links for 2009-10-02
Can We Please Stop Having Bulls--- from David Brooks in the New York Times Now?

Another Bad Employment Report (I-Wish-We-Had-a-Ripcord-to-Pull Department)

The adult civilian employment-to-population ratio drops below 59% to 58.8%, down from a December 2006 peak of 63.4% (and an April 2000 peak of 64.7%):


God! I really wish that I were not so smart!

Brad DeLong, March 25, 2009:

The Stimulus Package Looks a Lot Smaller Now...: We are going to need a bigger one in September, which means it has to be put into the budget resolution now...

Well, we didn't. And now when it would be very nice to have a very large state aid program ready to be dropped into the fall reconciliation bill--and when it would be very nice to have a government-paid health corps starting up now as part of health care reform--we don't.


Generating a Robust Recovery: Suppose that a prudent use of fiscal policy would be to enlarge the government’s budget deficits by a third of the forecast output gap, and you have an estimate of the appropriate size of expansionary fiscal policy as the situation looked in August 2008: $450 billion in cumulative deficit spending spread out over the next four years. Then came... Fannie Mae and Freddie Mac... Lehman Brothers... AIG... the recession problem was at least twice as bad as it had looked in August, and over the next four and a half months until the February 17, 2009 signing of the ARRA the magnitude of the likely cumulative output gap doubled again.... If $450 billion was the appropriate size of a short-term deficit-spending program for the $1,350 billion cumulative output gap anticipated as of August 2008, then simple extrapolation suggests that the appropriate size of the boost to short-term deficit spending as of February 2009 was $1.8 trillion (over three to four years).

What we got was a cumulative number of $600 billion—roughly 1/3 aid to states, 1/3 tax cuts (in a good-faith effort by the Obama administration to propose a bipartisan plan that legislators of both parties could sign on to), and 1/3 infrastructure and other direct government purchases intended not so much to slow the decline as rather to boost the recovery.... At the technocratic level, the disproportion between the size of the response and the magnitude of the need is obvious.

More commentary:

What Larry Mishel said:

The... employment decline, down 263,000, is still far below the awful hemorrhaging in the winter months.... The revisions announced to last March’s employment level—payroll employment was an astounding 824,000... shows the huge hole we have been thrown into. That, of course, can't be blamed on Obama!...

[T]he drop in the labor force of 571,000 is the only reason that unemployment didn’t exceed 10.0% [last] month.... Also amazing is that the nation’s labor force—those employed or seeking work-declined by 615,000, or 0.4% over the last twelve months when normally we would expect it to rise by at least 1%...

What Dean Baker said:

The loss of 263,000 payroll jobs, coupled with a 0.1 hour decline in the average workweek, pushed the index of aggregate hours to 98.5, slightly below the 98.6 level in December of 1998. Hours worked have now declined by 8.6 percent from the pre-recession peak. In the 1981-81 recession the decline from peak to trough was 5.8 percent. The loss of jobs also pushed the unemployment rate to 9.8 percent....

The government sector lost 53,000 jobs in September... at the state and local level... 47,000... lost jobs.... The construction sector continued its rapid pace of job loss, shedding 64,000 jobs in September.... Manufacturing lost another 51,000 jobs.... Wage growth continues to weaken with wages rising at just a 1.7 percent nominal rate over the last quarter, almost certainly less than the rate of inflation.

The Bureau of Labor Statistics (BLS) reported its preliminary benchmark revisions to the establishment survey data... employment in March of 2009 was 824,000 lower than originally reported with private sector employment 855,000 lower. This extraordinarily large downward revision is not surprising... the imputation for new firms not included in the survey was consistently larger than the imputation from the prior year when the economy was still growing.... [T]he economy has lost 8,029,000 [payroll] jobs in the downturn....

[A] turnaround in the labor market is not imminent. Continuing losses of jobs and declines in hours, coupled with stagnant or declining real wages, means that workers’ purchasing power is still falling. There are no further tax breaks scheduled to boost demand and state and local governments are cutting back and raising taxes to address budget shortfalls. The future is not good.

Kristin Winkler Krapja:

New orders for manufactured goods declined 0.8% in August...

Alan Rappeport:

US unemployment rate hits 9.8%: The US unemployment rate climbed to a fresh 26-year high of 9.8 per cent in September, as the pain of recession continues to linger on the shoulders of American workers in spite of aggressive measures to stimulate the economy. Official figures on Friday showed that non-farm payrolls dropped by 263,000, making it the 21st consecutive month that the US economy has shed jobs. The data were worse than even the most grim expectations, as economists predicted a 175,000 drop in payrolls, and followed a decline of a revised 201,000 jobs in August when the unemployment rate was 9.7 per cent. “It is clear that the labour market is still very weak,” said Paul Dales, US economist at Capital Economics. “The last time one in ten members of the labour force were out of work was in 1983.”...

The US unemployment rate has more than doubled in the past two years and the number of people without jobs has risen by 7.6m to 15.1m since the recession began in December 2007.... In September, hourly earnings ticked up by a penny to $18.67, but the average work week, a closely watched measure that signals future hiring, slid back to 33 hours. This remains close to a record low and economists suggest that an expansion in working hours will have to come before new hiring begins. “Hourly earnings are soft, reinforcing a view that the short term problem is disinflation not inflation, and does not support a consumer spending rebound,” said Alan Ruskin, a strategist at RBS Greenwich Capital.

The labour department figures come as analysts project that the US economy grew at an adjusted annual rate of 3 per cent in the just completed third quarter. Fears abound, however, over a “jobless recovery”, where companies that have become acclimated to operating with fewer workers are slow to begin rehiring and where employment lags the rest of the economy. Ben Bernanke, chairman of the Federal Reserve, said on Thursday that even if the economy expands at a rate of 3 per cent, that will not be enough to chip away at the unemployment rate, which is expected to rise above 10 per cent before falling back next year. Mr Bernanke has pointed to rising levels of long-term unemployment – of six months or more – as another looming risk to the labour force, as workers begin to see their skills erode. In September, 5.4m Americans had been unemployed for more than six months, representing 35.6 per cent of those who were unemployed....

Other indicators have added to the argument that unemployment will remain stubbornly high. New jobless claims have been mounting at a clip of around 500,000 a week, the rebound in manufacturing activity appears to be sputtering and the latest Conference Board survey found that more people feel like jobs are hard to get...

The U-6 underemployment rate--"total unemployed, plus all marginally-attached workers, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all marginally-attached workers--is 17.0%.