 59.1% to 57.2%--while the unemployment rate climbed by 3.6%. Between unemployment's June 1990 low point and its June 1992 peak, the employment-to-population ratio fell by 1.4%--from 62.9% to 61.5%--while the unemployment rate climbed by 2.6%. In general, during a serious labor-market downturn the unemployment rate jumps up sharply, and jumps up sharply by almost twice as much as the fall in the employment-to-population ratio. But this past recession has been very different. Since December of 2000 the employment-to-population ratio has shrunk by 2.3%--from 64.5% to 62.2%. From previous experience we would expect such a fall in the employment-to-population ratio to be accompanied by a big jump in the unemployment: 3.5%, 4.1%, or 4.6%. But it hasn't--the unemployment rate today is only 1.8% above its peak. We have had less than half the jump in the unemployment rate I would have expected given the fall in the employment-to-population ratio. We have...

Posted by DeLong at 04:39 PM

January 09, 2004
A Lousy Jobs Report

A lousy December jobs report: Payrolls Barely Rise, Worse Than Expected: American employers barely took on any new workers in December, a disappointing government report on Friday showed, indicating the economic recovery has yet to translate into sustained jobs growth.... The number of workers on U.S. payrolls outside the farm sector in December increased by just 1,000, after a downwardly revised rise of 43,000 in November. It was the fifth consecutive monthly rise but was far worse than economist expectations of a rise of 130,000.... "This is a very disappointing jobs report," said John Person, head financial analyst, Infinity Brokerage Services, Chicago.... However, the report showed a 38,000 fall in hiring in the retail sector, which the department said was due to general merchandise stores taking on fewer workers than usual. The troubled manufacturing sector failed to break its job-cutting trend, shedding 26,000 jobs in December, the 41st month of declines. Some economists, pointing to recent data suggesting a turnaround in manufacturing, had predicted factories would finally take on new workers in December... The gap between the size of the recession as measured by what is happening to the unemployment rate and the size of the recession as measured by...

Posted by DeLong at 06:49 AM

January 06, 2004
Screams and Leaps...

Daniel Drezner takes understandable exception to my characterization of him as screaming and leaping fangs-bared for Paul Krugman's jugular... He states that when he wrote that "[Paul] Krugman is either wrong or has a different definition of 'unusual' than the rest of the English-speaking world. Distortions like this one could explain parodies like this one..." he did not intend to: Provide an unfavorable description of Paul Krugman Impugn Paul Krugman's motives Convey the impression that Paul Krugman lied Or ascribe any form of malign intent to Paul Krugman But intended only to state that he believed Krugman to be wrong. Unfortunately, for Dan, of the four claims made by Krugman in his paragraph at issue: The measured unemployment rate of 5.9 percent isn't that high by historical standards, but other labor market indicators paint a less favorable picture. Because an unusually large number of people have given up looking for work, dropped out of the labor force, and thus escaped being counted as "unemployed," the rise in unemployment is smaller than we would have expected given the fall in employment. Many of those who say they have jobs seem to be only marginally employed--there is an unusually large gap between...

Posted by DeLong at 09:15 PM

January 03, 2004
Still Dumbfounded

I'm still dumbfounded at how sharp the fall in the employment-to-population ratio has been......

Posted by DeLong at 10:21 AM

The Median Duration of Unemployment

Half of all the unemployed have been unemployed for more than X weeks: The number of unemployed at any point in time is the product of (a) how many people become unemployed in a typical week times (b) how long they stay unemployed. This statistic is a measure of how lousy the labor market feels to those of us who have lost their jobs (or who are just entering the labor force and starting to search)....

Posted by DeLong at 09:48 AM

Notes: Elise Gould on the Household and Payroll Surveys

The EPI's Elise Gould writes about the differences between the household and the payroll surveys of employment: Measuring employment since the recovery: ...Some have speculated that the household survey provides a better indication of the trend in employment at and around turning points in the business cycle. These critics question whether the payroll survey accurately and fully picks up new businesses, known as "firm births." This problem may be especially exacerbated when measuring employment in a recovery. In its estimates of employment, the BLS addresses the problem of firm births and deaths using past history and various estimation techniques to provide an adjustment factor to the current series. In addition, updates to the payroll survey are conducted annually to adjust for any discrepancies.... However, the BLS announced in October that its analysis of detailed tax records through March 2003 would result in a downward revision of total nonfarm payroll employment by approximately 145,000 for the March 2003 reference month (BLS 2003b). A second critique of the payroll survey is that it leaves out self-employment. However, because the household survey employment reports do not distinguish between the self-employed who are gainfully employed and those who are searching for work--and because the...

Posted by DeLong at 08:49 AM

December 31, 2003
At Long Last, Good Unemployment News

At long last, some unambiguously good unemployment news: WSJ.com - Initial Jobless Claims Drop To Lowest Level Since 2001: ...The number of workers filing new claims for unemployment benefits in the week that ended Saturday dropped by 15,000 to 339,000, the Labor Department reported Wednesday. It was the lowest level since the week ended Jan. 20, 2001, Mr. Bush's inauguration day. The four-week average, which smooths out weekly fluctuations, decreased by 6,500 to 355,750. Economists had expected claims to increase by 2,000, according to a survey by Dow Jones and CNBC. The decline, particularly in the four-week average, was encouraging to most economists......

Posted by DeLong at 08:48 AM

December 24, 2003
Jobless Recovery

Economists 4 Dean tracks the jobless recovery: Economists for Dean: Iraq and the Jobless Recovery...

Posted by DeLong at 12:45 PM

Unemployment Claims

An unemployment claims number roughly consistent with a stable employment-to-population ratio: Jobless Claims Held Steady Last Week (washingtonpost.com): ...First-time applications for state unemployment insurance, an early reading on the resilience of the labor market, fell a mere 1,000 to 353,000 in the week ended Dec. 20 from a revised 354,000 in the prior week, the Labor Department said. The figure was in line with Wall Street forecasts for 353,000 new claims......

Posted by DeLong at 06:26 AM

December 18, 2003
A Good Unemployment Insurance Claims Report

Good news about the labor market this week: Quicken.com - News Center: U.S. Jobless Claims Fall by 22,000; More Than Expected: The number of U.S. workers filing first-time applications for unemployment benefits tumbled last week in a drop that was sharper than expected. Initial jobless claims fell by 22,000 to 353,000 in the week ending Dec. 13, the Labor Department said Thursday. The level was the lowest since the week ending Nov. 1.... The size of the decline was a surprise on Wall Street. The median estimate of 11 economists surveyed by Dow Jones and CNBC called for claims to ease by just 8,000... It's a very rough and noisy measure, but a UI claims number of 400,000 is roughly consistent over time with a stable level for employment, and a UI claims number of 360,000 is roughly consistent with a stable unemployment rate. Lower than that, and there is likely to be downward pressure on the unemployment rate. In other news, Paul Kedrosky admonishes me for paying too much attention to this inaccurate and noisy weekly signal. He has a good point....

Posted by DeLong at 07:23 AM

December 15, 2003
Behind the Numbers

The Washington Post's David Finkel tries to look behind the employment numbers at the real state of the economy: washingtonpost.com: At Recovery's Dawn: But just as "sparkle" can be a euphemism for housekeeping, "recovering" can gloss over the reality of what for millions of Americans having a job has come to mean. More people are working part time than ever: Last month, for the first time, the number exceeded 25 million. More are classified as "involuntary" part-time, meaning they would rather be working full time: 4.9 million in November, an increase of 600,000 from a year ago and 1.6 million since the recession began in March 2001.... In addition, more people are cobbling together a working life of two or three part-time jobs to keep up with bills. More jobs come without benefits, the chance for mobility and the security of long-term stability. Wages for most workers are not keeping up with inflation. The number of manufacturing jobs has declined 40 months in a row. The average time spent looking for work is now more than 20 weeks. And many people remain not working at all. Even with the addition of those 328,000 jobs, the total number of jobs is...

