Mark Thoma at Economist’s View tackles a question I’ve been wondering about: The number of new jobs it takes to sustain full employment.
That is, how many jobs does the economy have to add in a month to keep the unemployment rate steady. In recent years, since the beginning of the “Bush recovery,” the number of jobs added has been suspiciously low. This past month, 92,000 jobs added brought the U.S. to the lowest level of unemployment in five-and-a-half years. yet, it used to take 150,000 to 200,000 jobs added each month to do the same thing.
The Wall Street Journal reports the Federal Reserve now says only 110,000 jobs added is sufficient to sustain current employment rates. But this seems to me to be the result of the increasing politicization of the Fed, which seems more concerned with supporting White House messaging than managing the economy that actually exists.
The change from 150,000 to 110,000 is fairly recent. Michael Moskow’s speech, the first time I heard the revised estimate, was in June, 2006, a year and a half after the trough shown in the graph below. Moskow said:
With overall population growth continuing to slow and labor force participation not expected to rise, we probably need to adjust our benchmarks for what level of employment growth is consistent with economic growth near potential and a steady unemployment rate. It used to be that increases in payroll employment that averaged 150,000 per month were consistent with flat unemployment. Now that number may be closer to 100,000.
Here’s the overall participation rate, and it doesn’t seem to support such a large change in estimate of the job growth needed to hold unemployment steady (to two-thirds of its previous value)… read the rest.