Low unemployment? Then where’d all the workers go?

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.

Economist’s View: What Level of Job Creation will Sustain Full Employment?:

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.

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Turn up the global heat, turn down the global economy

My comment: Keep in mind, this five-to-twenty percent less economic activity figure is if we do nothing. If we invest and solve the problem, it’s the key to making the massive gains of the industrial era looking like child’s play. Why would we not invest to end global warming? It means clean power, perhaps unlimited power to drive generations of progress, not just lower sea levels.

Global warming, economic cooling? | Economist.com :

SIR NICHOLAS STERN, the head of the British Government Economic Service, has produced the world’s first big report on the economics of climate change. … Sir Nicholas’s argument is that, far from undermining the American way of life, attempts to mitigate climate change may help preserve it. He argues this by setting the costs of allowing climate change to happen against the costs of mitigating climate change.

Previous estimates of the costs of climate change—as a result of more hurricanes, more floods and rising sea levels, for instance—have been somewhere between nothing and 2% of global GDP. But Sir Nicholas says those figures were wrong, for two reasons. First, the science has changed, and global warming seems to be happening faster than was previously believed. Second, those estimates have looked only at the likeliest outcomes from climate change, not at the outlying catastrophic possibilities. As a result, Sir Nicholas maintains that if greenhouse gas emissions go on increasing at their present rate, global output is likely to be between 5% and 20% lower over the next two centuries than it otherwise would have been.

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$33 more a month for typical retirees

Social Security Checks to Rise, Inflation Slows – washingtonpost.com:

Social Security payments will increase 3.3 percent next year, a smaller cost of living hike than last year for the more than 53 million Americans who receive monthly retirement or disability checks, the government announced today.For retirees, the cost of living adjustment will mean an extra $33 a month beginning in January, with the typical payment jumping from $1,011 to $1,044.

Imagine the leisure opportunities that extra $33 opens wide before the American senior…. Just imagine.

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Over at ZD Net, Monday, October 16, 2006

As part of your humble publisher’s ever-increasings efforts to make reading convenient and pleasurable, here are excerpts the postings I did at ZD Net in the last day (click the headline to read the whole article):

Knowing a lot less than your readers

I’ve resisted getting into another confrontation with Dave Winer, preferring to leave it to Nick Carr and Donna Bogatin to respond to one of the dumbest overgeneralizing “insights” Dave has ever published, that journalism is “like cooking dinner” and that it is “easier for readers to become reporters than it is for reporters to become readers.”

Then, I read this obituary for murdered Russian journalist Anna Politkovskaya:

SHE was brave beyond belief, reporting a gruesome war and a creeping dictatorship with a sharp pen and steel nerves. It may be a chilling coincidence that Anna Politkovskaya was murdered on Vladimir Putin’s birthday, but her friends and supporters are in little doubt that her dogged, gloomy reporting of the sinister turn Russia has taken under what she called his “bloody” leadership was what led to her body being dumped in the lift of her Moscow apartment block.

Winer wrote last week, in a posting I’ll take point by point…

Taxonomy: Will practice make perfect?

Renee Blodgett points to the upcoming Taxonomy Boot Camp, where David Weinberger (author of the upcoming Everything Is Miscellaneous) will be giving the keynote. David’s thoughts are always useful and frequently blindingly insightful. I’d like to be at the conference, but have a conflict. So, I’ll just inject the comments I’d offer if I could go….

The topics at the event include “How to create and implement a successful taxonomy,” which poses an interesting challenge for David’s talk, because he has been at the forefront of the folksonomy movement. Is it possible to “create and implement a taxonomy,” which implies extensive planning and management? Well, sure, if you have to create a closed system, I suppose it is possible, but the collaboratively produced taxonomy is more about the creation of a setting in which purposeful discussion and compromise can happen, because few things can be uniformly tagged and categorized to deal with all situations….

News of puppets?

I’m a big fan of Second Life. But I wonder about a Reuters bureau for SL, which was launched, along with an SL news page where stories have the gushing quality of a press release, like this:

Philip Rosedale and his team at Linden Lab have almost godlike powers in Second Life that Alan Greenspan (right) could only have dreamed of, but they have much the same job managing its fast-growing economy.

With the Second Life economy growing by a red-hot 10 to 15 percent a month, roughly in line with its overall population, Linden Lab is keen to avoid the hyperinflation that has often tainted both real economies and virtual ones.

I understand writing about new products that connect Second Life to external events and covering business and virtual business, because money is really changing hands, but I doubt that requires this kind of production Reuters—or, rather, its reporter—is undertaking to seem relevant to the community he covers. After all, one can certainly report on events on Second Life without having a virtual bureau—seems like the best way to be flooded with cheesy PR pitches to me….