Posted by DeLong at 12:03 PM

December 12, 2003
Hiring Patterns

Morgan Stanley's Stephen Roach takes a closer look at hiring patterns: Morgan Stanley: ...There seems to be a real disconnect between the actual numbers on the hiring front and the impressions that have been formed in financial markets. Total nonfarm payrolls have expanded by only 328,000 workers over the August to November 2003 period -- an average of 82,000 per month. That's far short of the pace of job creation that normally occurs at this stage in a business cycle recovery -- somewhere in the range of 250,000 to 300,000 per month. Yet many have been quick to interpret the recent modest pickup in hiring as a sign that Corporate America is finally breaking the shackles of risk aversion and emerging from the funk of recent years. The mix of recent hiring trends tells a very different picture. It turns out that fully 84% of the total increase in nonfarm payrolls over the August to November period is traceable to hiring in four segments of the labor market -- the temporary staffing industry, health, education, and government -- where combined jobs have increased by 68,000 per month. In other words, the bulk of the so-called hiring turnaround since August has...

Posted by DeLong at 02:56 PM

December 11, 2003
Unemployment Insurance Claims Rise

*Sigh*. Worse news than I expected: Jobless claims up to 378,000 in latest week - Dec. 11, 2003: The Labor Department said 378,000 people filed new claims for unemployment benefits in the week ended Dec. 6, compared with a revised reading of 365,000 in the prior week. Economists, on average, expected 359,000 new claims, according to Briefing.com.... The four-week moving average of new claims, which irons out the volatility of the weekly data, rose to 364,750 last week from a revised 362,500 in the prior week......

Posted by DeLong at 06:56 AM

December 08, 2003
Note: The Strange Case of the Unemployment Rate That Did Little in the Early 2000s

Look at what has happened to the U.S. employment-to-population ratio--estimated from the BLS household survey--over the past half century: The employment-to-population ratio falls in each recessionary period.* Back in the old days, the rule of thumb was that the rise in the unemployment rate (in percentage points) was about five-thirds as large as the fall in the employment-to-population ratio (in percentage points). Thus the 1973-1945 recession saw the unemployment rate rise by 4.4% while the employment-to-population ratio fell by 2.4%. The 1979-1983 recessionary period saw the unemployment rate rise by 5.2% while the employment-to-population ratio fell by 3.1%. But in the most recent 2000-2003 recessionary period, the employment-to-population ratio has fallen by 2.7% while the unemployment rate has only risen by 2.1%. The old pattern would have led us to expect such a fall in the employment-to-population ratio to have been accompanied by a rise in the unemployment rate of not 2.1% but 4.5%. More than half of the additional people who would have reported themselves as unemployed in a previous big recessionary period... aren't. They're reporting themselves as out of the labor force instead. Why? What's happened to change the relationship between changes in employment and changes in the...

Posted by DeLong at 02:18 PM

December 07, 2003
The Jobless Recovery Continues

The Economist's take on the latest labor market news: Economist.com | America's labour market: ...On Friday December 5th, the Bureau of Labour Statistics announced that another 57,000 Americans were added to the (non-farm) payrolls in November.... [T]he labour market is still far from strong.... With output roaring away, analysts had expected hiring to move up a gear, adding 150,000 to 200,000 people to the payrolls. Instead, the labour market remains in neutral. There may be a few more jobs than a month ago, but there are also more people to find jobs for. About 140,000 people enter the labour force on average every month.... Output often recovers before employment, because firms hesitate to add to workforces they have just finished cutting. But in most recoveries, this hesitation lasts only about three months. This time round... it lasted a year and a half.... [P]ayroll employment is still 700,000 lower than it was when the recession ended in November 2001.... It may be little consolation to Mr Bush junior, but strong growth coupled with tepid hiring is doing marvellous things to the productivity numbers.... The problem with creative destruction is that the destruction seems to arrive long before the creation. A puzzle...

Posted by DeLong at 08:21 AM

December 05, 2003
Disappointing Labor Market News

*Sigh.* Unexpected disappointing labor market news. Employment growth in October below what was expected, and what is needed to keep payrolls growing as rapidly as the labor force: WSJ Online: ...Nonfarm business payrolls grew by a net 57,000 last month, raising the total of job gains since July to 328,000. Economists had expected a heftier payroll gain of 150,000, and for the unemployment rate to hold at 6%, according to a survey by Dow Jones Newswires and CNBC. Over the last three years, employers have cut more than three million private-sector jobs. In order to replace those jobs and sustain the recovery, most economists are looking for monthly payroll gains in the neighborhood of 200,000 to 300,000. Ed McKelvey, an economist with Goldman Sachs & Co. in New York, puts that number at more like 400,000. That far exceeds the average of the late-1990s economic boom. In a speech last month, Federal Reserve Vice Chairman Roger Ferguson said, "Even if the growth is sufficient to make meaningful progress in reducing the slack in our nation's labor and capital resources, that pool of underutilized resources is large and it will take some time to be worked off completely." Most forecasters, as...

Posted by DeLong at 06:08 AM

November 13, 2003
Neutral Labor Market News

This morning's unemployment claims number: Jobless claims rise to 366,000 in latest week - Nov. 13, 2003: The Labor Department said 366,000 people filed new claims for unemployment benefits in the week ended Nov. 8, compared with a revised reading of 353,000 in the prior week. Economists, on average, expected 364,000 new claims, according to Briefing.com... In the 1990s, such an unemployment claims number was consistent with a stable unemployment rate: an unemployment rate that was neither rising nor falling....

Posted by DeLong at 08:08 AM

November 07, 2003
Todays "Good" Employment News

The estimated number for payroll employment in America in October grew by 126 thousand--that's a rapid enough pace of hiring to, if it is sustained, stop the unemployment rate from rising and the output gap from growing. As far as production and employment relative to the economy's potential is concerned, it's a sign that we're treading water--that we're no longer sinking lower. Good news! Well, neutral news. But when the employment news has been so bad for so long, the fact that the news isn't absolutely bad this month is good, sort of. The fact that we are all happy at two months during which payroll employment grows as fast as the labor force--the fact that we regard this as good rather than bad news--shows us how low the employment-news bar has become, because of how bad the employment news has been for such a long time. After all, today's employment level is 2.3 million lower than at the start of 2001, 2.6 million lower than the president's Council of Economic Advisers projected back in February would be employed today if the congress passed the administration's "jobs and growth" program, and even 75 thousand lower than the Treasury Secretary projected...

Posted by DeLong at 08:21 AM

November 06, 2003
Finally Some Sign That the Job Market Is Not Getting Worse!

For the first time in a long time, a sign that the job market is not getting worse: Jobless claims plunge to lowest since Jan. 2001 - Nov. 6, 2003: ...The Labor Department said 348,000 people filed new claims for unemployment benefits in the week ended Nov. 1, compared with a revised reading of 391,000 in the prior week. It was the lowest number of weekly jobless claims since 339,000 in the week of Jan. 20, 2001. Economists, on average, expected 380,000 new claims, according to Briefing.com. A spokesman for the Labor Department told Reuters there was no apparent explanation for the enormous drop in claims, but suggested at least some of that drop should be discounted. "Every week we encourage (people to look at) the four-week average. This is certainly one of those weeks," the spokesman said. The four-week moving average of new claims, which irons out the volatility of the weekly data, fell to 380,000 in the week ended Nov. 1 from a revised 390,000 in the prior week... This week's unemployment claims number--if sustained--is roughly consistent with a stable unemployment rate....

