This Friday, December 5, the Bureau of Labor Statistics will release its monthly jobs report. The key pieces of information contained in the report will be the Jobs Number, which is the change in nonfarm payroll employment, and the Unemployment Rate. As presented, both of these pieces of information are somewhat misleading. By this, I mean that the public gets a false impression of what is going on in the economy. Today, I will go into the first of these two numbers, the so-called jobs number. Tomorrow I will continue with some analysis of the unemployment rate.
The “jobs number” is presented as the number of jobs created by the nation’s economy during the previous month. It is “seasonally adjusted” to avoid the drastic changes that occur due to the annual cycle of jobs in various parts of the economy. So far, so good – the number presented does in fact represent the net number of jobs that exist this month that didn’t exist last month. This is, of course, unless jobs are being lost from the economy, in which case the number is negative. Lets refer to the jobs number as Jobs Created.
However, when the number is positive, that is jobs are being created, the officials in the Department of Labor talk as if any job creation reflects successful economic policy. However, it ignores one very important factor: it ignores population growth.
If the number of jobs created doesn’t keep up with population growth, then in reality, the employment situation is getting worse. Our population is growing by very nearly 0.1% per month, and has been doing so for about three decades. Our current labor force is about 155 million workers. Currently, that means that we need about 155,000 new jobs each month just to stay “even”. This might suggest that we need aggressive policy to create these jobs. However, a growing population should “automatically” create jobs. What do I mean by this?
More people means more demand for everything – more housing, more food, more cars, more energy, more everything. So, a growing population creates growing demand that will fuel the economy to create jobs. This growing population that is fueling demand and economic activity should create a growing number of jobs. In fact, the work force should increase by about the same percentage as the population as a whole. Let’s give this automatic and needed job growth a name – let’s call it the Jobs Expected. A true measure of the efficacy of national economic policy is whether or not the economy is creating sufficient jobs to employ the growing population. That is, whether Jobs Created is greater than or less than Jobs Expected.
Let me put this succinctly. At this point in time, a “good” economy is one that is producing more than 155,000 jobs each month. Anything less than that is not a good economy. Good economic policy should produce a good economy. If the economy is not producing 155,000 jobs each month, then this indicates bad economic policy.
So, how has an employment fared under policy put forward by recent Presidential administrations? First, we must know what the expected job growth was during each of the past five administrations. Each month, this is equal to 0.1% of the current work force. Then we simply sum up all the jobs number data from all the years of the administration and see how it compares. That is, we are comparing the Jobs Created and Jobs Expected for the entire period of the President’s administration. The difference between these is an effective Jobs Surplus or Jobs Deficit.
The table at the beginning of this entry represents the data for the last five administrations. As we can see, the Carter years produced a job surplus of over 5 million, and in just four years. The Reagan years produced a similar amount, but over an eight year period. The best years by far were those under President Clinton, when we produced a job surplus of over 10 million.
This is in contrast with both of the administrations of Presidents Bush. The years of Bush 41 saw a jobs deficit of 3.4 million jobs. The worst performance by far has been the current administration. While they often claim to have overseen a vibrant healthy economy, the truth is that they oversaw a jobs deficit of nearly 10 million. Further examination reveals that during five of the eight years, there was a deficit: in only three years was there sufficient job growth to employ our growing population. It’s really even worse than that: in only 24 of 94 months during the Presidency of George W. Bush was there sufficient job growth to employ our growing population.
Compare this to the previous administration: in 81 of 96 months of President Bill Clinton’s administration, our economy produced a surplus of jobs. Let’s hope that President-elect Barack Obama can follow in Bill Clinton’s footsteps and oversee a economy characterized by strong job growth.
The “jobs number” is presented as the number of jobs created by the nation’s economy during the previous month. It is “seasonally adjusted” to avoid the drastic changes that occur due to the annual cycle of jobs in various parts of the economy. So far, so good – the number presented does in fact represent the net number of jobs that exist this month that didn’t exist last month. This is, of course, unless jobs are being lost from the economy, in which case the number is negative. Lets refer to the jobs number as Jobs Created.
However, when the number is positive, that is jobs are being created, the officials in the Department of Labor talk as if any job creation reflects successful economic policy. However, it ignores one very important factor: it ignores population growth.
If the number of jobs created doesn’t keep up with population growth, then in reality, the employment situation is getting worse. Our population is growing by very nearly 0.1% per month, and has been doing so for about three decades. Our current labor force is about 155 million workers. Currently, that means that we need about 155,000 new jobs each month just to stay “even”. This might suggest that we need aggressive policy to create these jobs. However, a growing population should “automatically” create jobs. What do I mean by this?
More people means more demand for everything – more housing, more food, more cars, more energy, more everything. So, a growing population creates growing demand that will fuel the economy to create jobs. This growing population that is fueling demand and economic activity should create a growing number of jobs. In fact, the work force should increase by about the same percentage as the population as a whole. Let’s give this automatic and needed job growth a name – let’s call it the Jobs Expected. A true measure of the efficacy of national economic policy is whether or not the economy is creating sufficient jobs to employ the growing population. That is, whether Jobs Created is greater than or less than Jobs Expected.
Let me put this succinctly. At this point in time, a “good” economy is one that is producing more than 155,000 jobs each month. Anything less than that is not a good economy. Good economic policy should produce a good economy. If the economy is not producing 155,000 jobs each month, then this indicates bad economic policy.
So, how has an employment fared under policy put forward by recent Presidential administrations? First, we must know what the expected job growth was during each of the past five administrations. Each month, this is equal to 0.1% of the current work force. Then we simply sum up all the jobs number data from all the years of the administration and see how it compares. That is, we are comparing the Jobs Created and Jobs Expected for the entire period of the President’s administration. The difference between these is an effective Jobs Surplus or Jobs Deficit.
The table at the beginning of this entry represents the data for the last five administrations. As we can see, the Carter years produced a job surplus of over 5 million, and in just four years. The Reagan years produced a similar amount, but over an eight year period. The best years by far were those under President Clinton, when we produced a job surplus of over 10 million.
This is in contrast with both of the administrations of Presidents Bush. The years of Bush 41 saw a jobs deficit of 3.4 million jobs. The worst performance by far has been the current administration. While they often claim to have overseen a vibrant healthy economy, the truth is that they oversaw a jobs deficit of nearly 10 million. Further examination reveals that during five of the eight years, there was a deficit: in only three years was there sufficient job growth to employ our growing population. It’s really even worse than that: in only 24 of 94 months during the Presidency of George W. Bush was there sufficient job growth to employ our growing population.
Compare this to the previous administration: in 81 of 96 months of President Bill Clinton’s administration, our economy produced a surplus of jobs. Let’s hope that President-elect Barack Obama can follow in Bill Clinton’s footsteps and oversee a economy characterized by strong job growth.
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1 comment:
Excellent. Nothing like facts.
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