I feel like I’m in the movie Groundhog Day when it comes to the job numbers. I wake up on the first Friday each month to the same story — subpar job growth, no budging in key indicators, the insanity of the “anti-stimulus” of bleeding government jobs – and then wake up to it again next month. This month looks like the past dozen: 80,000 jobs were created, while the government sector shed 24,000 jobs.
We need a new description because I’m exhausted with describing how disappointing the job numbers are, especially when the results are so obvious given a lack of movement on fiscal and monetary stimulus. So let me instead describe what a good jobs numbers report would have looked like.
First of all, there would have been job growth that gets us back to full employment instead of job growth that is slightly around the rate of population growth. There would be well over 150,000 jobs created a month, ideally above 200,000 and even beyond that — there’s a lot of catching up to do. The key indicator to watch is the employment-population ratio, which is the percentage of the workforce that has a job. As unemployment only indicates the number of people actively searching for a job, and many are dropping out of the labor force and giving up on finding a job, the unemployment rate tells us less and less. And if the population is growing faster than the number of jobs created, we are losing out. The employment-population ratio tells us the actual rate at which we are employing people. It is currently at 58.4 percent, the same it was in January 2011.
A tourniquet would have been applied to the bleeding of public sector jobs. This is the worst time to push government workers into the ranks of the unemployed. With slack capacity, a high number of unemployed people, and negative real interest rates, we can’t afford a war against government workers. It’s a war in which we’ve lost 250,000 government jobs since January, with 77,000 in the “local government education” category (in other words, public school teachers).
But here’s President Obama in the 2010 State of the Union giving the wrong message:
Now, I know that some in my own party will argue that we can’t address the deficit or freeze government spending when so many are still hurting. And I agree — which is why this freeze won’t take effect until next year — (laughter) — when the economy is stronger. That’s how budgeting works. (Laughter and applause.) But understand — understand if we don’t take meaningful steps to rein in our debt, it could damage our markets, increase the cost of borrowing, and jeopardize our recovery -– all of which would have an even worse effect on our job growth and family incomes.
Given that 2011 has been a lost year for the economy so far, this kind of deficit hawk aggression was the exact wrong call.
What else would a good report include? Strong gains in wages and hours worked. This is something we’d see more of as the economy returned to full employment, but it is worth keeping an eye on. The lack of these gains is a good sign that there is a ton of slack in the economy — and that those who have been freaking out about runaway inflation got it exactly wrong.
The duration of unemployment would have come down, and not because people are dropping out of the labor force. We saw a large decline this past month in the duration of unemployment: 40.5 to 39.4 (mean), 22.2 to 20.8 (median). We also saw a large drop in the number of people in the long-term unemployed category. More analysis is needed, but it certainly looks like many of people in this category are simply giving up on finding a job and dropping out of the labor force altogether.
What we really need is a healthy economy. The way we get there is a fiscal stimulus by any means necessary, aggressive monetary policy, and putting the housing market in order. What are the chances we’ll see changes on any of these fronts?