Posted by DeLong at 07:15 AM

October 31, 2003
Max Sawicky Announces "Miserable Failure Week"

Max Sawicky announces that next week on his weblog will be "Miserable Failure Week"--focusing on the lousy state of the labor market, the remarkable and unique nature of the current job-loss recovery, and the responsibility that George W. Bush bears not for everything that goes wrong with the economy but rather with his failure to "make a serious, credible effort" to devise good macroeconomic policies that will generate high employment and rapid wage and salary growth: Weblog Entry - 10/31/2003: "IT'S THE JOBS, STUPID": ...On Level Zero of public economic discourse, the new GDP growth number is being subjected to the usual ignorant banter. Among Bush toadies, we hear huzzahs because the ship of economic growth has come in. Now they are finally ready to say it's Bush's economy, not Clinton's. When the delicate matter of jobs is raised, the right responds, Ha! you are only abandoning this metric (GDP growth; they don't actually use that term) because it doesn't work for you. Well, we remember that before the GDP number came out, the right was venting about the wonderful leading indicators that showed prosperity was just around the corner. Or about low interest rates and other "fundamentals" that either...

Posted by DeLong at 11:15 AM

October 30, 2003
Yet More Unemployment Claims Weirdness

This morning's new unemployment claims number is 386,000: Forbes.com: US jobless claims fall in latest week: The total number of Americans filing initial jobless claims fell by 5,000 last week from a revised 391,000 the previous week, the government said on Thursday, in a sign of a convalescing U.S. job market. First-time claims for state unemployment insurance benefits fell to 386,000 in the week ended Oct. 25... This week's number, of course, is not a "decrease": it is the same as the number announced last week, which has been revised upwards....

Posted by DeLong at 06:13 AM

October 24, 2003
The Age of Diminished Expectations

Paul Krugman writes about how the Bush administration is trying to lower the bar it needs in order to call its economic policies a success. A very nice column indeed: Too Low a Bar: ...In September, employment rose for the first time since January, but the increase was only 57,000 jobs. And to have kept up with the population growth since Mr. Bush took office, the economy would have to add not two million, but seven million jobs by next November. Mr. Bush's employment policies would truly have been a success if he had left the job market no worse than he found it. In fact, even his own Treasury secretary thinks he'll fall five million or so jobs short of that mark. I know, I know, the usual suspects will roll out the usual explanations. It is, of course, Bill Clinton's fault. (Just for the record, the average rate of job creation during the whole of the Clinton administration was about 225,000 jobs a month. Mr. Clinton presided over the creation of 11 million jobs during each of his two terms.) Or maybe Osama bin Laden did it. But surely there must be a statute of limitations on these...

Posted by DeLong at 12:06 PM

October 23, 2003
Unemployment Insurance Claims

Those of you who remember that last week's New Unemployment Insurance Claims number was 384,000 may be surprised to learn that this week's number--386,000--is described as a "decrease." Wampum, however, is here to explain all: Wampum: New claims: Rinse, spin, repeat...: In case anyone missed it, here's last week's ruminations on newly filed unemployment claims: Claims are up...no, wait, they're down...or up? From the DOL press release this morning: In the week ending Oct. 11, the advance figure for seasonally adjusted initial claims was 384,000, a decrease of 4,000 from the previous week's revised figure of 388,000. The 4-week moving average was 390,750, a decrease of 4,250 from the previous week's revised average of 395,000. Of course, what the release doesn't tell us is that the 388K number was "revised" upwards by 6,000, from 382K last week. So while we're told that claims have again "dropped" this week, they actually increased by 2,000 from last week's "preliminary" number. Confused yet?For this week, change the revised figure to 390K, once again up 6,000 from last week's rosy preliminary figure of 384K. Change the current, also preliminary, number to 386K. Everything else stays the same......

Posted by DeLong at 11:18 AM

October 16, 2003
A Genuinely Strange Way of Reporting the Numbers

A genuinely strange way of reporting the numbers: Smartmoney.com: Breaking News: Weekly Jobless Claims Dip: The number of U.S. workers filing first-time applications for unemployment benefits dropped to an eight-month low last week, providing further evidence that the labor market is stabilizing. Initial jobless claims fell by 4,000 to 384,000 in the week that ended Oct. 11, marking the lowest level since the week of Feb. 8.... The Labor Department revised its preliminary estimate of initial claims for the week of Oct. 4, raising it by 6,000 to 388,000. The department routinely revises its initial estimates... So last week they reported 382,000. This week they say that last week's number was really 388,000 and report 384,000. They managed to confuse me--and this is what I do for a living. And I still cannot figure out why the press focuses on "below 400,000." If you want an unemployment claims number that corresponds to a stable unemployment rate, the number is probably not 400,000 a week but 360,000 a week....

Posted by DeLong at 07:42 AM

October 13, 2003
We Don't Want Burial Insurance

David Wessel of the Wall Street Journal writes about trying to find a new job in a relatively-bad labor market: WSJ.com - Clues to the Cure For Unemployment Begin to Emerge: ...Even optimistic observers doubt that much can be done to help many workers approaching retirement who lose their jobs and are looking for comparable work. One option is to offer them a kind of "wage insurance." The idea is to supplement their wages if they take a job that pays much less than their old one. Another possibility is to subsidize health insurance that often disappears with a job, and essentially help these workers get by until they reach retirement age. The government took a step in this direction last year with the creation of the Health Coverage Tax Credit, which pays 65% of health-insurance premiums for workers who lose their jobs because of trade or whose pension plans have gone bust. Proponents see it as a big step toward a strengthened safety net for older, displaced workers. The program is making a big difference to Kenneth Kyle, a 59-year-old disabled former employee of the railroad at Bethlehem Steel Corp.'s Sparrows Point plant in Baltimore. For the first few...

Posted by DeLong at 07:57 AM

October 09, 2003
Employment News Not as Bad as Expected

This morning's labor market news is not as bad as expected. However, alas, it still suggests that there is upward pressure on the unemployment rate. Jobless claims drop to 382,000 - Oct. 9, 2003: The Labor Department report said 382,000 people filed for benefits in the week ended Oct. 4 -- the lowest level since the week of Feb. 8 -- compared with a revised reading of 405,000 in the prior week. Economists, on average, expected 394,000 new claims, according to Briefing.com......

Posted by DeLong at 07:32 AM

October 03, 2003
Allan Meltzer Long Ago Stopped Being Careful

Allan Meltzer long ago stopped being careful. He accuses Alan Greenspan of "misread[ing] the employment data... referr[ing] to the 'weakening' labor market. It isn't so.... Don't believe these reports.... All these alleged facts are either wrong or greatly exaggerated, based on the same faulty source." Meltzer goes on to write: WSJ.com - A Jobless Recovery?: There are two sources of labor market statistics, the Establishment Survey and the Household Survey.... The first asks manufacturing and service sector companies how many employees they have. The second asks a sample of people whether they have jobs... old firms die and new ones are born. The Labor Department learns about the deaths quickly, but it takes longer to learn about the births. When the cafeteria workers are asked about their employment, they report that they are working. If they work for a new firm, the Establishment Survey misses them for a time. But their former employer reports that the number employed at the firm declined this month. Both reports are true, but the second is misleading when taken to the aggregate level.... Downsizing large firms in the interest of greater efficiency is a big source of the new, small firms. It's good to...

Posted by DeLong at 07:26 PM

October 02, 2003
Brie and Wine Speculations, No. XVIII

"Suppose you were to try to construct a scenario according to which the U.S. unemployment rate would decline to below 5.5% by the late summer of 2004. How would you do it?" "Well, the first thing I would do would be to assert that the recent spike in productivity growth was a cyclical phenomenon--that the U.S. economy has changed from one in which periods of slow-output growth are periods of slow productivity growth (as many firms keep valued workers on their payroll even though they do not currently have work form them to do) to periods of rapid productivity growth (as firms that are not sure that production will increase rapidly hunker down, cut costs, and work their remaining work forces harder. "I would then say that, as output growth accelerates in the current fall and winter, firms will become more confident that a strong recovery is really here. They will become eager to increase their labor forces to gain the capability to satisfy expanded demand. And they will also become eager to step the pace of work back down to a more normal level--and will in fact have no choice, as a falling unemployment rate would diminish firms' bargaining...

