The Recession-Like Episode Continues...

Payroll employment down 20K in April, and now 260K less than in December.

Or, in other words, an employment gap that has widened by 750K over the past four months.

Comments

[Neal]

Some detail:

Construction -31K
Manufacturing -46K
Retail -27K
Finance +3K
Business Services +39K
Temp Service -9K
Education/Health +52K
Leisure/Hospiality +18K
Government +9K

The negative aspects: loss of construction jobs in spring, loss of manufacturing jobs despite a 15% drop in the value of the dollar, loss of retail jobs showing less voluntary sprending, loss of temp service jobs show business contraction.

Th big positive gains in business services, education/health, leisure/hospitality (109K total add) benefited in some unquantified manner by an 186K added via the BLS birth/death model.

The biggest gainer-education/health, comes largely from non-voluntary enforced public/quasi-public spending with high inflation rates.

We're still on the road to the future--a giant teaching hospital with a food court/amusement park in the center.

Looks good, eh? The stock market thinks so.

Who are we to argue with the market? None of the "just the 3rd inning of the crisis" BS--we've won the game!!

[Neal]

One data series that I think is a good one to follow is the YOY change in unemployment for the 49 largest metropolitan areas (over 1 million population).

http://www.bls.gov/web/laulrgch.htm

For March 2007-March 2008

3 out of the 49 show a decrease in unemployment-got better (Oklahoma City unemployment rate went down by 1.1%, Louisville down 0.2%, San Antonio down 0.1%)

2 showed no change (Boston, Houston)

44 showed increase in unemployment (got worse)

of those 44, 21 had an increase of unemployment by 1% or more (San Jose, Chicago, Hartford, Los Angeles, Memphis, Nashville, San Diego, Virginia beach, Atlanta, Jacsonville, Orlando, Richmond, Rochester, Bufalo, Las Vegas, Providence, Sacramento, St Louis, Tampa, and worst of all--Riverside CA, where unemployment went from 5.2 to 7.1%--an increase of 1.9%.

No so good.

[kmeson]

Off topic...

In all of the discussion of the gas tax holiday I have not seen the measured, or modeled, gasoline supply and demand curves. What is a good source for this kind of data? What do Economists write on the back of their envelopes?

- a Physicist thwarted by Google

[anne]

http://www.epi.org/content.cfm/bp214

May 1, 2008

A Feeble Recovery: The fundamental economic weaknesses of the 2001-07 expansion
By L. Josh Bivens and John Irons

Evidence is mounting that the U.S. economy is in a recession. If this is the case, a complete business cycle from 2001 through the end of 2007 (or perhaps the start of 2008) is now on the books, and the economic performance of the current decade can be held up in comparison to that of past business cycles. By almost all measures, the most recent expansion was the worst since WWII.

A variety of recent economic data now show a pattern consistent with the start of a recession. Since 1951, three consecutive months of job declines have always been signals of a recession; the U.S. employment rate declined for the first three months of 2008. Furthermore, the unemployment rate rose from 4.4% in March 2007 to 5.1% in March 2008.

Economic output also began decelerating in the fourth quarter of 2007 to a 0.6% annual rate, an anemic pace that continued into the first quarter of 2008. Several of the internal indicators in the recent gross domestic product report—including consumption of goods and business investment—saw outright declines. Other monthly indicators—including industrial production and payroll employment—peaked in either the fourth quarter of last year or the first quarter of this year. Real income (less transfers) has been flat since last September.

While it will be many months before an "official" recession is declared, evidence shows that the economic expansion that began in 2001 has almost surely ended.1 Furthermore, if these trends continue, the start of a new recession will likely be dated either at the end of the last quarter of 2007, or at some point during the first quarter of 2008.2

Finally, financial market turmoil, housing price declines, and higher energy costs are all likely to place continued downward pressure on the macro economy, thus leading to a longer period of diminished economic activity.

Safely assuming that the expansion ended near the start of 2008, we can compare this cycle's performance to those of the past.

