The Wall Street Journal reports: WSJ.com - Outlook for U.S. Economic Growth Is Trimmed: Economists sharply reduced their projections of economic growth in the second half of this year, conceding that the outlook is distinctly less rosy than it seemed just a few weeks ago. The consensus forecast... calls for real gross domestic product to grow at an annual rate of 3.8% in the third quarter and 4.1% in the fourth quarter, down from consensus forecasts in late June of 4.4% and 4.2%, respectively.... The lower forecasts still represent a pickup from the actual GDP growth rate of 3.0% in the second quarter that ended in June and should be enough to bring modest improvement to the job market.... That last sentence may not be true: it hinges on productivity growth being less than 3% per year for the rest of this year. That's not something I'd be eager to bet on....

Kevin Drum asks if William Saletan has any hint of ironic awareness, and concludes that he does not: The Washington Monthly: SALETANISMS....Will Saletan complains today about John Kerry's stand on stem cell research: Why does Kerry call it a "ban on stem-cell research" instead of a ban on federal funding of embryonic stem-cell lines derived after Aug. 9, 2001? Because the shorter phrase, while scientifically inaccurate in four egregious ways, is more politically effective. This is pretty rich coming from a guy who spent two full months of his life bemoaning the fact that Kerry spends too much time explaining himself in detail. Sheesh....

Paul Krugman writes about the employment situation: Spin the Payrolls: By PAUL KRUGMAN Published: August 10, 2004 When Friday's dismal job report was released, traders in the Chicago pit began chanting, "Kerry, Kerry." But apologists for President Bush's economic policies are frantically spinning the bad news. Here's a guide to their techniques. First, they talk about recent increases in the number of jobs, not the fact that payroll employment is still far below its previous peak.... Because job growth has finally turned positive, some economists (who probably know better) claim that prosperity has returned.... But job growth... can be higher in a bad year than a good year... there was rapid nonfarm job growth (8.1 percent) in 1934, a year of mass unemployment and widespread misery - but that year was slightly less terrible than 1933.... The job situation might have improved somewhat in the past year, but it's still not good. Second... give numbers without context. President Bush boasts about 1.5 million new jobs over the past 11 months... barely enough to keep up with population growth, and it's worse than any 11-month stretch during the Clinton years. Third, they cherry-pick any good numbers they can find... because July's...

The Economist starts to worry about the consequences of the uneven distribution of the gains from America's business cycle recovery: Economist.com: President George Bush... will no doubt try to shift attention away from the job numbers' failure to meet expectations, and towards the 1.5m jobs that have been created in 11 straight months of employment growth (as well as the latest unemployment figure: the rate fell in July, from 5.6% to 5.5%). However... a net 1.1m jobs have been lost since he took office, and there is no chance of reversing that loss before the election. Furthermore, the fall in [the] unemployment [rate] might have as much to do with the low participation rate as with job creation. Another worry for the president is weaker spending. One of the abiding motifs of America’s recovery so far has been the “indefatigable consumer”. But the American consumer is now looking as tired as the cliché. According to figures released on Tuesday, consumer spending fell by 0.7% in June. The Federal Reserve’s recent anecdotal report on the American economy, the so-called “beige book”, paints a greying picture: Chicago is doing well, but New York, Cleveland, Richmond, Kansas City and San Francisco show evidence...

Yesterday, Dan Froomkin said: CJR Campaign Desk: Archives: I'd like to see a lot less stenography and lot more research. There's context here, people.... Don't just do he said/she said... Today I look at the New York Times business section, and find: The New York Times: The Data: A Job Picture Painted With Different Brushes: July was a poor month for job creation in the United States. July was an excellent month for job creation in the United States. That tale of two employment reports is true, and it continues a trend that has persisted for two and a half years. The discrepancies have made it possible for Republicans to herald a job recovery and for Democrats to deny one exists. Both sets of statistics were issued by the government's Bureau of Labor Statistics, but they come from very different surveys. One, the establishment survey, which questions 160,000 employers, paints the bleak picture. The other, the household survey, which questions 60,000 people about whether they or other family members are working, paints the better picture. Which is right? Because of its smaller sample size, the household survey is always more volatile, and month-to-month changes can be deceptive for that reason....

A bad employment report for July. It is worth noting that the administration's forecast, made last winter, was that by this time payroll employment would be at 132.8 million--not the 131.3 million that it is actually at. Somebody should ask Bush todaywhat has gone so unexpectedly wrong to put employment 1.5 million lower than expectations in just half a year. And somebody else should ask Bush today why he adopted a "jobs and growth" program of shifting taxes from the present into the future that got us only about half the bang per buck of deficit that we would have received from a normal Keynesian fiscal stimulus program. He didn't make the lousy labor market. But he and his team sure did pass up a lot of chances to buy insurance against the bizarrely weak job market we now find ourselves in. Job growth weaker than expected - Aug. 6, 2004: Hiring by U.S. employers slowed significantly in July, according to a government report Friday, as the number of new jobs added to payrolls came in far below Wall Street expectations. The Labor Department report showed only 32,000 new net jobs added to payrolls during the month, down from a...

Matthew Yglesias reads the op-ed published under the name "George Schultz" in the New York Times this morning and is an unhappy camper: matthew: Gee...: ...it strikes me as a bit misleading to construct a chart plotting change in GDP versus time and then discuss it as thought it were a chart of GDP versus time. The way Shultz has done it, the second Clinton administration looks like a period of plateau, albeit at a decent level, whereas mapping the second set of data points would reveal that it was, in fact, an era of rapid improvement in living standards. One could go on... Matthew identifies the trick of pretending that a graph of changes is a graph of levels: the graph of detrended levels is too favorable to Clinton, and by graphing changes you can pretend that a slowing of the rate of increase is a decline. But there are two other big problems here--problems that George Shultz's staff should have caught: First, Shultz's graphs show GDP rising throughout the first half of 2001--the first GDP decline in the third quarter of 2001. The first employment declines come in the third and fourth quarters of 2001 depending on the...

The employment-to-population ratio: At least the labor market situation is no longer deteriorating. That's good news. It is hard to stress enough the extraordinary contrast in this business cycle between the (lousy) labor market situation and the (good) output growth situation and the (fantastic) productivity growth situation....

The Bureau of Labor Statistics reports on earnings in June: REAL EARNINGS IN JUNE 2004 Real average weekly earnings decreased by 0.8 percent from May to June after seasonal adjustment, according to preliminary data released today by the Bureau of Labor Statistics of the U.S. Department of Labor. A 0.1 percent increase in average hourly earnings was more than offset by a 0.6 percent decline in average weekly hours and a 0.3 percent rise in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Data on average weekly earnings are collected from the payroll reports of private nonfarm establishments. Earnings of both full-time and part-time workers holding production or nonsupervisory jobs are included. Real average weekly earnings are calculated by adjusting earnings in current dollars for changes in the CPI-W. Average weekly earnings rose by 1.7 percent, seasonally adjusted, from June 2003 to June 2004. After deflation by the CPI-W, average weekly earnings declined by 1.4 percent. Before adjustment for seasonal change and inflation, average weekly earnings were $524.37 in June 2004, compared with $521.73 a year earlier. We live in a time when productivity is growing at between 3% and 4% per year--and thus when real...