Posted by DeLong at 08:45 PM

Continued Weak Labor Market

Yet more bad labor market news. It is starting to look not just like tomorrow's employment report will be depressing, but that the unemployment report released a month from now will be depressing as well: Jobless claims rise to 399,000 in latest week - Oct. 2, 2003: NEW YORK (CNN/Money) - Jobless claims rose last week, the government said Thursday, bouncing back to near the 400,000 level that many economists believe is a benchmark for labor-market weakness. The Labor Department report said 399,000 people filed for benefits in the week ended Sept. 27, compared with a revised reading of 386,000 in the prior week. Economists, on average, expected 395,000 new claims, according to Briefing.com....

Posted by DeLong at 06:55 AM

September 30, 2003
The Jobless Recovery

Morgan Stanley's Richard Berner worries about the "jobless recovery": Morgan Stanley: ...If the trend rate of productivity growth is higher than the 2% to 2½% rate that we and others have assumed now prevails, then the so-called "output gap" -- representing the balance between aggregate demand and potential supply -- could well be bigger and the resulting disinflationary bias larger than we've thought.  However, I think there are two important offsets.  Recent reductions in capacity are beginning to trim supply, helping to put a bottom under disinflationary pressure (see "The Rebirth of Pricing Power: Still in its Infancy," Global Economic Forum, September 19, 2003).  And for inflation, the change in the gap, not just its level, matters.  That's because both inflation expectations and the output gap influence inflation, in my view.  And if consumers and businesses adjust their inflation expectations gradually, the change in the output gap will affect the rate of inflation.  So if the gap is wide but closing, that dynamic will begin to reverse disinflationary pressures.  Of course, growth must be above the trend to close the gap, and if the trend in productivity is as high as 3%, even sustained 5% growth will only close the...

Posted by DeLong at 01:10 PM

September 25, 2003
Unemployment Insurance Claims

Thomas Stengle says that this week's UI claims number would probably have been 390,000 without the hurricane: Providence Business News: The number of Americans filing for unemployment benefits fell for the second straight week, a government report showed, suggesting employers may be slowing the pace of firings as the economy gains momentum. First-time jobless claims fell to 381,000 in the week that ended Saturday from a revised 400,000 the week before, the Labor Department said in Washington. About half of the decline in new claims may have been because of Hurricane Isabel, said Thomas Stengle, a Labor Department spokesman... And that means that next week's number will be too high by 9,000......

Posted by DeLong at 07:54 PM

September 24, 2003
The Employment News Is a Bit Better Than We Think

The extremely keen-eyed and keen-witted John Kitchen thinks that employment has not fallen as much in the past three years as we economists think that it has: WSJ.com: John Kitchen, an economist with the House Budget Committee... studied the performance of payroll employment during the first 20 months of five previous economic recoveries, and found that in each case, the government had to revise up its initial payroll estimates.... During the 20 months after the 1991 recession ended, for instance, the government... bumped up [employment growth by 330,000].... "It might be that we're not seeing as much of an ongoing decline as is suggested in the official numbers," Mr. Kitchen says.... But... Labor Department officials, are skeptical.... One reason is that the department's Bureau of Labor Statistics has been aware of the establishment survey's flaws for many years and has tried to do something about it. Three years ago, it began phasing in a new system for surveying businesses that is more aggressive.... Ms. Getz notes that because Mr. Kitchen's study was based on events that happened before this redesign, it might not apply anymore.... However, she acknowledges that the redesigned survey is going through a trial by fire, because...

Posted by DeLong at 07:11 AM

September 18, 2003
More Bad Employment News

It is now looking positively unlikely that the September payroll numbers will show employment picking up in September: Jobless claims drop to 399,000 in latest week - Sep. 18, 2003: Jobless claims fell last week, the government said Thursday, by more than analysts expected, dropping just below the benchmark 400,000 that signifies job-market weakness. The Labor Department report said 399,000 people filed for benefits in the week ended Sept. 13, compared with a revised reading of 428,000 in the prior week. Economists, on average, expected 410,000 new claims, according to Briefing.com....

Posted by DeLong at 08:04 AM

September 16, 2003
Yet More Bad Employment News

Manpower's survey of 16,000 U.S. employers reveals weaker demand for hiring workers than last year. Last year seasonally-adjusted hours worked in the American economy were flat between the third and the fourth quarter. That makes it likely that this year's fourth quarter will see seasonally-adjusted hours worked continue to fall (albeit not at as rapid a pace as it has been falling in recent quarters. However, the heading Forbes has given its story on the report is rather strange: Forbes.com: U.S. firms to boost hiring in 4th quarter-study: More U.S. companies plan to hire staff in the fourth quarter than in the previous three months.... But... the number of companies expecting to cut payroll is up as well, and fourth-quarter hiring this year will not keep pace with the prior year.... even sectors that traditionally add workers during the holiday season, such as retail, are showing less inclination to take on payroll than a year ago. "There has been an increase in hiring intentions, but it is not positive enough for us to feel there is any job creation," Manpower Chief Executive Jeffrey Joerres said.... Of the 16,000 U.S. employers... 22 percent said they intend to increase their work force...

Posted by DeLong at 02:17 PM

September 15, 2003
Mickey Kaus Confuses Himself Once Again

For no discernible reason that I can imagine, Mickey Kaus picks today to trash the New York Times's Edmund Andrews: Mickey Kaus: I'm quite willing to believe that "most economists predict that unemployment will remain almost unchanged at nearly 6 percent through the elections in November 2004." But shouldn't the NYT, after making this surprising assertion at the top of its lede business story, produce some actual evidence that most economists think this? Evidence like a survey of economists, or a blue-chip weighting--or at least quotes or views from a plural number of economists who make such a prediction? All the Times's Edmund Andrews gives us is a) his say-so and b) economist Brad DeLong. DeLong's quote: "I don't see where the demand is going to come from to produce a falling unemployment rate. ... Very few people are predicting real G.D.P. growth of more than 4 percent." But even DeLong's argument is immediately undercut by Andrews himself, who writes, "More than a few economists say that the economy might expand at an annual rate of more than 5 percent in the final half of this year."... [T]he Times doesn't offer much, beyond blind faith in Edmund Andrews, to convince non-economists...

Posted by DeLong at 04:13 PM

September 11, 2003
Forecasts of U.S. Growth

Martin Baily of the Institute for International Economics cannot believe that the U.S. economy's real GDP can grow at a rate of 4% per year without generating lots of jobs: News Release: Economic Recovery To Be Strong And Globalized: ...projecting US growth at better than 4 percent through at least mid-2004 with a strong possibility of considerably better results for a quarter or two, and Baily expects the rapid growth to start creating substantial numbers of new US jobs in the fourth quarter of this year... I agree with him: I can't believe it either. I can't believe that the U.S. economy is averaging 4 percent growth this spring and summer--which it is--with rapidly-falling employment numbers. It's definitely something new and strange......

Posted by DeLong at 07:43 PM

More Bad Unemployment News

More bad unemployment news: Jobless claims rise to 422,000 in latest week - Sep. 11, 2003: The Labor Department report said 422,000 people filed for benefits in the week ended Sept. 6, compared with an upwardly revised reading of 419,000 in the prior week. Economists, on average, expected 400,000 new claims, according to a Reuters poll. "These jobless claims figures strongly suggest that the any discussion of a runaway economic recovery have been greatly exaggerated," said Anthony Chan, chief economist at Banc One Investment Advisors. "Instead, what we see here is a recovery that continues to face significant headwinds emanating from the employment front." U.S. stock market futures weakened after the report, pointing to a negative opening on Wall Street. Treasury bond prices recovered from earlier losses. Though the economy's growth has clearly accelerated in the late summer and fall, the long-suffering labor market has shown few signs of recovery. Many economists now believe the economy's problems are structural rather than cyclical, that technology-driven gains in productivity have enabled manufacturers to make more goods with fewer workers. Many manufacturers, and many politicians, say competition for cheap labor from other nations, particularly China, has made it difficult for U.S. businesses to...