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Job growth weak again, unemployment rises – Aug. 4, 2006:

Job growth came in weak for the fourth straight month in July while the unemployment rate rose, according to a government report Friday that could give the Federal Reserve reason to pause in its two-year-old campaign to raise interest rates.

The economy added 113,000 jobs in July, the Labor Department said, down from a revised gain of 124,000 jobs in June. Economists surveyed by Briefing.com had forecast 145,000 new jobs.

Hold the presses. Last month, the number of jobs created was 121,000 and everyone, particularly President Bush, was saying that was good. A mere 8,000 jobs created is the difference that is going to tip Fed policy—I don’t think so.

Every month a crappy economy is dressed up in a different costume.

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Shabby performance, shiny disposition

Today the Bureau of Labor Statistics announced that the economy added 121,000 jobs last month (click here for the BLS report in full), about a third of what it need to in order to keep up with population growth. President Bush had this to say in Chicago, where he was characteristically sunny:

This morning we got some good news — the nation added 121,000 new jobs for the month of June. That’s over 5.4 million jobs since August of 2003; that’s 34 months of job increases. In the first quarter, our economy grew at 5.6 percent; productivity is high. People are better off, things are working. And so the fundamental question we face in Washington is how do we keep economic vitality alive. What do we do, what are the policies necessary to keep this growth strong?

The President is spinning to save his mid-term elections, calling for more tax cuts. Let’s compare Bush’s economy to the same month of Clinton’s presidency, June 1998: 205,000 jobs added after two months of more than 300,000 jobs added, or 805,000 jobs added for the three months ending in June. Remember, it required far fewer new jobs to keep up with population growth back in 1998, so June 1998 was a poor performance but still better as a percentage of the economy.

Under President Bush during the past three months, the economy has added just 75,000 in May and 138,000 in April for a total of 334,000.

To sum up:

  • At this point in the Clinton presidency, the economy over three months added 805,000 jobs.
  • Currently, in the Bush presidency, the economy over three months added 334,000 jobs
  • Bush is 471,000 jobs behind Clinton, or 58.5 percent behind.

But everything is great, according to Bush, who clearly has more work to do. Fortunately, hourly wages were up 3.9 percent year-over-year, but they are still down since 2001.

Note also, that when the President and the BLS talk about the economy having added 5.4 million jobs, they are talking about since August 2003, not during his presidency. If you look over Bush’s entire presidency, including the approximately 2.4 million people who had lost their jobs during the first two-and-a-half years, Bush has created only about 3 million jobs. Clinton’s tenure saw 22 million jobs created.

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Where’s that growth coming from? Tomorrow’s pockets

FRB: G.19 Release– Consumer Credit — June 7, 2006:

It’s not just the federal deficit that is rising. Consumer credit increased at a six-percent annual rate in April, according to the Federal Reserve. The only time we’ve borrowed more heavily is in 2001, when borrowing was all there was to do.

We’re spending far in excess of current income. Not good on several levels, the least of which is the growing threat of inflation, which, if checked by higher rates, could suddenly contract consumer spending, business spending and any other forces keeping the economy from turning on itself and going into a tailspin.

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Yuan to come over and stress my economy?

WSJ.com – World Bank Says China Needs Currency Appreciation:

The World Bank suggested it was in China’s own best interests to allow faster currency appreciation, ahead of a U.S. Treasury report that could label China a currency manipulator.

The bank’s careful statements follow blunt international pressure on China, including from the U.S. and the Group of Seven leading industrial nations, to allow a stronger yuan.

I’ve been saying for some time that part of the reason the Chinese have kept the yuan low, in addition to making its products more attractive, is a desire to use currency as a weapon. It makes sense for the yuan to appreciate, yet the Chinese have resisted in order to build up currency reserves, primarily dollar-denominated, that could be held over U.S. leaders’ heads—in essence, threatening to call the notes—in a crisis.

An appreciating yuan means China’s economy will run into a wall of reality as the real costs of its fantastic growth are finally expressed into the export market, which isn’t all bad for China. It will make workers in China more aware of how much more they may be entitled to, but it will also make U.S. shoppers feel their dependency on an artificially managed economy half-way around the world. Not a good time, for instance, to be Wal-Mart, which could see its margins under intense pressure. Also a bad time to be a shopper who, already confronted with higher gas prices, will not be able to count on Wal-Mart’s having artificially low prices, either. As always in the Bush era, it will be a bad, a worse, time to be poor.

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