Back on February 9, 2004, the Bush administration issued its Economic Report of the President and its 2004 economic forecast. In it, the Bush administration predicted that by the middle of this year payroll employment would have recovered to 132.7 million, and thus finally crept out of job-loss territory to a value higher than the 132.5 million payroll employment number reached at the peak of the last boom in the first quarter of 2004. Needless to say, this forecast did not come to pass: we were already far below it at the moment of its release, and by June payroll employment was 1.2 million lower than the value of the forecast that the Bush administration had released only four months before, in February. I can find nobody who can add--and have never found anybody who can add--who will defend this forecast in public, or even sketch out in public a scenario for how this forecast could have ever come to pass. It assumed, among other things, a total collapse in the rate of productivity growth in the first half of 2004--a collapse in productivity growth which would have had severe and adverse effects on stock prices, investment flows, and demand....

Ah. I won't be on the Lehrer News Hour talking about employment today. So I won't have the opportunity to use my talking points: BRAD DELONG'S TALKING POINTS: EMPLOYMENT: JULY 2, 2004 We do have bad employment news this morning: only an addition of 112,000 payroll jobs comparing the June payroll survey to the May survey--we were expecting 250,000, and hoping for even more. Nevertheless, the employment news is not very bad. The 140,000-job shorfall relative to expectations is only 0.1% of American employment. If the American economy is an ocean liner, this is only a single swell. And taking the past six months as a whole there is evidence that the employment situation is getting better--or at least that it has stopped getting worse. The right way to look at this, of course, is in its bigger context. And in the bigger context the employment situation right now is lousy. Relative to the peak of the boom, and taking account of the growing adult population, we would have to have 5 million more jobs now than we do to have the same degree labor market. Now that's too ambitious a goal--booms like 1999-2000 come along once in a generation....

Daniel Gross of Slate's "MoneyBox" writes about the employment situation: Sunny Side Down - Why 1.4 million new jobs haven't ended the jobless recovery. By Daniel Gross: Posted Tuesday, June 29, 2004, at 1:26 PM PT : Since last fall, when the economy finally began adding payroll jobs consistently, the Bush administration has embraced the monthly Bureau of Labor Statistics release of the employment situation report as evidence that its economic policies are working. "Nationwide, the economy has posted steady job gains for each of the last nine months—creating more than 1.4 million new jobs since August," the White House crowed in early June, when news came that 248,000 payroll jobs were added in May. That figure, 1.4 million new jobs, has become the default answer given by administration officials when confronted with unpleasant economic questions. To the mystification of the Bush administration and its allies, the American people aren't particularly grateful.... Here's one possible explanation for the disconnect between the administration's cheery rhetoric and the population's gloomy disposition: The labor market is nowhere near its late-1990s heyday.... Consider the employment–to-population ratio.... The ratio rose steadily in the 1990s, from 61.4 percent in January 1993 to 64.7 in the spring...

The very sharp and usually incisive Jake Schlesinger fails to distinguish between levels and rates of change: WASHINGTON -- With the economy now growing at a rapid clip, and employers finally hiring again in industrial Midwest battleground states, Democrats are losing a pillar of their 2004 campaign argument: that a weak recovery is making it unusually hard for Americans to find work... That the labor market is finally improving--that it is no longer becoming harder and harder month by month to find jobs--does not mean that the labor market is good. A few months of employment gains are good news: they mean that it is a little less bad out there in the labor market than it used to be. But don't confuse rates of change with levels: there are still perhaps 4 million people either unemployed or out of the labor force who would have jobs if we had a labor market in equilibrium. (And there are 6 million who would have jobs if we were in a boom like the late 1990s.) It's still unusually hard for Americans to find work--just not as unusually hard as it was six months ago. But I already said this yesterday:...

The Washington Post has retracted its false claim that John Kerry was wrong to say that real wages are falling: MaxSpeak, You Listen!: From the print edition of the Washington Post: CORRECTION: On June 19 we wrote that wage increases had kept pace with inflation in the year to May, and criticized Sen. John F. Kerry for suggesting that wages had fallen behind. We were wrong and Mr. Kerry was right: Hourly wages for non-supervisory workers rose 2.2 percent, while the consumer price index rose 3.1 percent. Perhaps we can take a step further forward, and get corrections of some of the analytical (rather than merely the arithmetic) blunders in the Post's editorial? Jobs and Mr. Kerry (washingtonpost.com): ...job creation, which appeared surprisingly weak a few months ago despite strong economic growth, is now healthy -- and statistical revisions suggest that it was robust as far back as March and respectable in January... [...] If Mr. Kerry's message seems exaggerated now, it will seem even less convincing soon. Job markets recover in three phases: As the economy picks up, employers ask workers to put in extra hours; when they've exhausted that option, they hire new workers; when new workers become...

Billmon finds an interesting story at Bloomberg: Whiskey Bar: It's the Wages, Stupid: Art Pine - a solid economics reporter, lately of the LA Times, now with Bloomberg News - grabs hold of the major obstacle standing in the way of the Bush campaign's frantic efforts to convince the voters the economy is booming: Wages in U.S. Lag Inflation May Blunt Bush Gains From New Jobs A 2.2 percent rise in wages in the 12 months through May has been more than offset by a 3.1 percent gain in consumer prices. It's unlikely that employees will get raises that outpace inflation over the next five to 10 years, said William A. Niskanen, former acting chairman of the President's Council of Economic Advisors during the Ronald Reagan administration. "I don't see any substantial increase in average real wages for some time,'' said Niskanen, who is now chairman of the Cato Institute, a Washington research group. Niskanen and other economists cite global competition, which forces companies to keep costs down, shrinking union clout and continuing slack in a labor market with an unemployment rate of 5.6 percent, up from 4.2 percent when the last recession began in March 2001. But... but... but...

Max Sawicky is unhappy with the New Republic's Jonathan Chait: MaxSpeak, You Listen!: RUBINTISM: Jonathan Chait of The New Republic flaunts his weak grasp of fiscal policy. Underscores reflect emphases added: What you can blame Kerry for is his choice of emphasis in the campaign. Kerry's best chance of passing a significant economic program would be to focus relentlessly on Bush's misplaced priorities and thus win a mandate to reverse them. Instead he has focused unremittingly on two things -- job losses and high gasoline prices -- that aren't really Bush's fault. The result has been an economic debate that bears almost no relation either to the damage that Bush has wrought or to the issues that the next president will face. Take jobs. Kerry has relentlessly blasted Bush as the first president since Herbert Hoover to preside over a loss of jobs. Yet there isn't even a remotely plausible theory as to how Bush's policies have caused those job losses. The truth is that structural economic forces, not policy, have caused unemployment. Now, if you press a smart Democratic economist on this point, he or she will insist that Bush could have stemmed job losses more effectively by channeling...

