Jobs!
- Posted by ryan on June 5th, 2009 filed in Economics
I’m interrupting my extended blogging weekend to issue a big eye-roll to the economics blogging community, which appears to have written and scheduled its posts on today’s job figure before seeing the actual numbers, and declined to make edits after. The blogosphere is seemingly unable to simultaneously think that in and of itself a 345,000 monthly decline in payrolls is very bad, but that the report is nonetheless an obvious and straightforward sign that things are improving.
Once again, everyone is saying all this means is that things are getting worse more slowly, to which I again note that that’s how one moves from a rapidly deteriorating economy to a growing economy. Felix, god bless him, writes:
Bloomberg tries to find a silver lining to today’s gut-wrenchingly atrocious unemployment figure:
The jobless rate increased to 9.4 percent, the highest since 1983, in part as more people joined the labor force to look for work.
Hey! People are out there looking for jobs! That must be a sign of optimism, right? Er, not really. It just means that households are getting desperate.
Or it’s a sign of optimism! As the permabears have it, when workers quit looking they’re feeling hopeless and when they start looking again they’re desperate. Presumably when they actually find jobs we’ll read that it still doesn’t mean the recession is coming to an end, because hey, folks don’t much like their new line of work! Or something.
The news here isn’t that 345,000 jobs is a bad report. Any idiot can tell you that the economy is pretty dreadful at the moment. The news here is that:
1) This is the best report since September.
2) Losses have come down by over 50% since the peak of the downturn in January.
3) The number beat expectations, suggesting that we may be closer to recovery than is widely anticipated.
Of course things are very fragile. Of course it’s important to continue to support the economy with monetary and fiscal stimulus. Of course a lot of households are hurting. Of course the labor market will remain extremely weak for some time to come, even after economic growth has resumed. That’s all true. But to act as if this is just more of the same bad news we’ve been getting since January is simply inaccurate.
We’re supposed to be providing context to readers. Most writers seem to think the best way to do this is to say that things are still awful because all we have is a positive second derivative. Well the second derivative turned positive for payrolls in February; is there really no difference to everyone in a monthly loss of 681,000 jobs and a monthly loss of 345,000 jobs? Really?
June 5th, 2009 at 1:06 pm
Thanks for pointing out the obvious– I liked the line “I’m interrupting my extended blogging weekend to issue a big eye-roll to the economics blogging community, which appears to have written and scheduled its posts on today’s job figure before seeing the actual numbers, and declined to make edits after.” Made a similarly themed comment in a reply to Felix.
Condescension from one member of the blogging community to another is always gold.
June 5th, 2009 at 2:29 pm
The report is even more telling than that. We have upward revisions in both prior months. That is a very good things.
Here is what doesn’t seem to be sinking in for some commentators: The economy has significant inertia. Enterprises don’t just make employment and capital decisions on a whim or because of one month’s revenue.
Many of the job cuts that are happening now were agreed to months ago. Some of the hiring freezes that are on now are a result of a decline in new orders in February that were in turn the result of contracting credit in September.
Thus we don’t expect the ship to turn around overnight. But, even more than that
1) The computer models know that the economy has significant momentum and they include that in their monthly estimates of job creation. Hopefully, no one is under the impression that this data is a raw, unadulterated count.
So when the economy begins to turn the computer model will consistently overshoot. Thus overshooting is a sign of a turn.
2) Because there is significant inertia it takes a heck of an impulse just slow to this big guy down. If job loss is slowing down it means something is pushing really hard in the opposite direction.
So, its not just that if the economy were recovering it would have to take this path; taking this path is itself a strong sign of recovery.
That’s not to say that we should take anything for granted. The New Claims for Unemployment data for example has not shown the kind of drop off I expected to see these last three weeks. However, these are mostly the correct signals.
June 5th, 2009 at 4:43 pm
Question: How are recently graduating college kids reported? Does this 345,000 number include 250,000 (or whatever) 22 year-olds who just graduated in May?
June 5th, 2009 at 4:59 pm
BeyondDC:
The payroll number is from a survey of businesses. So, individuals don’t report.
My understanding is that the businesses are to include the job when it begins, not when it is promised. So, most graduates will probably not be in the report.
However, also the numbers that we get are seasonally adjusted. There are huge drop offs in Jan. and July, that are smoothed out. I am not sure exactly when the college bump comes in but it should be taken out in that smoothing as well.
June 6th, 2009 at 12:02 am
Speaking of “Jobs,”
American City Business Journals bought portfolio.com. Felix Salmon now works for Reuters. Ryan Avent is back with The Economist.
Most of us who follow the any part of economics blogging community just wish the New York Times would go out of business - bringing Paul Krugman down right along with it.
June 6th, 2009 at 11:15 am
Very few writers on the Internets expose the basic dumbassery of the national press better than you do. Thank you.
June 6th, 2009 at 12:39 pm
The point on the U3 unemployment rate would have more impact if the U6 unemployment rate had stabilized or was declining.
I’ve seen this precise same fight in multiple online forums … those who wish to say that news is better than the news that we had been receiving say “this is good news”, sometimes taking the “of course, its still bad news, but its better bad news” for granted, sometimes not. Those who see another Bush-ite effort to spin bad news as good news react as they became accustomed to reacting, “pushing back” against the perceived effort to spin more lost jobs as good news, presumably for a stock market that has never cared directly about employment in the economy.
All entirely predictable given the experiences of various people over the past five years.
One solution may be to speak more precisely. This is an indicator that unemployment may be stabilizing. Its consistent with touching bottom in a few months from now and then starting a recovery.
Of course, its also consistent with another shock hitting the economy with a resumption of the rapid downward slide. Speculators may want an informed guess as to which is more likely, but the reality is that we are in a stage where there is intrinsic uncertainty whether or not we are headed for recovery, and those who proclaim the answer … whether the bullish version or the bearish version … are engaged in pretence.
June 7th, 2009 at 6:30 pm
More importantly, the stimulus is working.
Hot diggity!
June 7th, 2009 at 11:57 pm
Hot Diggity Dawg!