Dismal Jobs Numbers
The Bureau of Labor Statistics (BLS) released its monthly employment numbers today showing that only 121,000 jobs were added to the workforce in June. This is short of the 150,000-200,000 jobs that need to be created in order to keep up with growth of the labor force. However, the report starts off with two positive graphs showing unemployment dropping over the past 36 months while employment grows.
I was curious to see whether, using these 3 years (which were the best of the Bush presidency in terms of employment), employment and unemployment met the replacement rate (the rate at which jobs need to be created to keep pace with labor force growth). They were not, and the linked table (HTML) demonstrates that. Below I will discuss possible problems interpreting my analysis, but the fact is that the past 3 years have seen meager employment growth at the same time as the unemployment rate has failed to fall as much as possible. Had the economy grown by 175,000 jobs per month, the average value thought to be needed to keep up with population growth, the unemployment rate should be 3.5 percent and there should be an extra 1.28 million jobs. Even with a more modest assumption that the economy needs to generate 150,000 jobs per month to keep up with labor force growth, the unemployment rate would be 4.3 percent and there would be an extra 380,000 jobs. This is a 0.3 percent lower unemployment rate!
Now for the caveats. The main caveat is that my numbers will underestimate the unemployment level compared to the actual level. This is because I simply take the employment numbers in June 2003 and add 150,000 to it. If I had the capability, I would need to take into account that when employment growth is higher, the workforce will expand at a faster rate than when growth is lower. Because the extrapolations I measure are higher (175,000 and 150,000 per month versus 140,306), my values for employment are going to be high relative to the total labor force, for which I use the actual data. For example, my calculations suppose that with 175,000 jobs being created each month in the July 2003-June 2006 time frame, the unemployment rate will drop to 3.5 percent. In reality, with job growth of 175,000 workers per month, more job seekers are going to be looking for work and so the total labor force will increase more than it actually did, which would probably raise the unemployment rate to between 3.8 and 4.0 percent. However, the gains in total employment would make more people better off, and therefore increase the overall well-being. Therefore,
I think my estimates are still valid at showing that the economic policies which created the actual economic performance are sub-optimal to what is possible (and what actually occurred under the previous Democratic presidency). The rest of my caveats are more for the geeks and there isn't much that would interest the non-geeks and skipping it will not prejudice the overall conclusions. In order to calculate this, I used the seasonally adjusted private sector, non-farm employment number, the standard used by the BLS, calculated from the survey of enterprises (the Current
Employment Statistics survey, or CES). To calculate unemployment, I used the household survey (the Current Population Survey, or CPS). Because of the way these surveys are conducted, they sometimes differ on the level of unemployment, but the CPS is more frequently used. Because I had the private, non-farm employment numbers, I used the unemployment rate to calculate the private, non-farm unemployment numbers and therefore the total labor force (which is the employed plus unemployed populations).
The main thing to be gained by looking deeper by comparing the potential employment numbers with the actual numbers is that, whatever the political spin, the economy has underperformed over the past 3 years. Undoubtably, the picture would look far more bleak if the entire period from January 2001 to June 2006 were used. This compounded with the stagnation of wages for most workers (the minimum wage is at the lowest level in real terms since 1955) that the economic management of the Bush Administration begins to look quite dismal, at least for those who work for a living.
I was curious to see whether, using these 3 years (which were the best of the Bush presidency in terms of employment), employment and unemployment met the replacement rate (the rate at which jobs need to be created to keep pace with labor force growth). They were not, and the linked table (HTML) demonstrates that. Below I will discuss possible problems interpreting my analysis, but the fact is that the past 3 years have seen meager employment growth at the same time as the unemployment rate has failed to fall as much as possible. Had the economy grown by 175,000 jobs per month, the average value thought to be needed to keep up with population growth, the unemployment rate should be 3.5 percent and there should be an extra 1.28 million jobs. Even with a more modest assumption that the economy needs to generate 150,000 jobs per month to keep up with labor force growth, the unemployment rate would be 4.3 percent and there would be an extra 380,000 jobs. This is a 0.3 percent lower unemployment rate!
Now for the caveats. The main caveat is that my numbers will underestimate the unemployment level compared to the actual level. This is because I simply take the employment numbers in June 2003 and add 150,000 to it. If I had the capability, I would need to take into account that when employment growth is higher, the workforce will expand at a faster rate than when growth is lower. Because the extrapolations I measure are higher (175,000 and 150,000 per month versus 140,306), my values for employment are going to be high relative to the total labor force, for which I use the actual data. For example, my calculations suppose that with 175,000 jobs being created each month in the July 2003-June 2006 time frame, the unemployment rate will drop to 3.5 percent. In reality, with job growth of 175,000 workers per month, more job seekers are going to be looking for work and so the total labor force will increase more than it actually did, which would probably raise the unemployment rate to between 3.8 and 4.0 percent. However, the gains in total employment would make more people better off, and therefore increase the overall well-being. Therefore,
I think my estimates are still valid at showing that the economic policies which created the actual economic performance are sub-optimal to what is possible (and what actually occurred under the previous Democratic presidency). The rest of my caveats are more for the geeks and there isn't much that would interest the non-geeks and skipping it will not prejudice the overall conclusions. In order to calculate this, I used the seasonally adjusted private sector, non-farm employment number, the standard used by the BLS, calculated from the survey of enterprises (the Current
Employment Statistics survey, or CES). To calculate unemployment, I used the household survey (the Current Population Survey, or CPS). Because of the way these surveys are conducted, they sometimes differ on the level of unemployment, but the CPS is more frequently used. Because I had the private, non-farm employment numbers, I used the unemployment rate to calculate the private, non-farm unemployment numbers and therefore the total labor force (which is the employed plus unemployed populations).
The main thing to be gained by looking deeper by comparing the potential employment numbers with the actual numbers is that, whatever the political spin, the economy has underperformed over the past 3 years. Undoubtably, the picture would look far more bleak if the entire period from January 2001 to June 2006 were used. This compounded with the stagnation of wages for most workers (the minimum wage is at the lowest level in real terms since 1955) that the economic management of the Bush Administration begins to look quite dismal, at least for those who work for a living.
posted by Biafra27 at 1:04 AM
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