Posted by DeLong at 06:44 AM

September 05, 2003
Fear of Bad Employment Reports

This morning's employment report reduces Doug Henwood to a state of gibbering terror: Doug Henwood: This morning's U.S. employment report sucked. The survey of employers showed a loss of 93,000 jobs, when flat to slightly up was a reasonable expectation. We've now had seven consecutive months of job loss, something we've never seen outside a recession. The workweek was short and almost every industrial sector shed jobs. The survey of households showed a shrinkage in the labor force - the entire reason for the decline in unemployment from 6.2% to 6.1%. The share of the adult population working was flat, and remains at a low for this cycle. People are buying stuff, but it's not with their paychecks - it's all tax refunds and mortgage refinancing. If the job market doesn't recover soon, we're in trouble. What Doug fears is that sometime soon households will change their states of mind: they will think that the risk of losing and then being without a job, or being unable to find anything other than a crappy job, is too high; and thus that they need to cut back on their spending significantly in order to build up their buffer stocks of savings...

Posted by DeLong at 09:41 AM

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 06:43 AM

September 04, 2003
Another Not-Good Week for the Labor Market

Another not-good week for the labor market. The production (and productivity) news for August is looking very, very good indeed. The employment news is looking quite bad. NewsFinder: U.S. jobless claims edge above 400,000 By Rex Nutting | WASHINGTON (CBS.MW) - Initial claims for state unemployment benefits edged above the 400,000 level for the first time in a month in the latest week, evidence that the labor market remains weak. The average number of first-time claims over the past four weeks increased to 401,500 in the week ending Aug. 30, up from 397,250 a week earlier, the Labor Department said Thursday. In the most recent week, initial claims rose by 15,000 to 413,000. It's the highest level since mid-July. The average number of workers collecting state checks over the past four weeks rose to 3.64 million in the week ending Aug. 23, the highest in five weeks. The insured unemployment rate remained at 2.9 percent....

Posted by DeLong at 08:39 AM

September 03, 2003
Econ 101b: Fall 2003: The Erosion of Okun's Law

We used to have considerable confidence in Okun's law: that an extra one percentage point rise (or fall) in the unemployment rate over a year would reduce (or boost) that real GDP growth by an extra 2.5 percent over that year because a rising (or falling) unemployment rate would also be accompanied by a falling (rising) share of the population in the labor force and by falling (rapidly rising) productivity. Productivity would fall when the unemployment rate rose for two reasons: first, even when factories are not running at full capacity they still incur substantial setup and maintenance costs; second, even when there isn't enough work for them to do firms would rather hold onto skilled workers than watch them drift away and have to pay to train their replacements the next time the wheel of the business cycle turns. Things have been different, however, in this recession (and to a lesser extent in the preceding early-1990s recession. The standard relationship between output growth and hours worked has gone substantially awry. See that branch poking out of the scatter diagram on the left side? That's the most recent data. (The smaller twig pointing out below and to the left...

Posted by DeLong at 04:22 PM

Erica Groshen and Simon Potter: Structural Change and the Jobless Recovery

UPDATE: Let us now curse and keelhaul the webmasters of the Federal Reserve Bank of San Francisco. They have broken their links. Erica and Simon's article is now here. These aren't my thoughts--I have no informed contribution to make here--but they are very, very interesting ones. Erica Groshen and Simon Potter of the New York Fed are doing serious work on why the last two recessions have been followed by "jobless recoveries." Has Structural Change Contributed to a Jobless Recovery? - Federal Reserve Bank of New York: The sluggishness of payroll growth during the 1991-92 and current recoveries stands in sharp contrast to the vigorous rebound in employment during earlier recoveries (Chart 1). To be sure, these earlier recoveries had rocky moments, with occasional jobless intervals. At the start of any recovery, many employers will delay hires or recalls for a time to be certain that the increase in demand will continue. Nevertheless, although the job market resurgence in the past may often have lagged the output recovery by one quarter, only during the two most recent recoveries has the divergence between job and output growth persisted for a longer period. The divergent paths of output and employment in 1991-92 and...

Posted by DeLong at 07:10 AM

September 02, 2003
Labor Market Forecast

A labor market forecast from briefing.com: WSJ.com -- Reports from Briefing.com: The labor market remains in transition as the last six months of payroll declines are expected to turn into small gains over the coming months.  The dismal news from manufacturing continues with a 36th consecutive month of decline summing to 2.8 mln fewer workers.  Private service sector payrolls have been bouncing on either side of flat growth.  The monthly movement is volatile due to corporate cost cutting, strong labor productivity and an economy that's not generating a strong lift in aggregate demand.  The lagging unemployment rate reached a new 6.4% high in June and 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 shows no evidence of an impending upturn.  The labor market still shows no signs of tightening up but it lags the overall economy....

Posted by DeLong at 09:21 PM

September 01, 2003
Initial Unemployment Insurance Claims

400,000 may be the weekly initial unemployment insurance claims number below which the economy is gaining rather than shedding jobs on average. But in order to reduce the unemployment rate employment must be growing at more than the 1% per year that the labor force grows at. It looks as through--in the 1990s at least--357,000 is the weekly initial unemployment insurance claims number below which the unemployment rate is falling rather than rising....

Posted by DeLong at 08:55 AM

August 15, 2003
Output and Hours Since 1960

Some more two-year centered moving averages since 1960: this time it's nonfarm business real output and nonfarm business total hours worked. Once again (and unsurprisingly) we are outside the bounds of previous experience in the modern American economy: The little twig on the left side of the figure shows the moving-average data for 2000-2002. Never in any two-year period in the modern American economy's experience have hours fallen so fast. Given what has happened to hours in the recent past, the standard historical pattern would lead you to expect output to be falling at 2.5% per year or more--and you would expect productivity growth to be negative, not positive and in excess of 4% per year. We are indeed in uncharted waters. Not that we should mind--extraordinarily rapid productivity growth is a wonderful gift. But it does pose different problems for economic management to solve than the ones we had gotten used to......

Posted by DeLong at 10:43 AM

More Good GDP (and Productivity) News About the Second Quarter

News about the economy in the spring released since the initial estimate of second-quarter GDP growth tells us that the second-quarter growth rate is likely to be revised upward significantly--from a 2.4% annual growth rate to perhaps a 3.0% annual growth rate. This is excellent news for production and productivity: Forbes.com: Analysts see U.S. 2nd quarter GDP upward revision: Merchandise trade data out on Thursday showed exports rose a healthy 2.4 percent in June, while in real terms, which is what matters for gross domestic product, the trade deficit narrowed sharply to $47.23 billion from $50.04 billion in May. The [trade] deficit was much smaller than that assumed by statisticians in the advance measure of GDP released on July 31, suggesting trade subtracted less from growth than the 1.56 percentage points initially estimated. The trade news comes hot on the heels of significant upward revisions to retail sales figures for both May and June. On Wednesday the Commerce Department unexpectedly upped its June estimate of sales to a rise of 0.9 percent from 0.5 percent, while May now shows a gain of 0.5 percent when it was flat before. The sudden discovery that consumers spent a lot more than first...

Posted by DeLong at 09:54 AM

August 13, 2003
Signs of a Weak Labor Market

Signs of a weak labor market due to insufficient aggregate demand: WSJ.com - After Long Boom, Workers Confront Downward Mobility: In five years at Nortel Networks Corp., James Richter won a series of promotions and saw his salary more than double, to $94,000 a year. He figured the upward trend would continue. But the opposite happened. He was laid off in March 2002, and expected to find a new job quickly. But Mr. Richter, 30 years old, got no offers in the telecommunications industry, which was shedding thousands of workers. After six months, he ended up taking a supervisory job at a cable company, even though it paid little more than half as much as his old job. "I used to identify myself pretty heavily through work," says Mr. Richter, of Cumming, Ga. "Now I'm just Jimmy. I have a job, and I'm glad, and I'll do the best I can at it, but that's what it is: a job." This unusual period in U.S. economic history -- a sluggish recovery, with continued job losses, after a prolonged period of intense growth -- is increasing the ranks of the downwardly mobile. Many workers who have been laid off are eventually...

