This page is about the balance between employment and unemployment. The main question is to what extent the nation is using available resources.
6 Aug 2014.
6 Aug 2014. Data through Jul 2014.
Note the worsening progression of the last four recessions. “Jobs” means the non-farm payroll count from the BLS. Each curve in the graph shows the cumulative percent change from the month when the job count reached a peak near the beginning of the recession. The x-axis shows the number of months from this peak, while the y-axis shows the percent job losses/gains. The benchmark dashed line is 1%/year for population growth. The bump up centered at month 29, for recent data, was mainly due to the temporary hiring of the Census Bureau. (Click on graph for a larger image.)
Part time for economic reasons (6 Aug 2014) The fraction of the population working part-time for economic reasons (PTER) has declined slowly from a peak of around 3% in 2009 to about 2.4% now. This is still historically high, but no longer shockingly so. (Background.)
US employment background (5 Nov 2009) The employment situation is key to the economy, both because of a direct impact on citizens, and because the overall health of the economy depends crucially on whether the single most important resource, namely labor, is being used effectively. It is generally agreed that the two key statistics, both from the Bureau of Labor Statistics (BLS), are (1) non-farm payrolls (NFP), a proxy for the total number of jobs, obtained by surveying employers, and (2) the unemployment rate, obtained by surveying individuals.
Next in importance is some measure of how much those employed are working. Some of the top measure are aggregate hours worked, overtime hours, and the count of those working Part Time for Economic Reasons (PTER; i.e. part-time even though they would prefer full time). While these all measure different things, they tend to move together, and it suffices, for a macro understanding of the jobs market, to watch one. We choose PTER.
PTER tends to be an early indicator of changes; so do two others that are worth watching: (1) change in the number of temporary jobs (again from the BLS), which tends to lead NFP by several months, and (2) initial unemployment claims, from the Department of Labor's Employment and Training Administration, which give a weekly read on current layoffs. Together these five indicators give a good sense of the overall employment situation.
US initial unemployment claims (6 Aug 2014) The 4 week moving average of seasonally adjusted initial claims (SA), at 297,250, is significantly down from the peak, and now towards the best end of the range existing in the previous recovery.
The year-over-year change in unadjusted claims normally leads the year-over-year change in non-farm payrolls by an average of 5 months. It correctly predicted that the rate of jobs gain would stop improving at a very low level, and continues to suggest fairly flat performance (Background).
US non-farm payrolls (6 Aug 2014) The number of jobs (non-farm payrolls) was up 1.9% year-over-year – measurably above the neutral rate of 1.0%, where job growth is keeping up with population growth. However it is discouraging that the YOY change remains (1) very low by the standards of most historical recoveries, and (2) just equal to the eight-year high of 1.9% in February of 2012. (Background).
The current series from the Bureau of Labor Statistics began in 1990.
US unemployment (6 Aug 2014) The unemployment rate rose from 4.4% in Mar 2007 to 10.1% in Oct 2009, but has been in a declining trend since, and now stands at 6.2%.
The unemployment rate usually quoted is technically U-3, the most restrictive of several unemployment measures, including only those who have looked for work in the last four weeks. Long term, peaks usually come at the end of, or following, recessions, and can be anywhere from 6% to 11%. Within a long trend in one direction a tick of 0.1 or 0.2 in the opposite direction is common.
The broadest general unemployment measure, U-6, is about 80% higher than U-3 and changes in a parallel fashion; for policy, the differences are important; for investing, the trends are the same. For the longer term health of the economy, it is notable that a third quantity, prime-age men 'Not employed' (including even those not looking for work) has oscillated around a rising 40 year trendline from about 8% in 1968 to about 13% in 2008. (Background)
Covered through 31 Mar 2010.
