We don’t really understand why inflation-targeting central bankers closely monitor the job market.
For starters, there is something unseemly about connecting consumer price inflation to theories of labour market “slack”. The implication of ideas such as the “non-accelerating inflation rate of unemployment” is that innocent people should lose their jobs if the weighted-average nominal cost of goods and services rises a bit faster than an arbitrary target. Read more
Polled in March 2012, top academic economists overwhelmingly agreed that “freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment.”
This academic consensus has penetrated popular opinion to the extent that some people believe increasing cross-border trade flows is unambiguously good for everyone. Likewise, there is a relatively common — and wrong — belief that the Hawley-Smoot tariffs were a significant factor in the severity of the Great Depression.
We don’t want to suggest that trade is bad, but it is worth highlighting that the actual views of the experts who study these issues are much more nuanced than what the “pop internationalists” often spew out.
For example, a new paper by Daron Acemoglu, David Autor, David Dorn, Gordon H Hanson, and Brendan Price estimates that the sharp increase in bilateral trade between China and the US cost somewhere between 2 and 2.4 million jobs between 1999 and 2011 — about 1 percent of the entire civilian population in 2011. Less than half of those jobs were in manufacturing sectors that directly competed with Chinese businesses. Read more
If we were asked to make the Great Recession look radically different from all other postwar US recessions, we would point to this chart:
The White House has joined the debate about declining labour force participation with an excellent report from the Council of Economic Advisers. (The fingerprints of Harvard’s James Stock are in evidence in some punctilious time-series econometrics.)
The CEA reaches similar conclusions to a number of other studies. Most of the decline in labour force participation was demographic, due to an aging population; a modest proportion was due to the recession and its unusual severity. Read more
Looks like there will be a vote in the US Senate on reinstating emergency unemployment benefits, which expired on December 28, after Democrats and some Republicans agreed to push it through.
The bill would only extend the benefits for three months, though prospects for the extension remain unclear given the remaining legislative barriers. But via Menzie Chinn, here is the CBO’s estimate of the macroeconomic impact if the benefits were reinstated for a full year: Read more
The common retort to a reduction in the US unemployment rate, such as last week’s, goes something like, “Yes, but that doesn’t really capture the underemployment. What about all the part-timers?!” But, as ever, it comes down to how ‘part-time’ is defined. Comparing Bureau of Labor Statistics data with OECD data indicates that US underemployment is not as severe as the headline figures suggest. Read more
FT Alphaville has written a fair amount about seasonal distortions in economic data but thought this latest piece of research from Nomura was worth highlighting
(mostly because it involves time-travel).
It pokes a small but important hole in the surprisingly low 348k new US claims for unemployment insurance which were filed in the week ending 11 February, the fewest since March 2008. Read more
We found a couple of items from a Credit Suisse note commenting on Friday’s jobs report to be interesting and worth discussing in some detail.
First is a bit of commentary explaining that a higher number of unemployed have dropped out of the labour force since 2009 than have found new jobs. This has undone a long-term historical relationship. Read more
A chart via Nomura to keep in the back of your head as you eagerly anticipate this Friday’s BLS employment situation report in the US:
From a Europe mired in an unresolved sovereign debt crisis and in the midst of trying to recapitalise its banking sector, all this positive US economic data is frankly just irritating.
In fact it’s been so good in terms of positive employment and manufacturing metrics that the Rates & Currencies team at BofAML published a piece entitled “The USA a safe haven again” with this line in it: Read more
Consensus expectations were for 9 per cent and 125,000.
But don’t be deceived by the eye-catching drop in the unemployment rate: this report was good but not great. Read more
An 80,000 rise in non-farm payrolls is disappointing, but something exorcised the devil from the report’s underlying details, which were better than hoped.
There were big upward revisions to the prior two months, with September now showing a gain of 158,000 and August, which originally came in flat with zero growth, now posting a gain of 104,000. The average duration of unemployment fell, and U-6, a broader measure that includes people marginally attached to the labour force and part-time workers, also declined. Read more
This simple graph, pulled from a presentation by economist John Haltiwanger, is a tidy illustration of what David Leonhardt means when he writes that the ongoing labour market ossification is a disturbing mix of both secular and cyclical trends. Read more
The Oregon Office of Economic Analysis has ventured an update to Carmen Reinhart and Ken Rogoff’s ‘This Time it’s Different‘, the seminal work on financial crises of the past – and their related analysis on the aftermath of financial crises.
The OOEA* uses both updated and revised data and, mostly, confirm that while things have of course gotten worse, they’re still inside the historical norms. For example, equity price declines: Read more
As if you needed more.