Posted by DeLong at 12:31 PM

August 12, 2003
The Job-Loss Recovery

The Economist notes the large wedge between output growth and employment growth in America today: Economist.com: AMERICA'S economy is now supposedly on the road to recovery, but somebody forgot to tell the labour market. Non-farm payrolls fell by another 44,000 in July. Since the recession began in early 2001, 3.2m jobs have disappeared in the private sector. If the early-1990s' upturn was the jobless recovery, this, says Merrill Lynch, is "the job-loss recovery". In the first 20 months of previous post-war recoveries, employment rose by an average of almost 6%. The latest recession officially ended in November 2001, but in the 20 months since then employment has fallen by almost 1% (see chart). It is true that unemployment fell slightly in July, to 6.2% of the labour force. But the jobless figures are currently misleading, because the labour force has shrunk as discouraged workers have stopped looking for work. America's GDP growth seems to have picked up (see article), so why are firms still not hiring? One reason is that this has been America's slowest recovery in modern history. Real GDP has increased at an annual pace of only 2.6% since the recession ended.... In addition, faster productivity growth means...

Posted by DeLong at 06:30 PM

August 01, 2003
Still More Bad Unemployment News

Bad unemployment news for July. *Sigh*: Employment Report: The Labor Department's report Friday painted a picture of a job market that remains stubbornly sluggish and continues to frustrate people looking for work. The economy lost 44,000 jobs in July.... the exodus of 470,000 discouraged people [from the labor force] who abandoned job searches because they believed no jobs were available.... In July, there were 2 million out-of-work people [who had been] looking for a job for 27 weeks or longer.......

Posted by DeLong at 06:53 AM

July 28, 2003
The Wedge Between Output and Employment Growth

Alan Beattie of the Financial Times writes about the productivity-boom generated wedge between output growth and employment growth. I would be surprised if there were any employment growth at all in America over the next year unless real GDP growth exceeds 3.5% per year... FT.com Home US: After two years in which the American economy has faltered and sputtered, there is renewed hope in the administration of President George W. Bush that it is at last accelerating towards cruising speed. More than goods or services, the improvement he and his team want to see most as a result is in jobs. Like his father, Mr Bush has presided over a jobless recovery. Two years after the 2001 recession, private sector employment has fallen by more than 2.5m. The unemployment rate, at 6.4 per cent, is more than 2 percentage points higher. Larry Mishel, president of the left-leaning Employment Policy Institute, calls it "the greatest contraction in private sector employment since the Great Depression".... While the lack of a recovery of employment superficially resembles what happened during the climb out of recession in the early 1990s, the root cause is a little different. Then, companies were slower than expected to hire...

Posted by DeLong at 09:23 PM

July 24, 2003
Yay! Good Employment News!

The first not-bad news about employment in five months. Of course, it's still bad news for the unemployment rate: 390,000 new unemployment claims a month is not consistent with employment growing fast enough to take care of all the new entrants into the labor force, let alone reduce the numbers of unemployed. But it's still better employment news than we have had in a long time. FT.com Home US: US weekly jobless claims hit five-month low | By Peronet Despeignes in Washington | Published: July 24 2003 14:06 | Last Updated: July 24 2003 14:06 Demand for new unemployment benefits in the US sank last week to a five-month low, according to an official report likely to bolster hopes that the economic recovery is strengthening. The Labor Department said on Thursday that first-time unemployment insurance claims had fallen to 386,000 last week - the lowest level since mid-February and well below economists' expectations for a reading around 420,000. They dropped from a revised 415,000 the previous week. The move below the key 400,000 level is preliminary evidence that the job market is improving, but the figures are volatile and affected by summer seasonal adjustment problems associated with auto factory shutdowns....

Posted by DeLong at 09:48 AM

July 10, 2003
More Bad Unemployment News

Still more bad unemployment news. The highest number of people drawing unemployment insurance since February 1983: Jobless Claims Rise by 5,000: ...More American workers signed up for unemployment benefits last week, fresh evidence that businesses are keeping work forces lean and playing it safe until the economy shows clear signs of improvement. The Labor Department reported Thursday that for the work week ending July 5, new claims filed for unemployment insurance rose by a seasonally adjusted 5,000 to 439,000, the highest level since the week ending May 31. The increase surprised economists who were forecasting a decline in jobless claims. For 21 weeks in a row, the level of claims has been above the 400,000 mark, a level associated with a sluggish job market. The number of out-of-work Americans continuing to draw jobless benefits jumped by 87,000 to 3.8 million for the work week ending June 28, the most recent period for which that information is available. That represented the highest level since Feb. 26, 1983, and suggested that not a lot of hiring is taking place......

Posted by DeLong at 08:12 AM

July 03, 2003
The Help-Wanted Index

Slate's Daniel Gross has a nice piece on the Conference Board's help-wanted index: No Help Wanted for Help-Wanted - A tribute to the Help-Wanted Index, the economic gauge that shouldn't work but does. By Daniel Gross: Feeling more optimistic about the job market? Check out the Conference Board's Help-Wanted Index. The 52-year-old index, which measures the volume of help-wanted classified advertisements in newspapers, stood at 36 in May (with 1987 as a 100 baseline), its lowest level since 1961, and off 50 percent from February 2001.Should we care about this seemingly Jurassic metric? Surprisingly, yes. The Help-Wanted Index is oddly comforting, an economic gauge that seems archaic but remains incredibly useful. The index is derived from a medium that is slowly losing its audience. It ignores technological advances that have utterly changed what it is measuring. And it lost its bearings for a period in the late 1990s. (Truth be told, who didn't?) Even so, this dead-tree index is still vigorously alive.Since the Truman administration (1951), the Conference Board has been diligently collecting information on how many help-wanted ads were sold by one newspaper in each of 52 representative labor markets. (One can envision rows of clerks with green eyeshades sitting...

Posted by DeLong at 10:37 AM


Unemployment news significantly worse than I thought it would be. Yet another disappointing surprise. Jobless Rate Rises to 6.4 Percent; Highest in More Than 9 Years: WASHINGTON (AP) -- The nation's unemployment rate shot up to 6.4 percent in June, the highest level in more than nine years, in an economic slump that has added nearly a million people to jobless rolls in the past three months. Businesses slashed 30,000 jobs just last month, with cuts heavily concentrated on factory assembly lines, the Labor Department reported Thursday. The 0.3 percentage point increase from May's 6.1 percent rate was the largest month-to-month rise since the Sept. 11, 2001 terror attacks. That surprised analysts who predicted a smaller rise, to 6.2 percent. The last time the overall rate was higher was in March 1994. While recent economic indicators point to an economy struggling toward recovery, the latest report demonstrated that America's job market was still very much in a state of recession last month. Since March, unemployment has increased by 913,000. Two million people were unemployed for 27 weeks or more last month, an increase of 410,000 since the start of the year. Another factor behind the increase in the overall civilian...

Posted by DeLong at 07:03 AM

July 02, 2003
Employment Growth Forecasts

This statement is my choice for the 2003 understatement prize: Bush's Record on Jobs: Risking Comparison to a Republican Ghost: Still, Mr. Mankiw said that this summer, when the White House releases its next official forecast, it will probably reduce predicted job growth over the next year and a half from the 5.5 million it forecast early this year... Given the current level of employment, an annual growth rate in employment of 2.8% per year is needed in order to create 5.5 million net new jobs over a year and a half. Is this consistent with our forecasts for output growth? The answer is, "No. It is not consistent." Since 1996 the trend rate of growth of labor productivity in the American economy is some 2.6% per year. Hours worked are usually procyclical: when more people are hired, the hours that employers want their current workers to work increase as well. Figure that a 2.8% per year employment growth rate is likely to carry with it a 4.2% per year rate of growth of total hours worked. Add 2.6% to 4.2% to get a 6.8% annual growth rate for real GDP between now and the end of 2004 in order...

