Boomers and the job numbers

What does the retirement of the baby boom generation have to do with the job numbers you might ask.  I never thought of my retirement impacting the unemployment rate but reading Paul Krugman in the New York Times this morning, I realize that in a strange way I am helping the economy.  Yes, I’ve read all  the stories about how we didn’t save enough, how our homes (the big retirement plan for many) have lost value, how interest rates are hurting retirees, how the numbers are going to make Medicare and Social Security go broke and on and on.  But it never occurred to me that maybe the estimated 10.000 people a day who retire might actually be good for the economy.  Think about it.  Each person who retires has the potential to open up a job for someone else.  The bottom line is there is still work that needs to be done and at some point someone will be hired to do it.

 

AARP Social Security for Dummies Book Jacket

 

Krugman writes

 …the methods the bureau uses are public — and anyone familiar with the data understands that they are “noisy,” that especially good (or bad) months will be reported now and then as a simple consequence of statistical randomness. And that in turn means that you shouldn’t put much weight on any one month’s report.

In that case, however, what is the somewhat longer-term trend? Is the U.S. employment picture getting better? Yes, it is.

Some background: the monthly employment report is based on two surveys. One asks a random sample of employers how many people are on their payroll. The other asks a random sample of households whether their members are working or looking for work. And if you look at the trend over the past year or so, both surveys suggest a labor market that is gradually on the mend, with job creation consistently exceeding growth in the working-age population.

On the employer side, the current numbers say that over the past year the economy added 150,000 jobs a month, and revisions will probably push that number up significantly. That’s well above the 90,000 or so added jobs per month that we need to keep up with population. (This number used to be higher, but underlying work force growth has dropped off sharply now that many baby boomers are reaching retirement age.)

Meanwhile, the household survey produces estimates of both the number of Americans employed and the number unemployed, defined as people who are seeking work but don’t currently have a job. The eye-popping number from Friday’s report was a sudden drop in the unemployment rate to 7.8 percent from 8.1 percent, but as I said, you shouldn’t put too much emphasis on one month’s number. The more important point is that unemployment has been on a sustained downward trend.

But isn’t that just because people have given up looking for work, and hence no longer count as unemployed? Actually, no. It’s true that the employment-population ratio — the percentage of adults with jobs — has been more or less flat for the past year. But remember those aging baby boomers: the fraction of American adults who are in their prime working years is falling fast. Once you take the effects of an aging population into account, the numbers show a substantial improvement in the employment picture since the summer of 2011.

unemployment

unemployment (Photo credit: Sean MacEntee)

 

So the job growth and unemployment figures are slowly improving.  The overall trend is up for growth and down for unemployment.  I think one of the most shocking reactions to the numbers was the notion that they were somehow being manipulated and the things were actually much worse.  Do some like Jack Welsh actually want things to either get worse or at least to stay bad?  They just can’t bring themselves to admit that President Obama may be succeeding – despite Congress and the Republicans and turning things around.  Do they really need to win that badly?

Krugman says it better

…The U.S. economy is still far short of where it should be, and the job market has a long way to go before it makes up the ground lost in the Great Recession. But the employment data do suggest an economy that is slowly healing, an economy in which declining consumer debt burdens and a housing revival have finally put us on the road back to full employment.

And that’s the truth that the right can’t handle. The furor over Friday’s report revealed a political movement that is rooting for American failure, so obsessed with taking down Mr. Obama that good news for the nation’s long-suffering workers drives its members into a blind rage. It also revealed a movement that lives in an intellectual bubble, dealing with uncomfortable reality — whether that reality involves polls or economic data — not just by denying the facts, but by spinning wild conspiracy theories.

It is, quite simply, frightening to think that a movement this deranged wields so much political power.

Explaining the new jobs numbers

The number of jobs added grew again in September reflecting the slow but steady growth and unemployment dropped below 8% for the first time since January 2009, the month President Obama took office.  Republicans, including Jack Welsh the former CEO of General Electric, are going to argue that the Bureau of Labor Statistics somehow cooked the numbers to help the President. Ezra Klein explains why this couldn’t be the case.

We’ve hit that moment in the election when people begin to lose their minds. Case in point, within minutes of the jobs report, Twitter filled with Republicans claiming the books were somehow cooked, the numbers aren’t real, etc.

Let’s take a deep breath. Jobs reports are about the economy, not about the election. Confusing the two leads to very bad analysis.

