JONATHAN COHN JANUARY 6, 2012
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[Guest post by Matt O'Brien]
This finally might be an economic recovery worthy of the name. There have certainly been several headfakes before (remember "green shoots" and "Recovery Summer"), but, to borrow a dangerous phrase, this time might be different. Economic data has surprised on the upside for the past few months, and the December jobs report continued this positive trend. The headline unemployment rate fell to 8.5 percent on 200,000 net jobs added in the month—which, while not a fast enough pace to bring down unemployment to pre-recession levels till the mid 2020s, still represents a substantial acceleration over the past year.
Indeed, this was the most unequivocally good jobs report in some time. Job gains, rather than people exiting the workforce, drove most of the decline in the unemployment rate, with 176,000 new jobs swamping the 50,000 who left the workforce. Those unemployed for 27 weeks or longer also fell by 94,000, as both mean and median length of unemployment ticked down. Weekly hours and payrolls both edged up as well. But most significantly, U-6 unemployment—the broadest measure that includes not just the unemployed, but also those too discouraged to keep looking for work and part-time workers who can't find full-time jobs—fell from 15.6 percent to 15.2 percent. That is its lowest level since February of 2009.
Lower U-6 unemployment should translate into increased household formation. That, in turn, should lead to more rapid growth. Indeed, one of the key stories of the Great Recession has been the collapse of household formation. People have moved back home. As families have doubled up, demand for housing and big-ticket purchases like automobiles has tanked. Housing construction has basically stopped since 2008. Bizarre as it sounds, that has left us with a housing shortage—assuming anything close to normal household formation. As more people get good jobs, they will look to move out. Houses will need to be built and cars will be bought. In short, a new virtuous cycle will begin thanks to pent-up demand. And it may not be far off.
Again (and, as Ryan Avent noted, in contrast to the Bush years), this has been a private-sector powered employment surge. Government actually shed 12,000 jobs in December, with all of the losses coming at the state and local level. The private sector, meanwhile, added 212,000 jobs. This is precisely the type of recovery that conservatives say they want.
Of course, the usual caveats still apply. The employment-to-population ratio remained unchanged at 58.5 percent. As Jim Pethokoukis of AEI pointed out, if the workforce was the same size now as when Obama took office, the unemployment rate would be 10.9 percent. Happy days are not exactly back. More broadly, the question remains whether the past few months of good news is just another blip, or the beginning of a stronger economic expansion. Fourth quarter data has been conspicuously robust the past few years, which suggests that seasonal adjustments may not fully account for the holidays. The next few months will tell whether this is a new Morning in America or yet another false start.
Matt O'Brien is an intern at The New Republic.
13 comments
"The headline unemployment rate fell to 8.5 percent on 200,000 net jobs added in the month—which, while not a fast enough pace to bring down unemployment to pre-recession levels till the mid 2020s, still represents a substantial acceleration over the past year." Not to nit pick, but is the math off? Unemployment trending down .1% per month and we'd be at 5% in 3 years. The pace isn't wonderful to be sure, but certainly better than having to wait (as the article purports) another 10+ years just to get to pre-recession levels. Or am I missing something... ?
- Tristan
January 6, 2012 at 11:40am
"The headline unemployment rate fell to 8.5 percent on 200,000 net jobs added in the month—which, while not a fast enough pace to bring down unemployment to pre-recession levels till the mid 2020s, still represents a substantial acceleration over the past year." Not to nit pick, but is the math off? Unemployment trending down .1% per month and we'd be at 5% in 3 years. The pace isn't wonderful to be sure, but certainly better than having to wait (as the article purports) another 10+ years just to get to pre-recession levels. Or am I missing something... ?
- Tristan
January 6, 2012 at 11:40am
Apparently you're missing what appears to be a desire to make any recovery look trivial. I heard on NPR this morning (before the numbers actually came out) that "Major Economists" (un-named) were predicting a RISE in unemployment to 8.7 percent. Quoting a 10 year recovery time is yet one more piece of that pessimism. I don't know who these apparently Supply-Sider University Of Chicago pessimist Economists are, but they sure seem to have a huge impact on the spin applied to what has been a slow and pretty steady recovery. Mind you, I still think we're in the Great Recession, slowly clawing our way out of it, and implementing Tea-Party "Balance The Budget" spending cutting is the best way to destroy that recovery. But pretending the recovery isn't happening at all is THEIR best argument toward doing something suicidal "to improve the situation". Because if you can successfully argue Keynesian policies are "doing nothing to help", then further Supply-Side tax-cutting and entitlement cuts "to reduce the deficit" is at least doing something. Suicidal to the nation though that would be.
- AllanL5
January 6, 2012 at 12:09pm
It's possible that American business have started realizing the stock market cannot satisfy all their revenue stream needs, and isn't even really a good resource for a revenue stream, and are going back to creating jobs by offering products and services. If I had to bet a box of doughnuts though, I'd say this is just another blip.
