Brad DeLong's Semi-Daily Journal (2004)

Yeah, they are just numbers. Out of a large group of college educated friends, and those with other trained skills (say, computer animator) are with out work, or very under-employed. In fact, many of the students who were in the Master's progarm at GaTECH with me are now waiters at a local upscale restaurant. The reason for job losses vary, but I see nothing that makes me think jobs are going to increase. GaTECH's engineering dept, w/ civil engineering being the only exception, is experiencing difficulties in recruiting students due to the perception that the jobs that they train for will not exist, or will be radically different (read lower pay), upon graduation. What is the value of a computer engineering degree today? $20,000 per year, or I ship the job to India? It's not just the number of jobs, we must also be very concerned about the qualitiy of any jobs created.

Brad -- someone must be listening to you:

CBS Marketwatch has a story subtitled: Commentary: Report's call for 2.6 mln doesn't add up.

It does repeat a rather lovely quote from Mr. Mankiw: "You will see that we expect, sort of, on average jobs in 2004 to be 2.6 million more than jobs in 2003."

Quoting just a bit more:

Greg Mankiw, chairman of the White House Council of Economic Advisers, wouldn't be pinned down to a specific job growth target in an interview with CBS MarketWatch's Corbett Daly.  Watch the interview.

But Mankiw did repeat what he'd told reporters earlier: "You will see that we expect, sort of, on average jobs in 2004 to be 2.6 million more than jobs in 2003."

Creating 2.6 million new jobs by the end of the year won't raise the monthly average by that amount.

Assuming steady growth month after month for the rest of the year, employment would need to reach 135.3 million in December in order for the monthly average to be 132.7 million for the year. That's 5.2 million more than in December 2002 and 5.1 million more than the current 130.16 million.

That's 462,000 new jobs each month between now and December.

Only once in its history has the U.S. economy added as many as 5 million jobs in a 12-month period: In 1941 when millions of unemployed Americans left their Hooverville shacks for the factories to build the ships, tanks, planes and bombs that Britain was using against Hitler.

The 2.6 million number matches the number of jobs lost under Bush, but the White House says it did not make the forecast by taking what would be needed to keep Bush from joining Herbert Hoover as the only modern president to preside over job destruction for a full term and simply plugging that number into the official forecast on Table 3.1 on page 98 of the report. Read the report.

A simple mistake is the explanation that's easiest to understand. Why would the administration set itself up for failure on the one issue that matters most to voters? Why promise so much more than anyone could reasonably expect?

The Council of Economic Advisers says its report isn't political. But then why did the CEA inject itself into partisan politics by unilaterally changing the starting date for the 2001 recession so that it began during Bill Clinton's last weeks in the presidency, rather than during Bush's second month in office, as determined by the nonpartisan National Bureau of Economic Research? The CEA broke the gentleman's agreement that the NBER's rulings are not to be dragged into the mud of campaigns.

Since we're now living in a "deficits be damned" universe, I wonder if Bush isn't planning to unveil some massive WPA-style program around June or July?

After all, if he makes the government hire 2 or 3 million people for make-work projects, he can truthfully claim that the projection was correct.

Bonus Points: If Bush wins the election, he then scraps the entire thing on December 1 because it's too expensive. If Bush loses, it leaves an enormous political landmine for his successor to deal with. Win-Win for Bush, Lose-Lose for everyone else.

Zandi is right that, while the jobless rate ends up in the headline and in election forecasting models, it is employment opportunity - "people know if they are working" - that matters. I wonder whether the jobless rate was a better proxy for employment in prior cycles.

The numerical folderol may not matter. The odds of creating 2.6 mln jobs seems pretty low. If the good guys make this a debate about whose number is right (a debate that most voters won't follow in detail, if at all), then attention is focused less on holding Bush to account for the repeated failure of his own policies to meet his own job creation goals. He ain't gonna finish even. Let's point that out.

I've been thinking along the same lines as derelict, with this exception: Most of Bush's "Pioneers" and other top fundraisers are themselves CEOs and corporate bigwigs. Why isn't Karl Rove calling them all up and saying, "Listen, we appreciate the donations and all, but if you want us to win this, you all have to go out and *hire* people! We don't care if they *do* anything, and obviously we don't care if you lay them off again on November 3rd, but employment is our biggest vulnerability and if you all can help us take it off the table during the campaign we're home free."

Or is this too blatant interference with the sacred Free Market? Is this where Rove draws the line?

Every now and then, when economists here are wondering about some unusual feature or other of the current situation, I point out that the Bush administration could simply be cooking the books. This generally brings someone out to say that the people who make governmental statistics are protected civil servants, and that the Bush administration could not manipulate those numbers. (Fewer are willing to claim that the administration would not even if it could).

Now, falsifying an official forecast is not quite as bad as falsifying a current statistic, but aren't we getting a lot closer? I think that people should be looking very closely at what actual -- not merely customary -- safeguards are in place for whatever statistic they are relying on.

Not to continue to beat up on WashPo reporting on this stuff, but I'm suspicious of this quote from Weisman's piece today: "The Economic Report of the President made the same point: 'When a good or service is produced more cheaply abroad, it makes more sense to import it than make it or provide it domestically.'" Obviously, Mankiw wouldn't define comparative advantage in this manner (nor would anyone who has taken freshman econ), and I haven't been able to find this exact quote in the ERP. There's a section on comparative advantage, but it doesn't contain that quote.