This is a good jobs report in a still-weak economy. The 114,000 jobs we added in September aren’t very impressive. The revisions to the last two months, which added 86,000 jobs to the total, were much more impressive. Those revisions also suggest that September’s jobs could get revised up — or, of course, down. So be careful about reading too much into that number. Still, these are, at best, good, not great, numbers.

The chart shows the number of jobs added pretty consistent with previous numbers.  So where is the controversy?

The controversy, if it’s worth using that word, is over the unemployment rate, which dropped from 8.1 percent to 7.8 percent. That’s three-tenths of one percent. That’s what all the fuss is about.

Let’s get one thing out of the way: The data was not, as Jack Welch suggested in a now-infamous tweet, manipulated. The Bureau of Labor Statistics is set up to ensure the White House has no ability to influence it. As labor economist Betsey Stevenson wrote, “anyone who thinks that political folks can manipulate the unemployment data are completely ignorant of how the BLS works and how the data are compiled.” Plus, if the White House somehow was manipulating the data, don’t you think they would have made the payroll number look a bit better than 114,000? No one would have batted an eye at 160,000.

The fact is that there’s not much that needs to be explained here. We’ve seen drops like this — and even drops bigger than this — before. Between July and August the unemployment rate dropped from 8.3 percent to 8.1 percent — two-tenths of one percent. November-December of 2011 also saw a .2 percent drop. November-December of 2010 saw a .4 percent drop. This isn’t some incredible aberration. The fact that the unemployment rate broke under the psychologically important 8 percent line is making this number feel bigger to people than it really is.

Wonkblog posted this chart soon after the numbers were released.

 

The explanation

…the unemployment rate is a function of two things: the number of people
employed, and the number of people in the labor force. But the proportion of
people in the labor force actually went up, suggesting the fall in the
unemployment rate reflects a real improvement, rather than people stopping their
work search…

The Bureau of Labor Statistics looks at the unemployment rate in several ways as Klein explains.

Which leads to another argument: That U6, the broadest measure of labor-market pain, didn’t move, which should make us skeptical of the fact that U3, the normal unemployment rate, did move. That’s just misunderstanding what U6 is.

U6 is not an unemployment measure. It includes part-time workers who want full-time work. So it doesn’t count the increase in part-time work. But every measure of actual unemployment — U1, U2, U3, U4, and U5 — went down. You can see them all here. Again, there’s no mystery.

Klein concludes

This is an encouraging report. What it tells us is that the labor market has been a bit better over the last few months than we thought, and that the recovery hasn’t slowed in the ways we feared. What the response to it tells us is that the election is driving people a little bit crazy.

You can see more charts by clicking the various links.

Creating Jobs: which party does better

The Republicans will campaign on the idea that lowing taxes on the wealthy (I think Romney wants to keep the Bush tax cuts and even cut more) creates jobs because the money the wealthy do not pay in taxes goes to create jobs.  Fay Paxton has looked at the history of job creation and posted an analysis on Winning Progressive.   Her conclusion:  Democrats create more jobs.  These charts describe private sector job creation.

Yes, the first months of the Obama Administration were rough, but as the chart shows, we started bleeding jobs under George W. Bush.

Ronald Reagan wins among Republicans, but he wasn’t afraid of raising taxes.

So what about federal public sector jobs?  The Republicans always claim that the Democrats are the party of big government.  Is this true?  Paxton says

Republicans talk about being conservatives who believe in small government and reducing the federal workforce. The numbers don’t bear out their claims.  In a press conference, House Speaker John Boehner said, “In the last two years, under President Obama, the federal government has added 200,000 new federal jobs.”  The Republicans even advanced legislation calling for a reduction of 200,000 federal employees.

Here’s the truth:

According to the Office of Personnel Management, it is true that the federal workforce increased by 237,000 employees. What Boehner does not tell…150,000 of the employees added to the roles were uniformed military personnel, no doubt to accommodate the wars in Iraq and Afghanistan. The 237,000 figure also includes temporary Census workers.

Despite claims of huge government expansion, historically, Democratic presidents reduced the size of the federal government workforce. The federal employment numbers, according to the U.S. Office of Personnel Management, the department charged with tracking the number of employees, the data shows the following:

Paxton summarizes

If we combine the totals for all federal employees, including the military:
Reagan began office with a total of 4,982,000 employees and ended his term with 5,292,000 employees. While President Obama took office with a federal employee roster of 4,430,000 employees (fewer than Reagan). At the end of 2010 President Obama’s federal workforce numbered 4,443,000; that’s 849,000 fewer employees than Reagan, the advocate of small government! Add to this the fact that President Reagan governed during peacetime, while President Obama inherited two wars.