In this post we’ll stick to the descriptive parts of these notes and leave aside the prescriptive, as the potential efficacy of various monetary loosening measures has been (and will continue to be) debated ad nauseum pretty much everywhere, including on this blog. Read more
President Barack Obama used a Labor Day rally to call again for more infrastructure spending and a payroll tax cut ahead of Thursday’s nationally televised jobs speech, reports Reuters. “We’ve got more than 1 million unemployed construction workers ready to get dirty right now. There is work to be done and there are workers ready to do it. Labor’s on board, business is on board. We just need Congress to get on board,” Obama said. Few specifics were offered by Obama — these are expected to come on Thursday. Calculated Risk summarises the (lack of) jobs stories on Labor Day, while the FT’s Clive Crook has a powerful column on what the President needs to say and do to get America back to work.
Striking workers at Verizon Communications pushed up new US jobless claims last week, reports Reuters, but there was little evidence the recent stock market turmoil had spooked businesses enough for them to cut workers. Initial claims for state unemployment benefits rose 5,000 to 417,000, the Labor Department said on Thursday. While the level suggests the job market is still struggling to gain momentum, it falls well short of a recession signal. The FT says last week, at least 8,500 Verizon workers filed for insurance, and another 12,500 filed claims during the week ending August 13, which was the survey period for the government’s August employment reading, due out September 2. This suggests that the labour dispute may affect the closely watched report. The strikers went back to work on Tuesday but the strike “could start affecting non-farm payrolls this month”, said Robbert Van Batenburg, head of Global Research at Louis Capital Markets. “It’s a temporary effect, but still this doesn’t look good for the jobs market.”
The July jobs report released on Friday was a sweet upside surprise compared to the battering that took place last month. Private sector payrolls increased by 154,000, government jobs fell by 37,000, leaving a net payrolls increase of 117,000. The unemployment rate now stands at a whopping… 9.1 per cent — down from 9.2 per cent in the month before. Read more
We’ll be dissecting tomorrow’s employment report on US Markets Live at 10am in New York (3pm in London).
Bad US payrolls data for May appear to reflect a “general weakening in job growth” rather than any temporary distortion, the head of the agency that compiles the statistics said in an interview with the FT. “Probably the most notable thing about [the jobs report] is there isn’t anything notable about it,” said Keith Hall, commissioner of the Bureau of Labor Statistics. The US added only 54,000 jobs in May, well below this year’s average gain of 182,000, stoking fears that the recovery of the world’s largest economy has lost momentum. The Washington Post says recent lacklustre economic data has prompted many in the market to ask if ‘QE3’ is a possibility. MarketWatch has three reasons QE3 won’t happen.
Cue a big collective “ouch”.
The consensus was for a reading of around 150,000, following a dire week of US data releases. The unemployment rate is now at 9.1 per cent. Estimates for the last two months were also revised down: for March from +221,000 to +194,000 and for April from +244,000 to +232,000. Read more
Our takeaway from the April employment report is that its two surveys — of households and of establishments — finally converged a bit, as was probably inevitable.
For many months now, the household survey had been painting a much better jobs picture than the establishment survey, with total employment (measured in the household survey) well outpacing payrolls growth (from the establishments). Read more
Fewer Americans filed for unemployment insurance last week, and the total number of people claiming jobless benefits fell, supporting the Federal Reserve’s view that the labour market is gradually improving, according to the FT. A separate report showed consumer prices rose faster than expected in February, spurred by rising food and energy costs. See also FT Alphaville on the gap between headline and core inflation.
We’ll continue to have updates as we make our way through the report, so keep checking back:
1) At a glance, a decent report, very close to expectations, and after upward revisions to December and January (each by close 30,000), here is what payrolls look like for the last six months: Read more
We’ll keep updating this post with analysis as we make our way through it, but for now here’s the link and an excerpt from the report itself is below.
Updates: Read more
The cyclical vs structural debate raised a lot of heat and not a great deal of light during the summer. But in the last week or so wise minds have returned to the issue.
In a syndicated column, Raghuram Rajan cited research that ostensibly suggested the demise of housing-related jobs represents a structural break in the US labour market: Read more
Let’s jump right in:
1. To dispense with the obvious, the headline number of 103,000 new jobs fell a good deal short of the roughly 150,000 expected. Including subsequent revisions, this is what the payroll changes in the last six months look like: Read more
We’ll be back with analysis in a bit, but here’s the link and the main part of the report:
The unemployment rate fell by 0.4 percentage point to 9.4 percent in December, and nonfarm payroll employment increased by 103,000, the U.S. Bureau of Labor Statistics reported today. Employment rose in leisure and hospitality and in health care but was little changed in other major industries.
It’s been nearly a week since the atrocious payroll report for November seemingly put a halt to what was starting to look like a nascent jobs growth recovery. The report was especially surprising as it defied favorable economic indicators released in the preceding weeks.
But since then, we’ve seen a steady accumulation of observations and data releases suggesting that the outlook for jobs growth is (somewhat) better than the report indicated. Let’s have a look: Read more
The Ben Bernanke show hit prime time Sunday night.
The Federal Reserve chairman played warm-up act to Facebook’s chief executive Mark Zuckerberg on CBS’ 60 minutes, continuing his recent profile-raising efforts and his polite offensive against QE2 critics. Read more