Debunking The Happy Headlines About Job Growth

May 16, 2016 11:53 AM ET
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Portfolio Strategy, Long Only, Long-Term Horizon

Contributor Since 2013

Larry Kummer has 37 years experience in the finance industry in a variety of roles. From 1994 to 2013 he was at UBS, the last 15 years as a senior portfolio manager and Vice President of Investments. Now retired, he had most of the major licenses at FINA, plus those for commodities and insurance.  His articles are widely reposted. Those about economics & finance appear at Roubini’s Economonitor,,, Wolf Street, and (of course) Seeking Alpha. Those about climate change appear at websites such as Climate Etc (of eminent climate scientist Judith Curry). Those about geopolitics have been posted at Martin van Creveld’s website and elsewhere. See his articles about the 2007-08 crash here: Seeing the real estate crash coming, he began writing in Nov 2007. He called the recession in early 2008 (a controversial call then). Like everybody else, he didn't anticipate the depth of the crash in late 2008 -- although accurately reporting as it happened.

Summary: The news overflows with chaff about the economy. It's great! It's a recession! Neither is true. Since the 2009 trough we have had growth - but unusually slow growth. Here we look at one measure of growth: jobs, going in slow clear steps from the wonderful headline news to the grimmer reality.

Fast Snail

The headlines surge with good news about jobs. "U.S. Economy Added A Robust 292,000 Jobs In December". "Barack Obama has been a great president for job creation". "Job Growth Surges in February". "Job growth picks up steam, economy adds 242k jobs in February." There are reports comparing the numbers of new jobs "by" each President (Washington, Teddy Roosevelt, and LBJ look pretty bad by this daft metric, which doesn't account for population growth).

Let's start with the good news and work through to the grimmer reality.

Here's the good news that excites Janet Yellen:
job openings as a percent of total non-farm jobs are back to their 2001 peak!

Job Openings as percent of nonfarm jobs

The bad news:
the rate of hires (people actually hired as percent of total jobs) has climbed, but only back to the average of the previous expansion (2002-2007)

Hires as percent of nonfarm jobs

The very bad news:
the higher rate of hires has not boosted the rate of job formation (payroll growth). It's just faster turnover of jobs. This shows percent growth in jobs. It looks better when expressed in thousands because the population grows over time.

Growth rate of nonfarm payrolls

Confirming the bad news (no tight labor markets):
hourly wages of workers are growing even slower than in 2001-2007. The 2001-2007 expansion was called "jobless growth".

Growth of hourly wages for workers

The worst news: for the first time since the 1930s
America's working age population (red) grows faster than jobs (
BLUE). Index: 100 = March 2001 (peak before the tech recession).

Growth of Jobs vs Working Age Population


Jobs and wages are the key not just to prosperity in America, but to social and economic stability. Growth of an underclass - people without secure jobs, in part-time contingent minimum-wage jobs - drives a wide range of social ills. This is incomparable with our political institutions, and tangible evidence of our failure.

For almost a generation we have tried a wide range of economic nostrums: tax cuts for the rich paid for by government borrowing - massive growth of household, business, and government debt - wild fiddling with the knobs of monetary policy (zero interest rates, massive expansion of the money supply, quantitative easing) - and even foreign wars. Nothing has worked.

Meanwhile our public infrastructure rots from insufficient maintenance and inequality grows. Hillary Clinton has little interest in these things (I'll wager that passing the Trans-Pacific Partnership faux-trade treaty becomes a higher priority if we elect her). Trump gives us random sound bites, while his far-right advisors plan policies to help the 1%.

America is changing into something else. But the political machinery the Founders bequeathed us remains powerful, needing only our participation to make it work (voting is the starting point of citizenship, not its essence). The clock is running. Time is not our friend.

For More Information

If you liked this post, like us on Facebook and follow us on Twitter. See all posts about increasing income inequality and falling social mobility, about ways to reform America, about Campaign 2016, and especially these…

  1. Why America's growth is slowing, and a solution - Imagine bringing June Cleaver from her 1957 home to today's equivalent; she'd be astonished at our lack of progress. Look at how we've underperformed futurist Herman Kahn's 1967 expectations for the year 2000.
  2. Poorly prepared Boomers retiring means hard times for them and for America.
  3. As boomers retire they create a drag on US GDP that will last for decades.
  4. Strong job growth. Weak wages. What's wrong with this picture?
  5. Fewer new superstar firms: another step towards secular stagnation for America.
  6. Why new home sales are slow, and will remain so for a long time.
Two books about our slow growth

Are we Doomed to Secular Stagnation? Limitations of Supply-Side Economic Policies by Uwe Petersen (2014) and the highly rated Secular Stagnation: Facts, Causes and Cures by editors Richard Baldwin and Coen Teulings (2014).

Are we Doomed to Secular Stagnation

Available at Amazon.

Secular Stagnation: Facts, Causes and Cures

Available at Amazon.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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