Posted by DeLong at 09:20 PM

Yet More Bad Labor Market News

Every once in a while I stop, take a look at the labor market, and scratch my head. First, I'm impressed at how low the unemployment rate is given how bad most of the other labor market indicators are. Second, I'm impressed at how bad most of the labor market indicators are. Little relief in unemployment expected soon - Jul. 2, 2003: NEW YORK (CNN/Money) - Two years ago, the U.S. economy was just entering its third -- and probably last -- quarter of recession, and the unemployment rate was just beginning to climb. Two years later, the jobless rate is still climbing, and is likely to rise further Thursday when the Labor Department is scheduled to report on unemployment and payrolls for June. According to a recent Reuters poll, economists, on average, think unemployment will rise to 6.2 percent from 6.1 percent in May, and they think payrolls outside the farm sector will be unchanged after losing 17,000 jobs in May. Usually, by this point in the recession-recovery cycle, the jobless rate should be on its way back down.... Today's economy... seems to be climbing out of its own slump -- but it probably won't be enough to create...

Posted by DeLong at 10:32 AM

June 21, 2003
Forthcoming Federal Reserve Rate Cut

The Washington Post's John Berry puts his ear to the ground and guesses that the Federal Reserve will cut interest rates next week by 0.50 percentage points (a 60% chance) or by 0.25 percentage points (a 40% chance). That seems about right to me--but his sources are much, much better than mine. One bone to pick, however. John Berry says that economists were "surprise[d]" by the fact that "recovery has been halting and 'jobless' despite huge doses of monetary and fiscal stimulus." This economist hasn't been surprised. Simply look at the late-1990s boom and the structural sources of the acceleration in productivity growth, and a "jobless recovery" looked like a definite possibility. Rate Cut Looking Like a Sure Thing (washingtonpost.com): ...Federal Reserve officials, concerned there is still no sign of the solid pickup in U.S. economic growth needed to foreclose the possibility of deflation, appear certain to cut their target for overnight interest rates next week. There is broad agreement among investors and analysts that a rate cut is coming, but there is disagreement about whether policymakers will lower their 1.25 percent target by a quarter-percentage point or by a half-point. The latter seems to be more likely as a...

Posted by DeLong at 06:48 AM

June 06, 2003
Unemployment Report

The expected bad employment report for May: Unemployment rises to 6.1% - Jun. 6, 2003: NEW YORK (CNN/Money) - The unemployment rate rose to 6.1 percent in May as businesses cut thousands more jobs, the government said Friday, extending the labor market's prolonged slump. Unemployment rose from 6.0 percent in April, the Labor Department said, to the highest level since July 1994.... Non-farm payrolls lost 17,000 jobs, the report said, after being unchanged in April.... Nine million people were unemployed in May, compared with 8.8 million in April.... Several labor-market indicators in recent weeks gave warning that a weak jobs report was on the way, especially a stream of new claims for unemployment benefits numbering more than 400,000 every week, a benchmark sign of weakness... Remember, given population and trend labor force growth, a monthly payroll increase number of about 80,000 is needed to keep labor market conditions from getting worse....

Posted by DeLong at 06:29 AM

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 10:53 AM

May 22, 2003
Sigh. More Bad Unemployment News

D*mn! It is starting to look as though there weren't a lot of hiring and investment decisions being postponed until the Iraq situation was sorted out--or maybe people are thinking that things still aren't sorted out. Jobless claims jump to 428,000 - May. 22, 2003: NEW YORK (CNN/Money) - New jobless claims in the United States rose last week, the government said Thursday, defying analysts' expectations for a fall and pointing to a labor market still struggling to recover. The Labor Department said the number of Americans filing new claims for unemployment benefits rose to 428,000 in the week ended May 17 from a revised 421,000 the prior week. Economists, on average, expected 415,000 new claims, according to a Reuters poll. U.S. stock futures gave up some of their earlier gains after the report but continued to trade higher, pointing to a positive opening on Wall Street. Treasury bond prices fell. Many economists believe the 400,000 level of claims is a benchmark for labor-market weakness; others think that number should be higher. Regardless, few economists would argue that the labor market is particularly strong at the moment. The U.S. unemployment rate is at 6.0 percent, matching the highest level since...

Posted by DeLong at 11:42 AM

May 19, 2003
Still Bemused

I'm still bemused by the fact that there were 3.3 percent fewer hours worked in the nonfarm business sector in 2003:I (the first quarter of 2003) than in 2000:I. Such a prolonged shrinkage in hours worked--given America's robust demographics--is an extraordinary labor market experience for the United States....

Posted by DeLong at 04:43 PM

May 02, 2003
Bad Employment News

As expected, the April employment news was bad: in the cyclically adjusted numbers, the unemployment rate was up from 5.8 to 6.0 percent, payroll employment was down by 50,000 jobs, and the average workweek shrank by 1 percent. NEW YORK (CNN/Money) - The U.S. unemployment rate rose to 6 percent in April, the government said Friday, as businesses cut thousands more jobs from their payrolls. Unemployment rose from March's 5.8 percent rate, the Labor Department reported, and non-farm payrolls shrank by 48,000 jobs, after losing a revised 124,000 jobs in March. Economists, on average, expected unemployment to rise to 5.9 percent and 53,000 jobs to be lost, according to a Reuters poll."I find this report a little more reassuring than it looks on the face of it," Bill Cheney, chief economist at John Hancock Financial Services, told CNNfn. "[Some analysts] were looking for a really awful number, and getting a number close to what was expected is actually kind of a relief."The report had little impact on U.S. stock market futures, which pointed to a mixed opening on Wall Street. Treasury bond prices were little changed.Friday's report means the year-to-year net change in private payrolls has been negative for 22...

Posted by DeLong at 06:32 AM

April 12, 2003
How Deep Is the Current Recession?

The Economic Policy Institute has found a measure according to which the current recession is actually the deepest and most severe of post-WWII recessions. The measure? The percentage by which private employment is below its peak level two years after the recession began: "In the two years since the recession began in March 2001, total payrolls have fallen by 2.1 million and private sector payrolls are down by 2.6 million." This is, of course, only part of the story: the current recession is very shallow insofar as production is concerned (in large part because of the rapid underlying productivity growth trend), moderate as far as the unemployment rate is concerned (in part because lots of people have dropped out of the labor force during this recession), and deep as far as private-sector employment is concerned. Which is the "right" measure? Well, it depends on what you are interested in, of course. A balanced picture of the perhaps-still-ongoing recession needs to comprehend all three......

Posted by DeLong at 09:19 AM

April 06, 2003
More Bad Unemployment News

John S. Irons reports more bad employment news: The employment situation remains poor. Data released by the Bureau of Labor Statistics shows that the unemployment rate for March remains unchanged at 5.8%, and, in addition, total nonfarm payroll employment declined by 108,000 after seasonal adjustment. Overall, these numbers again point to the idea that the economy is in somewhat of a holding pattern. Overall growth appears to be weak, leading to the decline in employment, yet the unemployment rate has been holding steady at just under 6% for the past year. Given how lousy the employment numbers have been over the past year, it is remarkable that the unemployment rate has not risen by more......