Ah. The Economist issues a correction: Economist.com: Last week (“Cursed by lagging perceptions”) we suggested that the current pace of job growth (an average of 238,000 new jobs per month this year) meant that a forecast published in February by George Bush's Council of Economic Advisers, which suggested 2.6m new jobs would be created in 2004, might prove too low. In fact, the CEA'S forecasts were based on calendar-year averages, not year-end figures, and their calculations actually implied the creation of more than 320,000 new jobs per month during 2004. 320,000 per month is 3.8 million over the calendar year. The Wall Street Journal, however, has not yet corrected its June 8 observation that "readers may recall that chief White House economist Greg Mankiw was widely ridiculed in February for predicting that the economy would create 2.6 million new jobs this year." And I don't believe that the Wall Street Journal ever will....

Draft: For Nightly Business Report, to be broadcast Monday June 21, 2004 We do live in amazing times. Since the first quarter of 1995, the real productivity--nonfarm business--of America's workers has risen by 30.1%. The average American worker in the first quarter of 2004 produced 30.1% more goods and services per hour than his or her counterpart in the first quarter of 1995. At that pace of growth, America's real economic productivity would double in only 26.4 years: each generation would live twice as well as its parents. But the bright silver clouds conceal a dark lining. Since the first quarter of 2001--the last business cycle peak--the productivity of America's workers has risen by 14.1%. But real GDP has risen by only 8.4%. And workers' real wages and salaries have risen by only 0.5%. Real wage and salary income per capita has, so far, fallen by 3.5% over the Bush administration. This is a remarkable disconnect between the extraordinary rapid growth of the productive potential of the American economy and the loss of income on the part of the bulk of Americans--who are wage and salary workers, not coupon clippers. The tide is rising: the productivity tide is rising at...

The Economist lends the Bush administration a helping hand: Economist.com: ...a forecast that suggested America's economy would create 2.6m jobs this year. If job creation continues at today's pace, that forecast will prove too low. The claim that the Bush administration forecast was that "America's economy would create 2.6 million jobs this year" was obtained by subtracting the December 2003 employment number--130.1m--from 132.7m. But in the Bush administration forecast, 132.7m was not the forecast of employment in December 2004. The forecast of employment in December 2004 was 134.3m. 132.7m was the forecast of the average level of employment over the year. I realize that the Bush administration worked hard to confuse reporters on what, exactly, their forecast was. But that is only half an excuse. The Economist needs to work harder, and be better....

I'm going to go bang my head against the wall again. The Washington Post's Jonathan Weisman writes: Jonathan Weisman Strikes Again: [George W.] Bush is not the first president to suffer from a disconnect between objective economic indicators and voter perceptions on the economy. The economy began growing steadily in March 1991, when President George H.W. Bush registered a 49 percent approval rating on his handling of the economy. But by July of 1992, those approval ratings had slid to an abysmal 25 percent, presaging his electoral defeat three months later.... Leave to one side the assumption that "objective economic indicators" are now "good"--the productivity numbers are indeed truly wonderful, but the employment and real wage situation is still lousy, albeit better than it was half a year ago. Focus, instead, on the assertion that during the period between March 1991 and July 1992 there was a "disconnect between objective economic indicators"--good--"and voter perceptions"--bad. But during that period the unemployment rate rose from 6.8% to 7.9%: that's a lot of powerful bad news about "objective economic conditions" in the labor market. You can say a bunch of things about the slide in George H.W. Bush's approval ratings between early 1991...

Another good payroll employment growth number: Employment Situation Summary : Nonfarm payroll employment rose by 248,000 in May... Of course, we are still deep in the hole: payroll employment would have to grow at an average pace of 850,000 per month (yes, that's eight hundred fifty thousand per month) in the next two months to get us back onto the midyear employment forecast the administration released last February....

Me at Nieman Watchdog II: Nieman Watchdog > Ask This > Questions About Bush’s Policies: By Brad DeLong jbdelong@uclink.berkeley.edu Q. How much bang for the buck did Bush’s tax cuts actually have? How many jobs were created, versus how much did the deficit grow? Q. How did the Bush administration decide that these tax cuts were the right stimulus package to put forward? Q. What have representative people who received big hunks of money from the Bush tax cuts done with it? Q. What do those inside the Bush administration now think of their economic policy moves over the past four years? The press needs to be asking about the making of Bush administration economic policy – and examining the results. So far in the twenty-first century the underlying structural basis of the American economy has gotten rapidly, surprisingly stronger: the productive potential of the economy has grown at an extraordinarily rapid pace. But the short-term performance of the economy – the part that government has powerful tools to affect in the short run – has been abysmal. Two million jobs have been lost. The gap between real Gross Domestic Product and the economy's productive potential is larger than seen...

Paul Krugman writes about the employment situation: The New York Times > Opinion > Op-Ed Columnist: Delusions of Triumph: Republicans, we hear, are frustrated by polls showing that the public has a poor opinion of George Bush's economic leadership. In their view, the good news about Mr. Bush's economic triumphs is being drowned out by the bad news from Iraq.... But is the economic news really that good? No. While the recent economic performance is better than in the administration's first three years, it isn't at all exceptional by historical standards. And after those three terrible years, the economy has a lot of ground to make up. Let's start with the "nearly 900,000 new jobs" created in the last four months. Is that exceptional? Well, during the first four months of 2000, the last presidential election year, the economy created 1.1 million new jobs. An e-mail message to Bush's supporters from Ken Mehlman, his campaign manager, takes a longer view, boasting of 1.1 million jobs created since last August (when job growth finally turned positive). But in April 2000, payroll employment was 2.3 million higher than in August 1999.... If you want to convince yourself that I'm not playing games...

Dan Froomkin writes about the symbolic politics of employment: washingtonpost.com: Bush Backdrop Turns Sour: When President Bush visited a Timken Co. ball-bearing plant in Canton, Ohio, a year ago, he told workers that their optimism about the future of their company inspired his optimism about the future of the economy. A photo from his talk at Timken leads the White House Web site's "Building America's Economy Photo Essay." It shows Bush standing in front of a glorious red, white and blue "Jobs and Growth" banner. As he said at the time, the "greatest strength of the American economy is found right here, right in this room, found in the pride and skill of the American work force." Last week, Timken announced that the folks right there in that room are getting fired. Timken, the world's largest industrial bearings maker, whose chairman is a major donor and fundraiser for the Republican Party, plans to shut down three factories in Canton and eliminate 1,300 jobs.... Mark Naymik writes in the Cleveland Plain Dealer: "When President Bush needed a factory floor to serve as a prop for an economic speech last year, Canton-based Timken Co. opened its doors. But the maker of bearings...

From the BLS. A second month of good employment news! Nonfarm payroll employment increased by 288,000 in April, and the unemployment rate was about unchanged at 5.6 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today.  The April in- crease in payroll employment follows a gain of 337,000 in March, and job growth again was widespread.  In April, employment rose substantially in several service-providing industries, construction continued to add jobs, and there was a noteworthy job gain in durable goods manufacturing. Very nice to see... But I really would like to see some growth in the employment-population ratio to make me happy......

