Don’t Get Your Hopes Up
I agree with Dean Baker that the 7.7% unemployment rate is likely a blip that will rise right back up with the cascading impact of the sequester and continued decline in public sector work. Not to mention other fundamental issues such as people simply leaving the workforce, the rising debt crisis combined with a lack of jobs for recent graduates, and other long-term problems with our economic system that no Republicans and only a minority of leading Democrats are really willing to face or even talk about.
The more depressing thing about the jobs report is that even the good headline numbers and relatively decent headline numbers for much of last year, the employment to population ratio hadn’t changed at all in the past year. And there’s little reason to think it’ll go up this year if we stay the course.
Yes. Check Brad Delong’s blog. Unfortunately, he posts that the ratio is actually the same now as it was at the height of the recession. The long term effects are pretty scary.
the employment to population ratio has been oscillating around 58.5 +/- 0.2% since September 2009
http://data.bls.gov/timeseries/LNS12300000
so why the dip in the unemployment rate? people giving up on the job market or w/ev?
Most of the dip — not all — is traceable to a decline in people working. Some is natural retirement/aging. Some more give up. The so-called hysteresis effects are the subject of some scrutiny and debate.
I strongly suspect that much (perhaps most) of the “improvement” in the jobless numbers comes not from people getting jobs, but from folks exhausting their benefits.
Unemployment isn’t counted in terms of who receives benefits. Otherwise I suspect we’d be looking at a much lower unemployment rate.
There’s no real backing for Dean’s prediction that unemployment is likely to tick back up over the next year. The pattern of the last 3 years is a slow but sustained recovery. That is very likely to continue. One problem we will face in this recovery, though, is that the long term unemployed probably represent structurally unemployed workers by now. The question is whether the fed will have the desire and commitment to tolerate the inflation that would probably be necessary to get those folks back in the workplace (the answer is almost surely no). If not, we will start to get some inflation and the fed will contract the economy when unemployment sits somewhere between 6 and 7%. It may be a long time before we see 5% unemployment again.
Also, don’t confuse the short term and the long term. You may believe there are structural problems with the economy, but allowing them to bias your 1-2 year forecast is a mistake.
Um, the cuts from the sequester and Europe backsliding into recession aren’t wrenches in the works?
I’m also not sure where you’re seeing the threat of inflation coming from. Is it hanging out with the bond vigilantes?
I don’t think mpowell is seeing a “threat” of inflation.
He’s saying that some inflation would likely be necessary in order to take a real, meaningful swing at employment and that the Fed is completely unlikely to tolerate it.
As Murc said, I’m making the point that we’d probably need to generate some inflation to deal with the structural unemployment that our slow recovery has induced. On the other point, Europe has sucked for the last 5 years. I’m not sure things are getting any worse or that it will impact the US much. And I don’t think the sequester represents a more significant headwind than the average public policy response over the last few years. And the fed is paying close attention with a desire to keep things growing at a minimum at the current rate. I think they know the need to be aggressive to keep things going and I also believe that we have some room for unemployment to drop another 1% or so before we risk any actual inflation. Finally, housing has finally bottomed and started to pick back up at a nice pace and this will surely help.
Slow but sustained recovery for whom? The overclass is raking it in right now, but everyone else is fucked. Layoffs are still going on all across the public sector, and wage freezes and scare tactics are still being used to keep labor costs extremely low.
All this happy talk from the corporate media is designed to make the people servile and weak. There is nothing more discouraging for the unemployed and underemployed than stories about how great the economy is going. Because they signal that it is OK once again to demonize them instead of help them.
Not that the demonizing:helping ratio ever really changed much. McDonald’s is always hiring, amiright?
I think there’s an interesting argument to be made that this recovery will be difficult to maintain because the prolonged labor market weakness has kept middle class wages depressed, which will eventually lead to depression of consumer demand. But it’s really not clear how that will play out. On the other side of things, the economy has been adding jobs at faster than a replacement rate for several years, which adds demand for goods, which adds demand for employees, a virtuous cycle which still has some room to run. You need a good reason to believe this cycle will be stopped; the default position should be that it will continue. People talk about the average length of post-war recoveries, but this is asinine. The reason an expansion ends is because the fed ends it. A slow recovery should last much longer.
Another point is that by itself, a drop in the unemployment of 0.2% is not really statistically significant. The margin of error for the unemployment rate (which, remember, is produced from a survey) is 0.2%. It’s almost impossible to draw meaningful conclusions from a single month’s change in the unemployment rate as it is rarely larger than that margin of error.
the two best indicators are employment to working age population as was already noted up above and u6, which counts un and underemployed workers: the current rate is over 14% (down from a peak of 17.1% in late 2009), which is well above the norm form 1994 (the earliest date for which there is data) and 2008, when u6 rarely exceeded 10%.
in short, both of these indicators are telling the same story: we are no where close to creating enough jobs to provide options and bargaining power for anyone but ceos….
I do like employment to working age population ratio the best but I can’t find that data consistently. Do you know where that would be?
see the link at bill murray’s 1:04 comment up above.