Posted by DeLong at 08:43 PM

March 07, 2003
Employment Report Today Not Good

John S. Irons summarizes today's unemployment report. It is significantly worse than I, at least, was expecting... ArgMax Economics Weblog: Employment Situation: Not good: The Bureau of Labor Statistics released its monthly employment report today. The unemployment rate was up 0.1 to 5.8% in February. The big news in the report, though, was that total (non-farm) payroll employment fell by 308,000 after seasonal adjustment. This seemes to have been interpreted as a big negative for the economy and was much larger that expected. Keep in mind that the employment data is often called a "lagging indicator," meaning that the statistic tends to reflect the past state of the economy more that it indicates where the economy is headed. The weak employment number tends to indicates what we already know - that the economy was indeed weak; but it does not necessarily mean the economy is headed further downward. However, for the unemployed - and those looking for jobs - it is certainly not good news......

Posted by DeLong at 04:57 PM

September 12, 2002
More People Worry About Deflation

The Economist steps up to the "let's worry about deflation" plate. I agree with them. The Federal Reserve, however, does not seem to: the Federal Reserve appears to believe that the NAIRU--the unemployment rate at which inflation is constant--is somewhere near 5.5 percent (rather than the 4.5 to 5.5 percent I would estimate), and that the rate of growth of potential output--which is the rate at which real GDP has to grow to keep the unemployment rate constant--is only a shade above 2 percent per year (rather than the 3.5 percent per year that I would estimate). Economist.com: ...As a result, there is a risk that, before the end of 2003, the rich world's three biggest economies—America's, Japan's and Germany's—could all have negative inflation rates. A sharp jump in oil prices as a result of America invading Iraq could, of course, push up headline inflation. But the longer-term impact of higher oil prices would be deflationary, not inflationary. Higher oil prices operate like a tax that depresses growth, so their medium-term impact would be to heighten the deflation risk. DeAnne Julius, a former member of the Bank of England's monetary policy committee, argued in a recent speech that there is...

Posted by DeLong at 04:45 PM

September 08, 2002
Ball and Mankiw on the "Natural Rate" of Unemployment

Larry Ball and Greg Mankiw have a very nice paper on the unemployment rate at which inflation is stable--the so-called NAIRU. The most fascinating part of the paper deals with the question of why the U.S. NAIRU fell so far and so fast in the 1990s. Ball and Mankiw find that they lean toward the hypothesis that the NAIRU is actually closely linked to the trend rate of productivity growth. The NAIRU in Theory and Practice: NAIRU stands for the nonaccelerating inflation rate of unemployment. It is beyond dispute that this acronym is an ugly addition to the English language. There are, however, two issues that fail to command consensus among economists, which we address in this essay. The first issue is whether the concept of NAIRU is a useful piece of business cycle theory. We believe it is, and we begin this paper by attempting to explain why. In our view, the NAIRU is approximately a synonym for the natural rate of unemployment. This concept follows naturally from any theory that says that changes in monetary policy, and aggregate demand more generally, push inflation and unemployment in opposite directions in the short run. Once this short-run tradeoff is admitted,...

Posted by DeLong at 08:35 AM

September 01, 2002
The New German Problem

Project Syndicate: The New German Problem: J. Bradford DeLong : September 2002 As Germany prepares to elect its next Chancellor, the two main candidates, Gerhard Schroeder and Edmund Stoiber, agree on one thing: unemployment must be reduced. Over the past two decades, high unemployment has transformed Europe in general and Germany in particular into a sociological time bomb. What will the unemployed - especially the long-term unemployed with only dim memories of integration into the world of work - do with themselves and their time? What will happen to confidence in governments that can not solve the problem? It is easy to forget that little more than 50 years ago, Europe was the world's most violent continent. Europeans spent the previous forty years slaughtering each other on a scale unprecedented in human history. Against this backdrop, Western Europe after 1950 was remarkably peaceful and stable, even taking into account the fall of the French Fourth Republic and the transitions from dictatorship to democracy in Portugal, Spain, and Greece. The most remarkable transformation of all was that of the Federal Republic of Germany. Anyone familiar with German history since 1800 is still astonished at the enthusiasm with which the nation that...

Posted by DeLong at 04:44 PM

July 06, 2002
Another Forecast of a "Jobless Recovery"

Jared Bernstein of EPI also thinks we're heading for a "jobless recovery"--demand growth is too slow and productivity growth too high to generate a falling unemployment rate. I think he's more likely than not to be right, at least for the rest of this year. Jobs Picture | EPI | Since its low point of 3.9% in October 2000, unemployment has increased by two percentage points, adding 2.9 million to the jobless rolls. Since job growth has been stagnant, these job seekers have been experiencing lengthy unemployment spells. With the exception of one month following the deep recession of the early 1980s, the median number of weeks spent unemployed-11.7 in June-was the highest since such data were first collected in 1948. Long-term unemployment is a characteristic of a jobless recovery. Last month, the percentage of the unemployed looking for a job for more than six months was 19.4%, down slightly from May but 8.1 percentage points above the level in March of last year, when the recession began. During the last slow recovery in the early 1990s, the share of long-term unemployment peaked at 23.1%, seven months after the recession had officially been declared over......

Posted by DeLong at 12:08 PM

July 05, 2002
Unemployment Continues to Creep Upward

Why does the unemployment rate keep rising, if indeed we are in a recovery? First of all, we are not in that much of a recovery--demand and output are not growing that fast. Second, recall that only recently did President Bush agree to extend the duration of unemployment benefits. In the aftermath of any extension of unemployment benefit duration, the unemployment rate tends to rise by half a percentage point or so relatively to what it would have been: people take longer to search for new jobs (and on average do manage to get better jobs as a result of taking longer to search. WSJ.com - Economy WASHINGTON -- The U.S. unemployment rate edged up to 5.9% last month as employers remained reluctant to add new workers to their payrolls. The latest numbers suggest the economic recovery is too fragile to permit the Federal Reserve to raise interest rates anytime soon. The Labor Department's latest snapshot of the job market released Friday also showed that 36,000 jobs were created in June after a revised increase of 24,000 in May. But job growth wasn't strong enough to prevent the unemployment rate from rising in June from May's 5.8% rate....

Posted by DeLong at 11:24 PM

July 02, 2002
The Economist Applauds the Recommendations of the German Unemployment Insurance Reform Commission

Is Germany finally beginning to tackle its structural unemployment problem? If so, there needs to be some source of increased aggregate demand in order to produce the jobs that the formerly unemployed will want to take. Is there any sign that the European Central Bank is up to the job? I don't see any--and I think that is the reason that Chancellor Schroeder is likely to decide that the commission's recommendations need a hasty burial. German Labour-Market Reform | ...The heart of his proposals is one to turn the agency's 181 regional offices into de facto temporary-employment agencies. Anyone still jobless after six months would in effect be employed by them, and hired out short-term (though on union rates)--or have his benefits docked. Some 780,000 jobs could be created this way, the Hartz commission estimates. It has taken the same carrot-and-stick approach in most of its ideas for tighter rules on benefits and swifter work placement. Germany pays out euro40 billion a year, around 2% of GDP, in unemployment benefits. Depending on the recipient's family status, he gets 60-67% of his former wage for up to 32 months, and 53-57% for an unlimited period thereafter. Thousands of Labour Office staff...

Posted by DeLong at 01:26 PM

May 19, 2002
Thinking About European Unemployment

Surely the most thoughtful and brilliant macroeconomist trained in the late 1970s is M.I.T.'s Olivier Blanchard. In his Robbins Lectures he turns his mind to summarizing what he knows about the nature, causes, persistence, and prospects of and for European unemployment. [Olivier Blanchard (forthcoming 2002?), The Economics of Unemployment: Shocks, Institutions, and Interactions (Cambridge: MIT Press:).]

Posted by DeLong at 02:38 PM

September 01, 1989
J. Bradford DeLong (1989), "Facets of Interwar Unemployment," Journal of Monetary Economics 49:3 (September), pp. 800-802.

J. Bradford DeLong (1989), "Facets of Interwar Unemployment," Journal of Monetary Economics 49:3 (September), pp. 800-802....

Posted by DeLong at 02:02 PM