An off-topic question which I hope someone here can answer for me: is there any way to determine whether the trend over the past two decades of lower costs for consumer goods (i.e., thanks to companies like Wal-Mart, etc.) are lowering household expenses enough to compensate for the fact that wages have basically been stagnant?

"I wonder whether the jobless rate was a better proxy for employment in prior cycles."

Definitely!

"Is there any way to determine whether the trend over the past two decades of lower costs for consumer goods are lowering household expenses enough to compensate for the fact that wages have basically been stagnant?"

This is a fine beginning question, now break it down to define what might be "conpensation." Suppose middle level wages have been stagnant but we can consume a higher quality of good more cheaply? Interesting.

Thinking.....

http://www.morganstanley.com/GEFdata/digests/20040209-mon.html

Coping with the Global Labor Arbitrage
Stephen Roach

Month in and month out, the basic story really hasn’t changed. The United States remains in the midst of the most jobless recovery in modern-day, post-World War II history. It’s not the lags — especially after a 6% annualized growth spurt in the second half of 2003 and indications of more vigor to come in early 2004. Nor is it a measurement problem — with a small sample of households conveying a truth that a much larger sample of businesses is missing. Let’s face it: The Great American Job Machine has finally met its match.

To be sure, jobs are finally increasing. But the current hiring upturn pales in comparison with historical norms. Gains in private nonfarm payrolls have averaged only 84,000 over the past five months (September 2003 to January 2004) — less than half the 183,000 norm that was recorded, on average, over the comparable five-month interval of the previous six recoveries. Scaled for the expanded size of the US economy, this shortfall is even more serious. When compared with the 6.5% increase in private sector hiring that has occurred, on average, in the first 26 months of the past six cyclical upturns, the current decline of a little less than 1% translates into a shortfall of 8 million Americans who would have been at work had the US economy been on the hiring trajectory of the typical recovery.

The income implications of this hiring shortfall are equally profound. Private sector wage and salary disbursements — by far the largest component of personal income — are still down about 1% in real terms relative to levels prevailing at the trough of the last recession in November 2001; that compares with gains that averaged about 9% over the 25 months of the previous six upturns. That’s the functional equivalent of a $400 billion shortfall in real consumer purchasing power. Lacking in the fundamentals of income support, the current rebound is being fueled by more “toxic” sources of growth — budget deficits, reduced private saving, debt, and the extraction of purchasing power from over-valued assets such as property. Until that changes, the sustainability of this recovery remains an open question, in my view.

http://www.nytimes.com/2004/02/10/opinion/10KRUG.html

Jobs, Jobs, Jobs
By PAUL KRUGMAN

Last Friday the Bureau of Labor Statistics delivered yet another disappointing employment report.

Since there's a lot of confusion on this subject, let's talk about the numbers. The bureau actually produces two estimates of employment, one based on a survey that asks each employer in a random sample how many workers are on its payroll, the other on a survey that asks each household in a random sample how many of its members are employed. Most experts regard the employer survey as more reliable; even in the midst of the recovery, that survey has contained nothing but bad news. The household numbers look better, but not particularly good....

So far, it looks like the Bush re-election campaign is shaping up to include (missing) jobs, (missing) WMDs, and (missing) military service. I think that first, projecting a job creation target they can't possibly reach, will turn out to be the "how could they have been so stupid" kind of blunder that an election turns on.

"Zandi is right that, while the jobless rate ends up in the headline and in election forecasting models, it is employment opportunity - "people know if they are working" - that matters. I wonder whether the jobless rate was a better proxy for employment in prior cycles. "

Chicken/Egg - low "unemployment" rate is predictive of election success, so politicians focused on that.

PQuincy:

"In 1941 when millions of unemployed Americans left their Hooverville shacks for the factories to build the ships, tanks, planes and bombs that Britain was using against Hitler."

Dubya: Now, that's an idea!?

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Brad DeLong - Zogby:

"....One in 5 voters live in a household where someone is afraid of losing their job in the next 12 months, according to the most recent Zogby poll... "

This is important.

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Anne - Stephen Roach:

"...a shortfall of 8 million Americans who would have been at work had the US economy been on the hiring trajectory of the typical recovery...."

This also is important. And this too:

"Lacking in the fundamentals of income support, the current rebound is being fueled by more “toxic” sources of growth — budget deficits, reduced private saving, debt, and the extraction of purchasing power from over-valued assets such as property. Until that changes, the sustainability of this recovery remains an open question, in my view. "

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Farm employement is 3 percent of labor force and manuf and services employment are headed that way too. Productivity is pushing things in that direction and it is inevitable. This means productivity increase is changing the structure of the economy. Bush policies are hindering that change of structure by hindering the kind of investment which would accelerate that change of structure. And by hindering such investment and structural change, Bush policies are also hindering creation and expansion of better and more jobs commensurate with that new, upcoming structure of economy.

Truth is a kind and gentle lie.

Nature is not anthropomorphic.

Gratitude is born in hearts that take time to count up past mercies.

An unimportant door is never locked.

[In] mourning, it is better to err on the side of grief than on the side of formality.