10 Nov 2008. The Conscience of a Liberal.
“Stimulus math (wonkish)”
“So what kinds of numbers are we talking about? GDP next year will be about $15 trillion, so 1% of GDP is $150 billion. The natural rate of unemployment is, say, 5% — maybe lower. Given Okun’s law, every excess point of unemployment above 5 means a 2% output gap. Right now, we’re at 6.5% unemployment and a 3% output gap – but those numbers are heading higher fast. Goldman predicts 8.5% unemployment, meaning a 7% output gap. That sounds reasonable to me. So we need a fiscal stimulus big enough to close a 7% output gap. Remember, if the stimulus is too big, it does much less harm than if it’s too small. What’s the multiplier? Better, we hope, than on the early-2008 package. But you’d be hard pressed to argue for an overall multiplier as high as 2. When I put all this together, I conclude that the stimulus package should be at least 4% of GDP, or $600 billion.”
22 Jun 2009. Harvard JCHS yearly overview.
“The state of the nation's housing 2009”
“Although accounting for just 2 percent of employment, residential construction contributed 13.5 percent (about 415,000) of last year’s job losses. Including such housing-related positions as real estate agents, brokers, and lend- ers, employment declines in the industry approached 1 million— or about a third of the nearly 3 million total.”
8 Sep 2009. Hussman Funds
“Is the Job Market Ready for a Recovery? William Hester”
[William Hester of Hussman Funds compared a number of employment measures across recession recoveries, assuming (as many do) that the 2007ff recession ended about Jun 2009. For all measures, the 2009 values were worse than any other post-war recession. For duration of unemployment, the previous worst record was the 1982 recession; two months after the 1982 recession ended, the average duration of unemployment was about 19 weeks. In Aug 2009 it was about 25 weeks.]
31 Mar 2010. Speech by Lockhart, on Atlanta Fed website. (ht CR)
“Prospects for Sustained Recovery and Employment Gains. Dennis P. Lockhart”
“Today's slow pace of employment gains is due more to the slow pace of job creation, not the high rate of layoffs. Job gains, as conventionally understood, require two things: a vacancy and a worker able to fill that vacancy. For most of 2009, vacancies were relatively flat while unemployment continued to rise. This condition suggests the existence of what labor economists call “match inefficiencies.”
There are two key types of match inefficiency. One is geographic mismatch. In 2008, the percentage of individuals living in a county or state different than the previous year was the lowest recorded in more than 50 years of data. People may be reluctant to relocate for a new job if the value of their house has declined. In addition, many who would like to move are under water in their mortgage or can't sell their homes.
The second inefficiency is skills mismatch. In simple terms, the skills people have don't match the jobs available. Coming out of this recession there may be a more or less permanent change in the composition of jobs. Skill mismatches require new training, and there is evidence that adult education institutions have responded to this need. For instance, officials at Miami-Dade College in Florida, which is the largest college in the country and a grantor of associate and vocational degrees, told us they have recently seen a strong increase in enrollment, especially of men in their 20s.
This evidence of retooling is encouraging, but, to be realistic, structural adjustment takes time.”
18 Aug 2010. FT.com.
“US matches Indian call centre costs. By James Lamont and Joe Leahy”
“High unemployment levels have driven down wages for some low-skilled outsourcing services in some parts of the US, particularly among the Hispanic population.
At the same time, wages in India’s outsourcing sector have risen by 10 per cent this year and senior outsourcing managers based in the country command salaries above global averages.
Pramod Bhasin, the chief executive of Genpact, said his company expected to treble its workforce in the US over the next two years, from about 1,500 employees now.
“We need to be very aware [of what’s available] as people [in the US] are open to working at home and working at lower salaries than they were used to,” said Mr Bhasin. “We can hire some seasoned executives with experience in the US for less money.”
The narrowing of the traditional cost advantage is also spurring other Indian outsourcers to hire more staff outside India.
Wipro, the Bangalore-based IT outsourcing company, started to recruit workers in Europe, the Middle East and Africa during the global economic downturn. Suresh Vaswani, joint chief executive of Wipro Technologies, forecasts that half of his company’s overseas workforce will be non-Indians in two years, from the current 39 per cent.”