Sunday, January 8, 2012

Happy, Happy. Joy, Joy. Oh, Wait, We're Still Unemployed?

There was, as usual with unemployment reports that sound positive, all sorts of hoopla from Democrats about how marvelous it is that we're finally on the right track economically. Their usual apologists in the press are taking a crack at making this pig look perfect for that shade of lipstick. I think all you have to do is read Paul Krugman's or Brad DeLong's frank assessments to realize that this is overblown, but maybe the best rebuttal came from Dean Baker yesterday:
The 200,000 jobs number reported for December was distorted by unusual seasonal factors, the most obvious of which was the 42,200 job growth reported in the courier industry. This is primarily companies like Fed Ex and UPS who hire additional workers to deal with holiday demand.

In principle seasonal adjustments should remove the impact of seasonal fluctuations, however these adjustments are always based on historical experience. When there is a sharp departure from historical patterns, like the explosion of Internet sales, the seasonal adjustments will not pick this up. We have good reason for believing this to be the case here because in 2010 the Labor Department reported an increase of 46,300 jobs in the courier industry, all of which disappeared the next month. In 2009, it was 30,100 jobs reported in December that all disappeared in January.

Here's the picture:

Employment in Couriers and Messengers (seasonally adjusted)
Source: Bureau of Labor Statistics.

What should we infer from this? We should assume that most, [if] not all of these 42,200 jobs reported in December will disappear in January. That puts our jobs number around 160,000. There were some other unusual factors that may have pumped the numbers in December slightly. Construction employment reportedly rose 17,000 in December after falling 10,000 in October and 12,000 in November. Did we turn the corner in the construction industry? Well the sector added 31,000 jobs in September. Construction employment is very erratic because of the weather. We had a relatively mild December in the Northeast and Midwest, which means that we would expect better than usual construction employment. Don't bet on this one being part of a trend.

More on the Celebration Over December's Job Report
After explaining why the unemployment figures are getting better (a combination of things, but put most of it down to there being fewer people in the available labor pool because they've given up looking for work), he concludes:
The 58.5 percent number for December is up just 0.3 percentage points from the trough of 58.2 percent hit last summer. By comparison, the EPOP [Employment to Population Ratio] hit a peak of 63.4 percent in 2006. We still have almost 5 percentage points to go before we get back to this pre-recession peak. Or to put it slightly differently we have made up just 6 percent of the lost ground.

Employment to Population Ratio (EPOP)
Source: Bureau of Labor Statistics.

In short, a serious look at the December report does not provide much cause for celebration. The economy is still in very bad shape and the current growth path provides little hope for much relief any time soon. Economists should know this, but unfortunately few seem to pay much attention to the data. Remember the double-dip recession?

More on the Celebration Over December's Job Report
I agree with him that the EPOP is a better way of measuring unemployment, at least in times like these. There are some demographic reasons that the EPOP can fluctuate without there being an economic downturn, like the population just generally getting older, and thus more financially secure on average, but on the whole, it's a better measure when short-term changes like the one in that graph have occurred.

I have to chuckle when people warn us not to take all the Republican spin on the economy seriously. Heck, that's always good advice. One thing they don't have to spin, though, is that more than three and a half years after the crash that got us here, we're still looking way, way up at the not-so-grand days of the mid-George W. Bush Administration.

I'd call that sad enough, regardless of what the Republicans have to say.


One Fly said...

How much would he be loved if he prostrated himself and was praying towards Mecca.

Cujo359 said...

Are you commenting on the Tebow article, One Fly? If you are, then the answer is clearly "not nearly as much". In fact, I daresay most of the people who are singing his praises now would be cursing him, even if his behavior was otherwise exactly as it is now.

One Fly said...

I am and somehow clicked on the wrong thing.

My issue has always been how the sport franchises are treated in the Denver market by the media. It's a negative.

Example-when you have major events happening and lead off the news with stories about the Donks.

Cujo359 said...

That's a big reason for my disinterest in sports nowadays, I'm afraid. After the local governments spent $500 million+ to give our allegedly professional sports teams new stadiums, I've come to realize that we pay entirely too much attention to this. OTOH, as someone who is involved with performing arts, I can tell you that cities are nowhere near as interested in keeping theatres and other venues around and affordable, even though they are a much more effective economic stimulus than big sports venues.