The bottom line of such a comparison is that the economic performance from 2001 to 2007 was anemic by most measures, especially in regards to the labor market. For the vast majority of American households—that is, those who depend on earnings derived from the labor market for the bulk of their income—the economy has been seriously mismanaged.

How strong was the expansion?

Administration officials, including President Bush himself, have suggested that the "fundamentals are strong" even as the nation was clearly drifting toward recession....

This paper retrospectively assesses these claims of "strong fundamentals" by examining U.S. economic performance over the full run of the latest business cycle that began in March 2001 and comparing this recent performance with past cycles. Key findings include:

Of the 10 expansions since 1949, as measured from the end of the recession (trough) to the end of the expansion (peak), the expansion from 2001 through last year ranks last in average growth of GDP, investment, employment growth, and employee compensation.

GDP growth in the latest expansion was a full 40% slower than the post-World War II average (2.8% versus 4.8% in previous expansions).

Despite tax changes that were promoted as incentives to increase investment, average growth in total investment over the latest expansion was less than half of the post-WWII average, and ranked last in this group. For the full cycle, investment growth was also less than half the average and worse than all cycles in the last 50 years.

Compared to the start of the last recession (the peak that occurred in the first quarter of 2001), the percent of the population employed declined by 1.5 percentage points by the end of 2007. The only previous drop in this measure relative to a previous business cycle peak came during the mini-expansion of the early 1980s, and the drop in the latest expansion was five times as large.

If this employment-to-population ratio had remained constant, there would have been roughly 3.2 million more jobs, or an additional 39,000 jobs created each month in the U.S. economy over the course of the most recent expansion.

Corporate profits were the only area of strength in the latest cycle, ranking 2nd strongest among the last the prior 10 cycles....

[anne]

http://krugman.blogs.nytimes.com/2008/04/29/gas-tax-follies/

April 29, 2008

Gas Tax Follies
By Paul Krugman

I've been on the road (actually doing a public dialog with Barney Frank on financial reform), so I'm just catching up. Anyway, John McCain has a really bad idea on gasoline, Hillary Clinton is emulating him (but with a twist that makes her plan pointless rather than evil), and Barack Obama, to his credit, says no.

Why doesn't cutting the gas tax this summer make sense? It's Econ 101 tax incidence theory: if the supply of a good is more or less unresponsive to the price, the price to consumers will always rise until the quantity demanded falls to match the quantity supplied. Cut taxes, and all that happens is that the pretax price rises by the same amount. The McCain gas tax plan is a giveaway to oil companies, disguised as a gift to consumers.

Is the supply of gasoline really fixed? For this coming summer, it is. Refineries normally run flat out in the summer, the season of peak driving. Any elasticity in the supply comes earlier in the year, when refiners decide how much to put in inventories. The McCain/Clinton gas tax proposal comes too late for that. So it's Econ 101: the tax cut really goes to the oil companies.

The Clinton twist is that she proposes paying for the revenue loss with an excess profits tax on oil companies. In one pocket, out the other. So it's pointless, not evil. But it is pointless, and disappointing.

[anne]

"Is the supply of gasoline really fixed? For this coming summer, it is. Refineries normally run flat out in the summer, the season of peak driving. Any elasticity in the supply comes earlier in the year, when refiners decide how much to put in inventories."

I suggest using the reserve for the summer, in line with Cinton's thinking.

[Dave]

I am just wondering: At what point are the BLS numbers so clearly incorrect that someone actually mentions it?

There are 3,000 MORE people working in finance this month? Seriously?

[anne]

China makes price controls on fuel work for limited periods, so can we.

[jerry]

"What do Economists write on the back of their envelopes?"

Usually just "x" and "o" and hearts....

[pgl]

Can't wait until Kudlow decides to tout that household survey as the more reliable measure even as other NRO colleagues are hopelessly confused:

angrybear.blogspot.com/2008/05/news-from-employment-report-bls.html