Oh God! Do I have to? Gary Farber and Bruce Bartlett have been asking for my reaction to Kevin Hassett's claim that Bush Council of Economic Advisers employment forecasts have AEI - News & Commentary: met current professional standards. Indeed, economists who forecast job creation have just about all made the same mistakes as the council. For the past two years, job creation has been well behind the level we might normally have expected to see given the level of economic growth. For example, the highly regarded industry forecaster Macroeconomic Advisers kindly provided me with its jobs forecasts... [which are], of course, stunningly similar to the [CEA's forecasts]. Clearly, the errors are not a sign of corruption, but rather, an indication that the world surprises all economists from time to time. Those surprises challenge us to build better models. If a graduate student presented a seminar attempting to establish bias... he would immediately be shot down by professionals who would see through the subterfuge. If he submitted his analysis to a peer-reviewed journal, it would be rejected. But in the new media culture, [Paul] Krugman can insert into the public debate blatantly misleading content and the vilest accusations without suffering...

Larry Mishel is an unhappy camper: American Prospect Online - ViewWeb: ...What has caught me off guard, I must admit, is the clever -- some might even say deceitful -- ways the Bush administration argues that the current economy is great. But before investigating some of its outrageous claims about the economy, let's do a quick reality check. Where are we? The economy went into recession as George W. Bush took office, so it would be unfair and inaccurate to blame the initial downturn on the current administration. The Bush policies, however, have been flawed because they were never intended to generate jobs or growth in the short-term; they were always about cutting government revenue and shifting the tax burden away from income from investments (from the few) and onto income from labor (that's most of us). A decent set of policies -- enacting one-time tax cuts aimed at lower- and middle-income families, building roads and bridges, renovating schools, providing aid to the states, offering improved unemployment insurance -- could have yielded a much better situation [employment] today.... What did happen? There were continuous and record-breaking employment losses for roughly two and a half years, followed by some modest job...

As expected, a good GDP growth number: Gross Domestic Product News Release: Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 4.2 percent in the first quarter of 2004, according to advance estimates released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 4.1 percent. The Bureau emphasized that the first-quarter "advance" estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4). The first-quarter "preliminary" estimates, based on more comprehensive data, will be released on May 27, 2004. The major contributors to the increase in real GDP in the first quarter were personal consumption expenditures (PCE), equipment and software, government spending, exports, and private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased. That the U.S. economy's output can grow at 4.2% per year without providing any upward pressure on the employment-to-population ratio is remarkable, a result of the amazing underlying productivity growth of our economy....

Kash of Angry Bear looks forward to some real excitement: Angry Bear: We have one interesting piece of economic data to look forward to later this week. The advance estimates of first quarter GDP growth will come out on Thursday. The consensus forecast seems to be for a big, big positive number, with perhaps around 5.0% annualized growth. This release takes on added significance because the Fed’s Open Market Committee meets the following Tuesday (May 4) to decide whether a change in interest rates is called for. The proportion of Fed-watchers expecting an interest rate increase next week is small (most seem to expect an interest rate increase sometime over the summer, which this informal poll also indicates), but it could grow somewhat with a blowout number on Thursday. Stay tuned for all the excitement… Kash p.s. Yes, you know you’re an economist when this stuff classifies as “excitement”… Me, I think the Fed's decision making goes the other way: a high GDP growth number conditional on what we know about first-quarter employment is a signal that productivity growth is even more rapid than we had thought, and that monetary policy needs to stay more expansionary for longer in order...

Yesterday the New York Times took yet another dive--degrading the quality of public discourse and the state of public knowledge--when they published a highly misleading column by Heritage hack Tim Kane yesterday. Here we have Heather Boushey and Dean Baker doing the Lord's work by explaining just how complete and total a hack job Kane's piece was: April 7, 2004 Thomas FeyerNew York Times229 W. 43rd St.New York, NY 10036Dear Mr. Feyer:We are writing because we object to your decision to publish Tim Kane’s column (“Labor’s Lost Jobs,” 4-7-04), which implied that the Bureau of Labor Statistics (BLS) payroll survey seriously understates job growth. This piece seems intended to create public confusion about basic economic data, when there is no foundation for such skepticism. Economists, regardless of their political leanings, would agree that virtually every claim in this article is either false or hugely exaggerated. In his first claim, Mr. Kane argues that 1 million jobs have been lost in the establishment survey since 2001 because the rate of monthly job turnover has fallen by roughly 1 million, and that people are typically counted twice in the establishment survey when they change jobs. Presumably Mr. Kane knows that the survey...

Finally, some good labor market news! WSJ.com - U.S. Payrolls Grew in March At Fastest Pace in Four Years: Job creation jumped to a four-year high in March as the economic recovery finally filtered through to the long-suffering jobs market. The Labor Department said Friday that nonfarm payrolls soared by 308,000 in March from February, the biggest monthly gain since April 2000, at the height of the stock-market bubble. It also revised upward the tally for January and February, showing total job creation in those months of 205,000 instead of the previously reported 118,000. The unemployment rate, which is derived from a different survey than payrolls, rose a tenth of a percentage point to 5.7% as 179,000 people re-entered the labor force in search of jobs... Mr. Bush's chief economist, Gregory Mankiw, said the data confirm implications from other recent statistics that "the economy is on track for a robust recovery." He added that the recovery is a "result of pro-growth fiscal policies" and low interest rates. "It is a textbook recipe for how you get out of recession." Greg was, however, careful not to say that even the March pace of employment growth was less than the 320,000 per...

John Berry reports on the Macroeconomic Advisers'--Joel Prakken and company--forecast for the U.S. economy. It's very optimistic: Bloomberg: ...forecasts from Macroeconomic Advisers in St. Louis, the latest of which seems almost too good to be true: "For the rest of this year and 2005, the U.S. should see the heady combination of strong economic growth, payroll job gains running about 200,000 a month, additional increases in corporate profits, significant gains in stock prices, only moderately rising long-term interest rates and continued very low inflation."... Even payroll growth that strong need not trigger Fed action to raise its 1 percent target for overnight rates until early in 2005 because inflation will remain subdued, the Macroeconomic Advisers economists argued. Some investors are probably braced for a hit to the bond market whenever the Bureau of Labor Statistics announces the first monthly gain of 150,000 to 200,000 jobs. It will take several such months before Fed officials become convinced such gains are here to stay. In addition, even with 200,000 more jobs per month, it will take a long time to whittle away a significant amount of the slack in labor markets. Such job gains would be ``just enough to nudge the unemployment...

Dana Milbank reviews the unemployment statistics:When the government unveiled the February unemployment numbers recently, Democrats and Republicans sounded as if they were talking about two different reports."The unemployment rate of 5.6 percent continues to be below the averages of the 1970s, 1980s and 1990s," said Labor Secretary Elaine L. Chao, using a phrase echoed by the White House press secretary, and by the secretaries of Commerce and the Treasury.But Rep. Steny H. Hoyer (Md.), the No. 2 Democrat in the House, called the employment report "pathetic" because 2.3 million jobs were lost on President Bush's watch. He said "long-term unemployment is at its highest level in 20 years."Who's correct? Actually, they both are.Unemployment was 6.2 percent in the 1970s, 7.3 percent in the 1980s and 5.8 percent in the 1990s. Therefore, February's 5.6 percent is better than the average of each of the past three decades.That rate may seem counterintuitive, given the loss of so many jobs. The reason is that millions of Americans who might otherwise be working have taken themselves out of the labor force.At the moment, 65.7 percent of civilians are in the labor force, lower than any annual rate since 1987. The Labor Department says that...