So the figures don’t lie:  Democrats do a much better at creating new private sector jobs and reducing the size of the federal government.

 

Massachusetts Mitt, Jobs Creator?

Just so there is no mistake here:  I didn’t like Mitt Romney when he was Governor of Massachusetts.  First,  he got the Republican nomination by elbowing out a perfectly good candidate, Acting Governor Jane Swift.  Second, he spent most of his time here not being Governor, but running for President.  Third, getting universal health care was a great achievement showing the country that it can be done, but Mitt wants to forget it ever happened.  Kinda like throwing out your only child with the bath water.  But now Mitt is running again as a jobs creator because only Republicans can create jobs.

Last night Rachel Maddow reminded us of a little fact about Mitt Romney’s job creation:  He didn’t create very many. 

What Romney leaves out of his stump speech, however, is just how bad his state’s job creation statistics were during his four years as governor. Different job creation studies rank Massachusetts in the bottom four states during Romney’s administration. A study by the independent think tank MassINC ranked the state 49th in job creation from 2001-2007, ahead of only Michigan. And according to the U.S. Department of Labor, Massachusetts ranked 47th, ahead of only Michigan, Ohio, and Louisiana. Michigan and Ohio, both located in the Rust Belt, faced heavy job losses due to the flight of manufacturing jobs from the Midwest. Louisiana, meanwhile, lost hundreds of thousands of jobs in the aftermath of Hurricane Katrina in 2005.

During Romney’s period as governor, Massachusetts’ job growth was just 0.9 percent, well behind other high-wage, high-skill economies in New York (2.7), California (4.7), and North Carolina (7.6). The national average, meanwhile, was better than 5 percent.

So who does Mitt blame for this poor performance?  The Democrats in the legislature.

Romney blames the poor job numbers on Democrats in the Massachusetts state legislature. But since its economy faltered in 2008 and 2009, Massachusetts has rebounded in the job creation ranks, emerging from the recession with some of the nation’s strongest job numbers. Under current Gov. Deval Patrick (D) — and a legislature still controlled by Democrats — the state experienced 4.2 percent job growth in the first quarter of 2011, better than twice the national average and good enough to rank in the top 10 nationally. That followed a year of solid growth in 2010, when Massachusetts was among the nation’s leaders in job growth.

Mitt, you might have to find something else to run on.

Jobs and the Recovery

Very interesting blog entry today from Floyd Norris, Chief Financial Editor of the New York Times.   We all know that the last unemployment figures showed a rise to 10.2% and that President Obama keeps trying to explain that jobs are the last thing to return after a recession.  But Norris argues that maybe things have already started to turn.

The economic reactions over the weekend to Friday’s employment report all started from the assumption that things grew much worse in October. The unemployment rate leaped to 10.2 percent from 9.8 percent. Another 190,000 jobs vanished.

Actually, none of that happened.

In reality, the government report says unemployment rates remained steady at 9.5 percent. And the number of jobs actually rose, by 80,000. And the number of jobs for college-educated Americans rose more than in any month in the last six years.

If those were the numbers in the articles, we would hear about the economy stabilizing, and talk about the Obama stimulus plan starting to have the intended effect.

Why the disparity in numbers?  Because of something called “seasonal adjustment”.

…For some reason, October is the month with the largest seasonal adjustment down in jobs. So the increase in the unemployment rate does not reflect people actually losing jobs. It reflects the belief that seasonal factors should have added more jobs than they did.

So if there were no seasonal adjustment factor, jobs would have actually increased.

Studying the unadjusted numbers provides some indication that the hiring is starting to improve for better jobs. The number of jobs for college graduates, according to the household survey, rose 755,000 in October, before seasonal adjustments. That is the third-largest increase since the government started counting those figures, in 1992. (It trails increases of 895,000 in February 2002 and 755,000 in October 2003.)

On the other hand, the number of jobs fell for those with less education. If this report does indicate that the job recession is ending, it is an end that is providing immediate benefits for the educated, not for many of the people who most need help.

So when the stimulus funding really gets out on the street, probably in the spring, employment for construction jobs should increase.  In the meanwhile, we need to make sure unemployment benefits remain available.