One more such victory and we are lost

Congratulations people, we are back to square one.

Yes, there are finally now as many people working today as there were before the great recession began.

It only took 6+ years, way longer than any previous post-war recession, but at least there's one less bad thing to say about the economy now.

Here's the visual from the immortal Bill McBride:

Making sense of the jobs report

We had another head scratcher of a jobs report yesterday.

Only 113,000 new jobs but the unemployment rate fell from 6.7 to 6.6%.

Labor Force Participation must have fallen, you say.

Nope, it rose slightly from 62.8 to 63.0%.

BLS is on acid, you say.

Maybe, but the simple but weird fact that explains this is that new jobs and unemployment rates are calculated from two completely different government surveys!

Here's one of my favorite KPC posts from a couple years ago that explains this strange state of affairs.

Oklahoma is hiring in Time Series Econometrics!

It has been suggested to me that our ad in Job Openings for Economists is unclear, but we are hiring at the assistant level for Time Series!

Pay will be in the 6 figures (and is negotiable), teaching load is 2/2, start up funds, initial course load and summer support are negotiable, there is travel money available and we have a PhD. program and a funded seminar series.

If you are a time series person please consider applying! Operators are standing by.

Job Report Friday

Not a good initial number, people.  88,000 net new non-farm jobs in March (though the numbers for January and February were revised upward). Sure, this is an imprecise number, subject to revision, with a wide confidence interval, but....OUCH.

Full report is here.

The interesting question is whether this is just a soon to be revised blip on the road to full employment or if this is a harbinger of another spring-summer slowdown after a promising fall & winter. Last year showed a definite V shape in job growth as did 2011 to a lesser extent.

Another interesting question is how long after the end of a recession can you still refer to higher than the historical average unemployment as "cyclical'?

This is especially relevant because the reduction in unemployment we've seen during the "recovery" is largely due to declines in the labor force participation rate!

10.98%: What the unemployment rate would be if labor force participation was the same as in January 2009
— James Pethokoukis (@JimPethokoukis) April 5, 2013

Sure, some of the decline may be due to demographics, but things are worse than what the headline numbers show.

Jobs!

The jobs report for February is out and the news is decent. 236,000 net new non-farm jobs and the unemployment rate is down to 7.7%.

While we've still never had the really big job numbers that historically occur in recoveries, this was a good number in terms of beating expectations.

About the only bad news in the report is that last month's job number was revised downward from 157,000 to 119,000, a 24% downward adjustment.

Given that the confidence interval on these initial numbers is something over  + / - 50,000, we shouldn't get too excited or too upset at any single initial job number.

Survey says.....

People, a very interesting jobs report this morning, no?

Let's start with the Establishment Survey which reports 114,000 net new non-farm jobs in September.

That's a bad number.

But, revisions to July and August have raised job creation in those months by 86,000 ("The change in total nonfarm payroll employment for July was revised from +141,000 to +181,000, and the change for August was revised from +96,000 to +142,000").

Those are decent numbers.

But, as you may have seen, the blockbuster number is that the unemployment rate fell to 7.8%. And, this did not happen because people left the labor force. Labor force participation was "little changed".

You may ask, if it takes more than 150,000 net new jobs to lower unemployment unless people leave the labor force, and we had 114,000 jobs and no decline in labor force participation, how did unemployment fall .3 percentage points?

Well, unemployment is calculated from the Household Survey, which is separate from the Establishment survey and it (Household) reports that, "total employment rose by 873,000 in September", which is what caused the drop in the unemployment rate.

Obviously, 114,000 is pretty different than 873,000, even allowing for the sampling errors in the surveys. Why the big difference?

Is that because there were 760,000 new farm jobs? Technically it could be, but probably not.

The BLS has a report on the differences between the two surveys. Here is a good summary chart:

Since 2002, the two series track each other closely, though the household survey (the blue line) has been getting further and further away from the establishment survey (the red line):

The biggest difference between the dynamics of the two is that the household survey is way more volatile. Here I've graphed the growth rates of the two and you can see the difference (the household survey is the blue line, the establishment survey is the red line).

This month, one of the two jobs numbers is an outlier. If recent patterns hold, either the establishment survey number will get revised up or the household survey number will reverse itself in the next month (or some combination of the two).

While the household number is fantastic news for the economy, we need to realize that it might not last, given the high volatility of the dynamics of that survey.

Gotta Love the NYTimes

The lede on the story on the jobs report, from the Grey Lady:

The increase in jobs, reported on Friday by the Labor Department, is not enough to significantly reduce the backlog of unemployed workers.

Um...yes. That's something of an understatement, since the cut-off for producing new jobs fast enough to reduce unemployment is 175,000 per month, and more like 225,000 per month if you take into account labor force participation effects. (What THAT means is that if we start creating jobs at 250k per month, people will reenter the labor force, and the unemployment rate may even go UP slightly).

David Leonhardt, playing the "Defend Obama at all costs!" game, said in May that 150,000 was the cutoff. And he also bent over backwards to say that things were getting better, when there is exactly zero evidence that that is true.