Since June 2003, the household survey estimate of the number of working age Americans has grown by 1.53 million.* During that same period, the household survey estimate of employment has grown by 700 thousand. In order for the employment-to-population ratio to remain constant, a 1.53 million increase in the working-age population needs to be accompanied by an 950,000 increase in employment. According to the household survey, we are 250,000 short since last June at what we need to maintain the ratio of employed Americans to the working age population. For those extra 250,000 (according to the household survey), the past nine months' labor market news has not been good.However, writing for National Review, Jerry Bowyer claims: "last May President Bush fully implemented his tax cut, and since then the rate has rapidly dropped from 6.3 percent down to 5.6 percent, one of the quickest drops in history. That's great news, of course, for unemployed worker 5.61 through unemployed worker 6.30..."Bowyer implies--Bowyer probably thinks--that unemployed worker 5.61 through unemployed worker 6.30 are now happy because they have found jobs, and that things are not worse but much better than they were last June. But they haven't: the employment-to-population ratio has fallen,...

Kash at Angry Bear takes a look at the detailed pattern of employment change by industry: Job Creation and Destruction in Service Industries: Given the continued lousy state of the labor market, I wanted to know which industries are growing (in terms of numbers of workers) and which are shrinking.... My reading of the figures is that they illustrate that the weak labor market is indeed explained by the combination of technologically-based productivity improvements with weak demand. Industries with slow job growth (or job losses) seem to be those that have been intensively adopting lots of labor-saving IT in recent years, such as wholesale and retail trade, transportation, and telecoms. For obvious reasons, education and health has seen the least replacement of labor with IT, and so seeing lots of job growth in those industries is not surprising. Somewhat less obviously (at least to me), professional and business services (this category includes things like legal, engineering, administrative, advertising, management, consulting, IT and accounting services for businesses) has also been adding jobs at a rapid rate.......

Morgan Stanley's Stephen Roach tears himself in two: Morgan Stanley: The case for interest-rate normalization is grounded in one of the most basic principles of stabilization policy: Ammunition is to be used in bad times and then replenished in good times. Based on the Federal Reserve’s own assessment of recent and prospective vigor of US economic growth, it is now time to reload the monetary cannon. A failure to do so and keep the policy rate at 1% in nominal terms and “zero” in real terms is a recipe for a never-ending outbreak of asset bubbles. Early warning signs of such bubbles are now increasingly evident (see my 5 March dispatch, “A Time for Courage”). Largely for that reason, I have urged the Fed to raise the federal funds rate immediately to 3% (see “An Open Letter to Alan Greenspan” published in the March 1 edition of Newsweek International). Yet the pitfalls of America’s jobless recovery -- a scenario I have long embraced -- seem to argue against such a policy shift. And once again, the consensus mantra of “hiring is just around the corner” has been dealt a cruel blow by the reality check of the monthly labor market...

Staff Reporters of the Wall Street Journal James Hagerty and Jon Hilsenrath seem to me to be excessively polite to George W. Bush: WSJ.com - Job Growth Falls Short of Estimates: ...In a report described by one government economist as a "limp handshake," the Labor Department said Friday that just 21,000 payroll jobs were created in February; economists had expected about 125,000. The unemployment rate remained at 5.6%, but that was because more Americans dropped out of the labor market, many deciding that job hunting was a waste of time. Unless job creation picks up within the next few months, consumers may grow more jittery, as they watch friends and neighbors struggle to find work. That, in turn, could prompt Americans to slow spending, warned Sung Won Sohn, chief economist at Wells Fargo & Co. "The risk of economic slowdown has clearly increased," he said. The positive news in Friday's report was that it underlined continued improvements in productivity as companies find ways to raise output without expanding their work forces. While painful for many workers, these productivity gains have helped boost corporate profits and held down interest rates. In another positive development, job losses in manufacturing are slowing. Factories...

Ed Hugh points out that it is taking unemployed people a *long* time to find new jobs, an unusually long time: BonoboLand • Tough Labour Market. A Meaningful Metric: Last Friday's US jobs report contained a number of significant details. In particular the data revealed that once a worker loses his job, it takes more time than before to get a new one. In fact it takes more time now than during any other period since 1984. For in February, the average length of time spent jobless rose to 20.3 weeks, which was the longest since January 1984, when it was 20.4 weeks. According to Labor Department data going back to 1948, the longest spell was 20.8 weeks in 1983. If we keep on like this the record may well fall!...

Stephen Roach has faith that the output gap is shrinking, and hence believes that it is time for the Federal Reserve to raise interest rates: Morgan Stanley: ...This ambiguity is especially worrisome in the current climate. Inflation in the traditional sense is not a problem. Sure, commodity prices are now surging, but unit labor cost pressures are going the other way — down 1.7% on a year-over-year basis through 4Q03. With labor accounting for five to six times the share of commodities in the overall business cost structure, the forces of disinflation continue to have the upper hand. That shows up loud and clear in the ongoing deceleration of underlying inflation — a core CPI inflation rate that has slowed from 1.9% y-o-y in January 2003 to 1.1% in January 2004. But with the US economy having rebounded sharply in the second half of last year and expected to record a solid increase in 2004, the gap between aggregate supply and demand is finally beginning to close. For that reason, alone, it appears now safe to conclude that the risks of an immediate deflation are receding — at least for the time being. At the same time, with most businesses...

The usually-reliable Noam Scheiber drifts off base. He argues that because Bush administration fiscal policies contributed perhaps 1.5% to growth last year, that the Bush administration managed to "do enough" and should not be blamed for stagnant employment: The New Republic Online: Whack Job: ...Liberals in Congress and at places like the Economic Policy Institute complain that the Bushies should have targeted the bulk of their tax cuts toward the working poor and middle class, who were more likely to spend their tax savings than more affluent beneficiaries were. They also argue that more of the tax cut's benefits should have been delivered in the short-term rather than over five or ten years, and that the administration should have sent more help to the states, which were cutting spending and raising taxes even as the federal government was doing the opposite. But, of these three criticisms, only the last one really holds water if the goal is stimulating the economy. For one thing, there is evidence that affluent people spend a higher proportion of their income than economic models have traditionally predicted. And, Democrats' complaints notwithstanding, the tax cuts provided plenty of stimulus when it counted. In all, according to...

The Bush administration CEA-Treasury-OMB macroeconomic forecast--the one on top of which the administration's budget estimates are built, and that was signed off on and approved by Treasury Secretary Snow, OMB Director Bolten, NEC Chair Friedman, and CEA Chair Mankiw--was put to bed early last December. It was released on February 9. Since then, administration officials have fled from the employment growth component of their own forecast as if it were some ravenous carniverous monster from a horror movie. It is worth noting that, according to today's February employment release, the pace of payroll job "growth" in America was running 1.07 million behind the pace of the forecast put to bed only two months before. The forecast was already 1,071,000 jobs high the week that it was released. That's a measure of how out-of-touch the Bush administration's High Politicians are with the state of the American labor market: from their perspective, we've had a million jobs' worth of surprising and unexpected bad employment news since December 2, 2003. For most of the rest of us, the employment news has been about what we expected....

