JONATHAN CHAIT MARCH 4, 2011
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Floyd Norris has been arguing that the Labor Department figures tend to underestimate job growth in the early part of a recovery (and underestimate job loss in the early stages of s recession.) Here's Norris's column from a month ago:
The unemployment rate declined four-tenths of a percentage point in one month. There had not been a monthly decline that large in many years, but economists were unimpressed. After all, the decline was caused in no small part by a surprising reduction in the labor force, which could be an indication that more workers were discouraged and no longer looking. That would hardly be an encouraging development.
Anyway, it was said, the unemployment rate is based on a survey of only 60,000 households, some of whom cannot be reached in any given month. It can be volatile, so you should not pay much attention to it. The president took heart from the figures, but critics said there was no real improvement.
The above describes what happened a month ago, when the unemployment rate for December came in at 9.4 percent. It was the first time in more than 11 years that the rate had declined that much in a single month, but the headline in The Chicago Tribune read, “U.S. jobs picture gets darker; Unemployment rate dips, but only because workers apparently are giving up.”
As it happened, those paragraphs also describe the situation 28 years ago. In January 1983, with President Ronald Reagan reeling from his large setback in the midterm elections the previous November, the unemployment rate fell to 10.4 percent from 10.8 percent. It was the first such decline in five years, but few thought it significant.
David Leonhardt applies this analysis to today's job numbers:
The other main survey the department does is of households, rather than businesses. It has a smaller sample size and so usually is not as accurate as the survey of businesses. At turning points, though, the household survey can detect changes before the business survey does. As Floyd Norris has explained, the numbers from the business survey may well end up being revised later on — as more accurate data on start-ups flows in — and looking more like the sunnier household survey.
Today’s report clearly raises the odds that we’re in the middle of such a period now.
Average job growth over the last three months has been only 102,000, according to the survey of businesses. But it’s been 221,000 — significantly more than population growth — according to the survey of households. The unemployment rate, which is calculated from the household survey, has dropped sharply in the past few months in large part because of these job gains.
It’s particularly noteworthy that the Labor Department today revised upward the business survey’s estimated job growth for both December and January. That may mean more revisions are coming.
Let me add another point. The Norris-Leonhardt hypothesis is also the best explanation for the pronounced rise in President Obama's approval ratings:
Of course, political events -- like the elections giving Obama a foil, or the spate of lame-duck accomplishments in Deecember -- probably played a role as well. But I'm guessing the polls reflect an improving labor market.
4 comments
It's the economy, stupid. Your hypothesis is a sound one, Jonathan. BHO as a foil and the lame-duck accomplishments probably do grab off a sliver of the increase in poll numbers, but the brightening labor market surely is responsible for the lion's share. What we don't need is a double-dip recession because if you think our politics are ugly now, well just you wait. But we should avoid that fate, and then, Obama's chances at reelection will look good in 2012.
- liberalref
March 4, 2011 at 2:05pm
As usual in this economy the results are a mixed bag. Based upon my experiences there is an increase in hiring. But it's coming at the expense of wages. My long term (2 years or more) unemployed friends are mostly back to work. But almost all of them are down 30-50% and have reduced benefits. And usually the return to work would bode well for the Administration. But the lower wages and benefits put this hoary old chestnut to the test. My belief is these folks going back to employment will not credit the President's action or support him as teh economy slowly recovers. I have seen a little bit of ping-ponging in the hiring where a friend gets a job and turns that around to a better onw 3-6 months later. Those folks will be more positive heading into 2012. But for the ones stuck back in 1995 employment levels, they will be bitter. The Republican message that Public Employees need to sacrifice will resonate with these folks. The current administration message that Public Employees are 'Hands-Off' and not to be vilified will fail in 2012.
- CRS9TNR
March 4, 2011 at 4:10pm
I don't know, crs9. I don't disagree that getting soaked to have a job won't cause people to be bitter, but not everyone will be bitter in the first place, not everyone who gets bitter will stay bitter for long, and not everyone who remains bitter in 2 years will blame Obama for everything, or anything. There's a lot that remains to be seen, including how Obama can capitalize on their frustration during the primaries and general election, and whether they've shaken off the last remnants of the hard times they went through by then. And of all those factors, I think the most certain is that those people will still be dealing with the loose ends and open to someone who is willing to listen and help, not just toss them into a steel cage full of rabid dogs with nothing but milkbone underwear and tell them to earn a better living if they don't like it.
- GSpinks
March 4, 2011 at 7:31pm
GSpinks, I think you're right. They are not as much bitter as busy picking up as you pointed out. But I am trying to provide a warning to the Democrats who believe an improving jobs market will translate into support for the current administration. The newer jobs are primarily in the Temp market at lower wages and benefits, including the ability to get let go in the next downturn. We did not have these types of jobs 20 or 30 years ago, so it's hard to know how these folks will turnout in 2012. I still beleive that President Obama has a special circumstance, similar to Reagan's, where the economy can pick up, adn the recent Middle East revolutions could lead him to a big election win. With the economy picking up more from 2012 to 2016 he could leave office on higher approval ratings than Reagan. But he really needs to win in 2012.
- CRS9TNR
March 5, 2011 at 11:20am