Look, folks, until someone makes some effort to (a) reduce military spending, (b) solve the growth of entitlement spending, and (c) turn off the spigot flooding businesses with new and unpredictable regulatory burdens, there will be no increase in jobs created. We are doing the deficit-spend thing about as much as is possible, and the Fed keeps firing its own bullet, right into the ocean. Ploop! Nada.

If this helps Romney, it's not because he has any kind of plan, or deserves to be helped. Romney has given no specifics of what he would do, or even how he thinks of what he might do.

Romney is running like an incumbent, in fact. Even though he has no indication of being able to address the three problems above. And the reason is, just like David Leonhardt said in May, that bad job growth numbers mean Obama loses. Not that Romney "wins," but that Obama loses.

I never thought Obama and co. would be this inept and pigheaded, but they are. They absolutely refuse to move from their position that the solution to the economic malaise is to pay more money to government employees and to fund their pensions.

"The private sector is doing fine," indeed. That was NOT a gaffe. It was a statement of core beliefs. Some people have said that Obama does not trust markets.  That's actually not true.  He has too MUCH faith in markets.  He thinks he can tax, regulate, and abuse people, and they will still doggedly go to work and try to make that cheddar.  That's not actually working out very well for him.

Or for us.

Mission accomplished

One of the (few) nerve-wracking parts of my job is placing students. This year, we had two PhD students in development on the market. Mrs. A advised one and I advised the other. They both got 20+ interviews at the AEA (the national economics conference and job market) meetings and 6 campus visits out of those interviews. Now, both have accepted tenure track jobs with decent salaries and teaching loads and good support for travel and research.

We try to make sure our students have teaching experience and (ideally) a publication before going on the market. We run multiple practice interviews for them before the AEA meetings and practice job talks before their campus visits.

Even though the ultimate burden is on the student, I always feel pretty squirmy until they get a job. I am barely comfortable being responsible for myself, let alone someone else's career.

Now I can sink back to my normal level of apathetic lethargy.

Good but not great

BLS reports that non-farm jobs increased by 227,000 in February and January's number was revised upward from plus 243,000 to 284,000.

The unemployment rate was unchanged at 8.3%

These are decent numbers, but, at this pace, a "normal" overall unemployment rate of say 6% is still a spec on the far horizon.

Among people 25 and older, those with less than a high school diploma have a 12.9% unemployment rate, those with a BA or greater have a 4.2% unemployment rate.

Of course these are average numbers, not marginal, and should not be used for any wagering!

More on manufacturing (don't forget the "e")

People, I give you Robert Reich vs. Laura Tyson.

First, here's Tyson arguing that manufacturing jobs should be prioritized:

"...on average manufacturing jobs are high-productivity, high value-added jobs with good pay and benefits. Even though the premium on manufacturing wages has been declining over time, it remains significant. Between 2005 and 2010, average weekly earnings in manufacturing were about 21 percent higher than average weekly private non-agricultural earnings. In 2009, the average manufacturing worker earned $74,447 in annual pay and benefits compared with $63,122 for the average non-manufacturing worker." 

 As I've pointed out pointedly in the past, this is simply logically incorrect. You cannot use averages to represent what is happening on the margin. If the premium is falling, that clearly means that the marginal wage for new jobs is significantly lower than the average pay for all existing jobs. The correct comparison is between wages for new jobs across sectors (marginal analysis), NOT average wages for all jobs across sectors (infra-marginal garbage).

This point is magnificently made by Reich:

Even if we didn’t have to compete with lower-wage workers overseas, we’d still have fewer factory jobs because the old assembly line has been replaced by numerically-controlled machine tools and robotics. Manufacturing is going high-tech. Bringing back American manufacturing isn’t the real challenge, anyway. It’s creating good jobs for the majority of Americans who lack four-year college degrees. Manufacturing used to supply lots of these kind of jobs, but that was only because factory workers were represented by unions powerful enough to get high wages. That’s no longer the case. Even the once-mighty United Auto Workers has been forced to accept pay packages for new hires at the Big Three that provide half what new hires got a decade ago. At $14 an hour, new auto workers earn about the same as most of America’s service-sector workers. 

 Bravo, Roberto!

 Marginal wages in manufacturing are much lower than average wages, and many new jobs are ones that require a high degree of skills/education.

 Reich's solution to create jobs and raise wages for non-college Americans is to re-empower unions! This would certainly raise wages, but would in all likelihood not be a big boon for increasing the number of jobs.

 I think this issue of what to do about living standards of "unskilled" workers in America is going to continue to worsen and the only feasible long run solution is going to be a type of guaranteed basic income policy.

Hey if Herbert Simon, Freddy Hayek, Bob Solow AND Milton Friedman all agree on it, it must be worth considering, right?

Whatever you do, don't be yourself!

Great essay in Inside Higher Ed on how "just be yourself" is horrible advice for academics going out on the job market.

Immortal line: "Sorry Academics; you suck at interviewing".

Mrs. Angus and I very very much emphasize to our students that they absolutely should NOT be themselves and spend a month or two before the job market working with them to project a professional persona. We run them through multiple rounds of practice interviews and practice job talks.

We were lucky this year to each have an excellent student on the market, each of whom had a full dance card at the AEAs and now have multiple campus visits. In fact, both are out on campus interviews right now.

Hat tip to RKG.