*Sigh* Another lousy employment report: Statement of Kathleen P. Utgoff, Commissioner, Bureau of Labor Statistics, Friday, March 5, 2004: ...Nonfarm payroll employment was little changed in February (+21,000), as the number of jobs held steady in most major industries.... None of the major segments of the service-providing sector showed a significant employment change in February. Wholesale trade employment was unchanged following 3 months of growth. Among retailers overall, there has been no net job growth since the onset of the holiday shopping season last fall.... Taking a look at some of the measures obtained from our survey of households, the unemployment rate was unchanged at 5.6 percent in February.... The labor force participation rate fell to 65.9 percent in February, reflecting a steep drop-off in the number of men in the labor force. The employment-population ratio was down over the month to 62.2 percent.......

Robert Samuelson was a real journalist once. But I see little evidence of that these days: A Phony Jobs Debate (washingtonpost.com): Facing a weak economy, a government can do three things: cut interest rates; run a budget deficit; and allow -- or cause -- its currency to depreciate. The first two promote borrowing and spending; the last makes a country's exports cheaper and its imports costlier. All these weapons have been deployed. Bush's policies are mostly standard economics; based on past patterns, these policies should have produced stronger job growth. Did Robert Samuelson completely miss the fact that the effect of the 2003 (and 2001) Bush tax cuts was to enlarge the budget deficit in a relatively un-job creating way? It is as if they were designed to reduce national savings as much as possible in the long run while providing little short-run boost to demand. Was he asleep all of last winter when this debate was held--and when the Bush administration falsely asserted that its dividend tax cut was a powerful short-run stimulus to employment? As best as we can track the thinking of the Bush administration, they decided to claim that large tax cuts for the $300,000+ a...

BRAD DELONG; ATLANTIC MONTHLY TOWN HALL; 7-8 PM TUESDAY FEBRUARY 24; WHEELER AUDITORIUM, U.C. BERKELEY CAMPUS, BERKELEY, CA.Draft 2.0/as prepared for delivery:What's Going on with the Economy?In the mid-1990s labor productivity growth in America accelerated from 1.2% to 3.0% per year. At a rate of labor productivity growth of 1.2% per year, America is a land of diminished expectations: it takes 60 years for incomes to double, and lots of good things that we would want to accomplish seem far outside our private and public budgets. At a rate of labor productivity growth of 3% per year, America is a land of infinite promise: incomes double every 25 years, and our public--and private--resources seem ample, are ample.We economists debate whether 1/6 (Greg Mankiw's estimate), 1/3, or 1/2 (my estimate) of the acceleration in productivity growth is due to better policies by the coalition that marched under Bill Clinton's banner, and how much by good luck with ongoing technological revolutions. We economists debate how long the boom in productivity growth will last--five more years? A decade? A generation? Longer? But I don't want to go there. I want to say that today America's productive potential is growing very rapidly, and America...

Population growth estimates, immigration, and the household vs. payroll employment survey: The Federal Reserve's view: Economic View: Two Tales of American Jobs: ...the Federal Reserve has just thrown cold water on the household data. It concludes that the gloomy payroll data is essentially accurate and that the household survey is probably off base. "I wish I could say the household survey were the more accurate,'' Alan Greenspan, the Fed chairman, said in his testimony at a House hearing on Feb. 11. "Everything we've looked at suggests that it's the payroll data which are the series which you have to follow.'' To test the self-employment theory, the Fed adjusted the household survey by taking out all the kinds of workers who do not show up on the payroll survey - self-employed people, but also farm workers and family workers in family-run companies. Even then, Mr. Greenspan said, the discrepancy remains large. The Fed's conclusion was that the household survey's results have been inflated by overestimates of population growth. Because the household survey is a sample, the Bureau of Labor Statistics infers the total change in jobs by multiplying the ratio of employed to unemployed workers in the household survey by its...

As measured by the decline in the share of working-age population on the payroll employment rolls, the current employment downturn is more than twice as bad as the recession of the early 1990s. As measured by the decline in the (Household Survey) employment-to-population ratio, it is only 35% worse than the recession of the early 1990s: Since 1950 there has never been as big a fall in payroll employment as a share of the working age population. Never. Not even in the double-dip 1980-1982 recession....

In this morning's New York Times, I read the headline "A Prettier Jobs Picture?" The headline writers are making a pun. Virginia Postrel is writing about undercounting the number of people who are at work making things (and people) prettier. The headline writers are referring to that and are also saying that this undercount means that the overall jobs picture is "prettier" than standard statistics suggest. The headline writers are wrong. This is yet another example of something every single reporter swears: that American journalism would be much, much improved if editors would let reporters write their own headlines. Virginia Postrel writes: "It is tempting, of course, to treat these undercounts as trivial. After all, what do 200,000 massage therapists or 300,000 manicurists matter in a country of 290 million people? But this list of occupations is hardly comprehensive. In every booming job category I looked at, official surveys were missing thousands of jobs. As the economy evolves, however, this bias against small enterprises and self-employment becomes more and more significant...." Virginia Postrel means that the detailed occupational estimates are undercounting growth of employment in aesthetic occupations. But the headline writers think she means more. Let's go over the three...

According to the Bush administration's forecasting "Troika" (a team made up of the macroeconomic forecasters from the Council of Economic Advisers, the Treasury's Office of Economic Policy, and the Office of Management and Budget's Chief Economist) there was a straightforward process that generated the employment growth forecast released nine days ago--the forecast that the Secretary of the Treasury, the Secretary of Commerce, the Press Secretary, and George W. Bush are now running away from. Here is the administration story as I understand it, and I am highly confident (but not completely sure) that I have what the administration would say (if the administration were saying anything, that is) right: The administration story is that the forecasting process was carried out last November, when there was only a little data from the just-begun fourth quarter. The administration Troika made its forecast of demand growth, and concluded that the conventional wisdom was correct: that real demand and thus real output would grow at a roughly 4% per year annual rate between the third quarter of 2003 and the end of 2004. The administration Troika made its forecast of productivity growth, and concluded that worker productivity would grow at a roughly 1.4% per...

When the Council of Economic Advisers released its 2004 Economic Report of the President last Monday, it should have said that the analysis contained therein led it to forecast that payroll employment would grow to 131.3 million (not 132.7 million) by June-July and to 132.4 million (not 134.5 million) by the end of the year. Why? Well, for the sake of hypothesis, suppose that we assume that the official administration employment projection--of employment growing at a steady 320,000 per month average since last October, of a June-July 2004 employment level of 132.7 million and a year-average employment level equal to the same number, of employment hitting 134.5 million by the end of 2004--is a purely political document, suitable only for tricking journalists into writing optimistic stories about the year-2004 economy, and unhelpful as a guide to where the economy is or where it is going. Can we then find any clues in the 2004 Economic Report of the President about what an unpoliticized employment forecast really would be? In the section of the 2004 Economic Report of the President called "Developments in 2003 and the Near Term Outlook" there is a short three-paragraph and one chart subsection called "The Labor...