- GSpinks
January 6, 2012 at 12:12pm
Today's jobs report shows a continuation of the trend towards a gradually strengthening labor market. But the headline jobs number is somewhat misleading. Over 42,000 jobs were added in the "Couriers and Messengers" industry--over 20% of the total! It seems that since 2007 on-line Christmas shopping has been booming, leading parcel delivery companies to ramp up their seasonal hiring. Statistical procedures for seasonally-adjusting data are not good at picking up such structural trends. As a result, the permanent job increase was probably about 40,000 less than the headline number implies. Still good, but no evidence that a corner has been turned.
- fbraconi
January 6, 2012 at 12:53pm
Once again I will pursue one of my two "bug TNR" projects for 2012: please start addressing the problems that will occur as automation/androids/robots/artificial intelligence start making much of human labor superfluous. Two examples. Recently I heard a radio feature (perhaps on NPR but I can't find a link at the moment) about the use of robots as person extenders. That is, instead of attending a meeting, some kind of robot that you control remotely would sit in for you at the meeting. Creepy image: a bunch of robots at a board of directors meeting, with no humans present. Secondly: here's an online discussion (too cautious, I suspect) on this topic. http://www.ideasinactiontv.com/episodes/2011/10/automation-nation-will-robots-take-our-jobs.html. [You can find a transcript of you don't want to sit and listen to the entire discussion. By the way -- how did they produce the transcript ... hmm?] From a comment at the end: Do I dare use italic? What the heck: Going down to the basics, the question is --- Why do we are so focused on jobs ? Because in today's world, you income comes basically from your job. Then the solution should be --- Devising a way to make income not dependent or less dependent on one's job. Can this be done ? It can be done today --- Give you an example. If you own 500 vending machines, you make a good living without getting a paycheck from anyone. In essence you own slaves, in this case machine slaves rather than human slave prior to civil war, to make your money for you. One of the guest correctly said the same .. When people on this planet get more and more richer, the society can and will evolve and devise a system where average people can count on their ownership of machine slaves to make their money for them ... in a very common and large scale. What we should do is to have MIT study this and work out a system to enable this .. How do you know this comment was posted by a human being? Because of the errors, verbosity, and incoherence. No robot would be caught dead posting a comment such as this.
- skahn
January 6, 2012 at 1:51pm
allan...I think the reason the supply-siders keep poo-pooing the good news of a slow but steady recovery trend is that it essentially proves that supply-side economics don't work when the times are good and definitely not when the times are bad. So they must paint any picture of good news with a wide brush of crap-on-it pessimism because the recover isn't either A) fast enough or B) fast enough or C) marginal tax rates haven't gone through the floor for the 1% 'job creators'. Essentially what the slow recovery tells us is that despite their dire predictions that Obama's "crypto-fascist-Marxist-statist" economic policies (heavy on the finance icing) are driving us into Phase 2 of the Greater Depression, things are actually improving because the bleeding was staunched. We're still bleeding slowly, but the scab is forming now. Healing happens after that. The supply-siders would have us pick the scab so they can say..."See! It's still bleeding! Cut the arm off to stop the bleeding!" As the jobs market begins to improve and people get back to work again it will be interesting to see how people interpret what exactly the government did and didn't do. The GOP will claim it wasn't fast enough because of Govt. The Dems will claim it wasn't fast enough because the GOP wanted it that way. But I think what we're seeing is that the recovery happened because and despite private and government sector meddling. Throwing stuff at the wall to see what sticks sums up the strategy I think. I am, however, elated to see more news and predictions that American manufacturing sectors are poised to recover extremely well and compete on the global market in a way that China and India wont be doing for some time.
- singlspeed
January 6, 2012 at 1:53pm
On the other hand, "view full comment" is not working for my comment. Either this is a sensible bit of editing and forced concision or TNR needs to have an AI run its software because too much of the time it just plain does not work.
- skahn
January 6, 2012 at 1:54pm
On the other hand, it is working for singlspeed. Discrimination!!
- skahn
January 6, 2012 at 1:55pm
"This is precisely the type of recovery that conservatives say they want." If there is one thing we have learned, never describe Republican preferences in the present tense. They may have said they wanted universal health insurance, or they may have said they wanted tax cuts, but when they happen under the current administration, suddenly, it's "You don't say?"
- Nusholtz
January 6, 2012 at 2:13pm
One big factor is probably deflation. Lower wages, matched by lower costs of living in many parts of the country.
- art.kleiner@booz.com-old1
January 6, 2012 at 2:45pm
Skahn...I've had the same thing happen to me. Doesn't matter how I post something with an outside link, TNR swallows everything after the 'view comment' I claim no preferential treatment on my part.
- singlspeed
January 6, 2012 at 2:56pm
Tristan, here's Paul Krugman with an answer to your question:
First, note that there are still about 6 million fewer jobs than there were at the end of 2007 — and that we would normally have expected to have added around 5 million jobs over a four-year period. So we’re 11 million jobs down — and we need at least 100,000 jobs a month just to keep up with working-age population growth. Do the math, and you’ll see that it would take 9 or 10 years of growth at this rate to restore full employment.
- AaronW
January 6, 2012 at 11:56pm