The blue line on the figure below is the actual path followed by nonfarm payroll employment since early 1999. You can see payroll employment peaking in early 2001, then declining sharply until the end of 2001 during the recession period proper, then continuing a slow decline until the middle of 2003, after which it begins a slow advance. The red line is the "projection" of employment that Glenn Hubbard made when he was Chair of the Council of Economic Advisers as part of the administration's propaganda campaign to convince the Congress last year that the then-proposed dividend tax cut was a "jobs and growth" program. Staff at the CEA, the Treasury, and OMB have hastened to assure me that this was not their forecast, that it was "not arrived at through the official Troika forecasting process," and was "Glenn's baby, and only Glenn's baby." The orange line is the current Blue Chip consensus forecast for employment growth for the rest of this year. The green line is the "projection" released last Monday in the 2004 Economic Report of the President--the "projection" that was, as of the moment of its release, already 750,000 too high....

From Greg Ip's Wall Street Journal's article: WSJ.com - Greenspan Predicts Upswing in Jobs: Mr. Greenspan said the payroll count is more reliable than the separate household survey, which has shown a much brighter jobs picture. He said employment has been held back by exceptionally high growth in productivity, which has enabled employers to meet rising demand with fewer workers. The loss of jobs due to higher productivity, he said, makes more acute the loss of jobs "as a result of imports, whether it's goods or services or outsourcing or whatever." Mr. Greenspan said it is "utterly inconceivable" that productivity growth, which topped 5% last year, can continue at that rate. As businesses run out of unused labor-saving technology to exploit, it "is going to slow down significantly" and "you will begin to create significant job growth."...

Greg Ip of the Wall Street Journal writes about Alan Greenspan. The most interesting thing Greenspan is reported saying in Ip's report is that he thinks the "natural rate of unemployment" consistent with stable inflation is "close to 4%": WSJ.com - Greenspan Predicts Upswing in Jobs: [Greenspan] said it is possible that the unemployment rate could drop to close to 4%, from 5.7% in January, before inflation started to accelerate.... According to the monetary-policy report, most members forecast growth of between 4.5% and 5% through the fourth quarter of this year from the same period a year ago, well above the average 4.2% predicted by economists surveyed by Blue Chip Economic Indicators, a Kansas City, Mo., newsletter. The members also see the unemployment rate dipping to between 5.25% and 5.5%. And they see inflation in the fourth quarter at 1% to 1.25%.... A key source of uncertainty at the Fed is how much productivity -- or output per worker -- will grow, which will determine how many unemployed workers will be put back to work and how much labor costs and prices will rise. While FOMC members don't release their expectations on productivity or jobs, private economists say that other...

From Greenspan's Humphrey-Hawkins testimony: WSJ.com - Text of Greenspan's Testimony: Gross separations from employment, two-fifths of which have been involuntary, are about what would be expected from past cyclical experience, given the current pace of output growth. New hires and recalls from layoffs, however, are far below what historical experience indicates. To a surprising degree, firms seem able to continue identifying and implementing new efficiencies in their production processes and thus have found it possible so far to meet increasing orders without stepping up hiring. In all likelihood, employment will begin to grow more quickly before long as output continues to expand. Productivity over the past few years has probably received a boost from the efforts of businesses to work off the stock of inefficiencies that had accumulated in the boom years. As those opportunities to enhance efficiency become scarcer and as managers become more confident in the durability of the expansion, firms will surely once again add to their payrolls. ... We must, as a consequence, remain alert to risks that could threaten the sustainability of the expansion. Besides the chronic concern about a sharp spike in oil or natural gas prices, a number of risks can be identified....

Nonfarm payroll estimates since January 2000: seasonally adjusted and not seasonally adjusted: See what a difference? Essentially we go through a full-sized business cycle every year as far as employment is concerned, with the peaks coming in the late spring and in the Christmas season, and a little trough in the summer and a big trough just after Christmas....

Reuters reports: White House Forecasts 2.6 Million New Jobs (washingtonpost.com): In the annual Economic Report of the President, the White House said the number of workers on U.S. non-farm payrolls was likely to rise to an average of 132.7 million this year from a 2003 average it thought would come in at 130.1 million. Has Reuters completely misread the Troika forecast--the forecast by the Treasury Department, the Office of Management and Budget, and the Council of Economic Advisers? Or has the Troika completely lost its collective mind? Or have the High Politicians of the Bush administration reached down (as I believe they did last year) and imposed phony job growth forecasts on the Troika? UPDATE: Sources believed to be reliable point out that the forecast was frozen as of last December 2, and that I have made additional errors in my calculations below. The effect is to lower the administration's expected employment growth rate to 320,000 per month (and the shortfall in job growth since October lowers the target to 131.9 million). At the moment we stand at a January 2004 estimate of 130.115 million Americans on nonfarm payrolls. The 2004 average is just that: an average, an average of...

Another disappointing payroll employment number: Employment Situation Summary : Total nonfarm payroll employment increased by 112,000 in January to 130.2 million, seasonally adjusted. Since August, payroll employment has grown by 366,000. Retail trade and construction added jobs in January on a seasonally adjusted basis. Manufacturing job losses continued, but at the slower pace that has prevailed in recent months. Employment in temporary help services edged lower, following 8 months of gains. (See table B-1.) Retail trade employment increased by 76,000 over the month, after seasonal adjustment. The industry had lost a total of 67,000 jobs in November and December. Weak holiday hiring in general merchandise, sporting goods, and miscellaneous stores meant that there were fewer workers to lay off in January, resulting in seasonally adjusted employment gains for the month. This does come as a surprise. As the report says, the fact that seasonal hiring for Christmas was so low led people (including me) to think that the seasonal adjustment factor was going to create a big positive retail trade job number in January: the BLS would be expecting to see a lot of temporary workers fired, and since there weren't that many temporary workers to fire, the seasonally-adjusted employment...

Stephen Roach and Richard Berner try to make sense of America's jobless recovery. They've never seen anything like it. There's never been anything like it in America: Morgan Stanley: There’s never been anything like it.  The US economy is currently in the midst of the most profound hiring shortfall of any modern-day business cycle.  Fully 25 months since the economy technically bottomed in November 2001, private nonfarm payrolls are 7.7 million workers below the typical hiring trajectory.  Employment is even tracking 2.4 million workers below the employment profile of the upturn of the early 1990s — heretofore America’s worst jobless recovery. ...

It does not appear as if increasing numbers of self-employed workers can do much to account for the discrepancy between household survey and payroll survey trends over the past three years:...

"Economic Growth Remained Strong in the Fourth Quarter," is the headline over the New York Times story. A rather strange headline for a quarter during which output grew at a slower pace than expected and employment did not grow fast enough to soak up expected growth in the labor force. "Though government data on payrolls showed almost no job growth in December, government surveys of households have suggested that hundreds of thousands of jobs have been created," reads a passage near the story's end. While the payroll survey did show employment growth of only 1,000 the household survey did not show "hundreds of thousands" of jobs created during December--it showed that 50,000 were lost. Over longer time periods the household survey does indeed paint a much brighter picture than the payroll survey--but not during December. "The contradictory evidence remains a puzzle, but one theory is that many people who no longer work at companies are now self-employed as consultants and service providers who work out of their own homes," reads the sentence immediately following. But the divergence since January 2001 between the household survey and the payroll survey has been 2.6 million, and the household survey itself reports that self-employment...

A 4.0% annual pace of real GDP growth in the fourth quarter. As has been the case for the past two and a half years--ever since the end of the recession--the fourth quarter saw lousy news about employment growth, and good news about productivity growth. The only uncertainty over the past 2 1/2 years has been whether the productivity growth news will be good or great, and thus whether the output growth news will be poor or good. This past quarter the output news was slightly good: Christopher Swann: Financial Times: ...Economists said the breakdown of the GDP figures, by contrast, pointed to steady but unspectacular growth. "We should not forget that the best outcome for the US economy would be a sustainable growth rate of between 3.5 and 4 per cent and we appear to be on course for that," said Steve Cochrane, director of US research at Economy.com, the consultancy. The pace of consumption slowed slightly more abruptly than had been expected, with the annualised rate of increases declining from 6.9 to 2.6 per cent. Economists said this was likely to be lifted by the effect of tax cuts in the first half of the year. Nevertheless, there...

The right-wing hackery from the Washington Post's editorial page defies belief. The Jobless Recovery (washingtonpost.com): Technological and organizational shifts are driving firms to close jobs down permanently, and laid-off workers are having to look for entirely new work. That takes time. Firms have to create jobs they never had before, which takes longer than re-creating old ones. As a result, the new structural nature of unemployment means that job creation lags in the early stages of a recovery. Mr. Bush should not be blamed for this, though his irresponsible fiscal policy harms business confidence and therefore job creation. But the bigger question is whether jobless recoveries are a bad thing. They are, after all, the flip side of good news. There is less cyclical unemployment these days, so recessions are milder; fewer jobs are being created now because fewer jobs were destroyed during the downturn... There are the lapses into incoherence: "firms have to create jobs they never had before, which takes longer than recreating old ones... job creation lags in the early stages of a recovery." But we are now 2 1/4 years after the end of the recession. A six month lag I could understand. A twelve-month...

The Economist's Buttonwood Tree sounds remarkably contrarian--for something that is a tree, not Stephen Roach, that is: Some 140 companies in the S&P 500 are due to announce their results this week... those that have already done so have beaten analysts’ expectations by some 6%.... But then they will need to be good, so high are investors’ expectations. Stockmarkets have already climbed... the S&P is up by 44%, and Nasdaq by 69%; and... investors expect more of the same.... But how much will profits have to grow...? And how sustainable is this surge in profits?... Buttonwood has said it before and he will say it again: if things can’t get better, they can only get worse.... Last week’s column looked at the astonishing profitability of American financial firms. Citigroup, to take one example, made more money last year than any company has ever made, and financial firms make up about a third of corporate profits, which is unsustainable. A bigger question is whether profits for non-financial firms are also being temporarily flattered, to which the answer is: most probably. Profitability, it is true, seems to have been boosted by cost-cutting.... There are, however, limits as to how much cost-cutting can...

Oh no! Not again! The Weekly Standard needs to replace Irving Stelzer with a different--and competent--economics writer, and the sooner the better: The Book of Jobs: In the past year, employers reported a net loss of over 70,000 jobs, while households reported a net gain of over two million. Believe the second figure... Stelzer has not done his own homework, and his simply cribbed his numbers straight out of a recent (and blatantly incorrect) Robert Barro Business Week column. So let me just repeat myself: Bad Barro! Bad Barro! No bone for you!: In his most recent Business Week column, Robert Barro says a number of things that... well, to put it politely, are not as true as he appears to think they are. But the most untrue of all are his claims that: ...over the past year... household [employment] grew by two million.... Let's look at the numbers, most easily found in the CEA-JEC's monthly publication Economic Indicators: Status of the Labor Force (Household Survey) Date Adult Non-Institutional Population Civilian Labor Force Civilian Employment 2002:Dec 218.74 145.15 136.44 2003:Jan3 219.90 145.84 137.54 2003:Feb3 220.11 145.86 137.41 2003:Mar 220.32 145.79 137.35 2003:Apr 220.54 146.47 137.69 2003:May 220.77 146.48 137.49 2003:Jun...

For background, take a look at http://www.epinet.org/content.cfm/briefingpapers_bp148. It's quite good on all these issues. Then go to http://www.gpoaccess.gov/indicators/browse.html, and download some recent issues of Economic Indicators. What is going on is roughly as follows: The BLS just reported that it estimated from its Household Survey that in December of 2003 there were (a seasonally adjusted) 138,479,000 people employed. (Economic Indicators p. 11). The BLS just reported that it estimated from its Business ("Establishment", "Payroll") Survey that in December of 2003 there were (a seasonally adjusted) 130,124,000 people on nonfarm payrolls. (Economic Indicators p. 14). The BLS reported three years ago that it estimated from its Household Survey that in January of 2001 there were (a seasonally adjusted) 135,999,000 people employed. (Economic Indicators p. 11). The BLS reported three years ago that it estimated from its Business ("Establishment", "Payroll") Survey that in January of 2001 there were (a seasonally adjusted) 132,428,000 people on nonfarm payrolls. (Economic Indicators p. 14). Subtract from today's nonfarm payroll number that of January 2001 and you get -2.3 million jobs. Subtract from today's household-survey number that of January 2001 and you get... well, you can't do that. The BLS says not to do that. The BLS,...

Oh God! Another piece of misinformation introduced into the stream of popular economic discourse! In his most recent Business Week column, Robert Barro says a number of things that... well, to put it politely, are not as true as he appears to think they are. But the most untrue of all are his claims that: ...over the past year... household [employment] grew by two million.... In the past year, the increase in the labor force by 1.7 million represented 1.2% growth--close to the annual growth rate of 1.4% seen since 1980. So there is no validity to the argument that the labor force behaved in an unusual way in 2003. Let's look at the numbers, most easily found in the CEA-JEC's monthly publication Economic Indicators: Status of the Labor Force (Household Survey) Date Adult Non-Institutional Population Civilian Labor Force Civilian Employment 2002:Dec 218.74 145.15 136.44 2003:Jan3 219.90 145.84 137.54 2003:Feb3 220.11 145.86 137.41 2003:Mar 220.32 145.79 137.35 2003:Apr 220.54 146.47 137.69 2003:May 220.77 146.48 137.49 2003:Jun 221.01 147.10 137.74 2003:Jul 221.25 146.54 137.48 2003:Aug 221.51 146.53 137.63 2003:Sep 221.78 146.54 137.57 2003:Oct 222.04 146.89 138.09 2003:Nov 222.28 147.19 138.53 2003:Dec 222.54 146.87 138.48 3Not strictly comparable with earlier data... an...

Morgan Stanley's Ted Wieseman and David Greenlaw are seeing signs of an upward turn in employment growth:

Morgan Stanley: Meanwhile the latest jobless claims report, along with the survey details of the Michigan sentiment report, extended the recent trend of job growth appearing everywhere except in the employment report.  Initial jobless claims in the week of January 10 fell 11,000 to 343,000, taking the 4-week average down 3,000 to 347,500, another new three-year low.  Continuing claims in the prior week plunged 128,000 to 3.139 million, the lowest level seen since right before 9/11.  The trend in claims, along with near-universal signs of improvement in every other labor market indicator and survey except for the employment report itself, leads us to believe that the December payroll number was understated and some catch-up in January could easily lead to a gain of 250,000+.

Of course, even after the employment-to-population ratio stops declining, we still have a long, long, long march in front of us before we return to anything like the full employment we had grown used to in the late 1990s.