Friday, June 3, 2011

Jobs

Naturally, everyone is disappointed in the May jobs figures. But to those who want to blame President Obama's policies for the slowing jobs growth, and call for a policy of cutting government spending and keeping taxes low, I would suggest that they take a closer look at the numbers.

Here is Austan Goolsbee's summary of the data:
Overall payroll employment rose by 54,000 in May. Solid employment increases occurred in professional and business services (+44,000) and education and health services (+34,000). Sectors with employment declines included local government (-28,000), retail trade (-8,500), and manufacturing (-5,000). Despite the decline this month, manufacturing has added 238,000 jobs since the beginning of 2010, the best period of manufacturing job growth in over a decade.
Private sector employment increased by 83,000 last month. Still not as good as anybody would like, but quite a bit better than the overall number of 54,000 added jobs.  And what is the reason for the difference? Primarily cuts in local government spending (which caused a loss of 28,000 jobs).  In other words, those who are calling for government austerity (translation: firing more government workers) would actually be contributing to declining jobs growth.  And those who are blaming Obama's policies for the lack of better jobs growth should actually be blaming themselves for calling for more cuts in government spending.  Advocates of more austerity should not be citing the 54,000 number.  They should be citing the 83,000 private sector number, because the 54,000 number factors in the effects of government austerity at the state level.

And to put things in even more perspective, look at the overall record of the last several years (also from Goolsbee's post):


Why on earth would anyone be calling for a return to the policies that gave us job losses in the hundreds of thousands, just because we are disappointed in the rate at which we are re-gaining those lost jobs? Instead they should be calling for an expansion of the policies that are gradually pulling the economy out of its slump, so we can get the numbers back up faster.

18 comments:

  1. The country needs at least 200,000+ jobs to be created EVERY month in order to keep pace with population growth: Anything less than that is not progress, Mr. Goolsbee.

    The broadest measure of unemployment (U6) has been trending over 15% for the last 28 months—looks like a stubborn plateau that will not go away easily as long as Obama and his allies continue their rampage against free-market capitalism.

    No one should be surprised by the anemic economic results. Many fiscal conservatives warned of the inanity of the “stimulus” packages and Federal Reserve intervention that were purportedly going to save us and usher in a new era of strong economic growth. Instead, we have inflation creep on food and fuel, a huge budget deficit, GDP growth under 3%, and we continue to have housing deflation--Fun times.

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  2. If Obama's policies are causing us to only gain 80,000 private sector jobs last month, what was causing us to lose more than 700,000 jobs per month before Obama even took office? Presumably that was before the "rampage against capitalism" began. But wouldn't you have to agree that whatever that was, it was worse than what is happening now?

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  3. When half your jobs are coming from McDonalds you're in danger of losing yours.

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  4. “If Obama's policies are causing us to only gain 80,000 private sector jobs last month, what was causing us to lose more than 700,000 jobs per month before Obama even took office?”

    A recession.

    “But wouldn't you have to agree that whatever that was, it was worse than what is happening now?”

    What is happening now is a slow choke hold. I guess it’s better than being beaten outright with a blunt object but sooner or later, the results will be grave. The economy should have bounced back vigorously just like every other recessionary period we’ve had in the last 50 years.

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  5. So let me get this straight, VH. If there's a recession, it's not the fault of the administration in power. Or is that true only when there is a Republican in power? But when we are pulling out of the recession more slowly than people would like, that must be the fault of the Democratic administration in power. Am I following you so far?

    As far as whether we should have pulled out of the recession more quickly, if it is true, as most experts have said, that this recession was the worst we have had since the Great Depression, and it took about 10 years and a World War to finally pull us out of that one, then wouldn't it be fair to expect that we would pull out of the 2008 recession at a pace that is somewhere in between that and all the other recessions of the past 50 years?

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  6. The Bush administration bungled the financial crisis horribly and the Obama administration continued the same bad policies but in an even grander scale and with great rhetoric (see Mr. Goolsbee). The results are plain to see. So no, I don’t think you’re following me on this.

    We will disagree on this but Roosevelt and his New Deal prolonged the economic pain for years until much (not all) of the New Deal policies were reversed after the war. I guess it’s OK to repeat history, eh? BTW, it’s a myth that wars are good for the economy. You wouldn’t say that the war in Iraq was good for economic growth, would you? I certainly don’t.

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  7. Speaking of history, I learned this week that Paul Revere was actually warning the British that the Americans were coming. How could I have been taught incorrectly that he was warning the Americans that the British were coming?

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  8. Until we add millions of jobs the housing market is not going to recover nor will our economy. There needs to be structural change that is not about the left or right. We need change that will help America add new jobs. Where is Obama and Congress on these issues?

    I’d like to see us confront China and their trade policies that keep the yaun artificially low. Incentivize corporate business to stay on shore and hire Americans. We should immediately increase domestic oil and gas production. Those are real jobs waiting to happen. The IRS tax code needs to be simplified there will be some modest tax increases as a result of compromise as we shrink government. Union members are going to pay more into their pensions. We can bring down the cost of health care insurance by opening competition among health insurers between states. Add real content to dodd-frank that will control too big to fail banks that are larger than ever before. They must view lending money as a source of income again so that they free up money allowing new businesses to hire and expand. There are so many things the administration and congress could be doing. I am beginning to wonder if they understand; 55,000 jobs is barely above zero. 9% unemployment represents millions of Americans who are suffering – right now. What is the administration’s plan (beyond getting re-elected)?

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  9. Want to hear my theory on how to increase employment? I think companies hire more people if, and only if, they think that business is improving. And business only starts improving when everybody thinks that the economy is improving. That's why up and down cycles are self-reinforcing. When the economy is slowing, everybody stops spending, and that makes things get even more worse. When the economy is improving, people start to loosen up, and then you get a lot of positive reinforcement.

    The odd thing about people's behavior is that it is often totally counter-productive. So we see that when housing prices are at their peak, everybody is still trying to buy a house. And when housing prices are in the toilet the way they are now, everybody is afraid to buy a house. This does not help, obviously. But it's hard to persuade people to do the opposite of what it seems logical for them to do.

    If all of that is true, then the thing the government can do that would make the most difference is to make everybody feel better about the direction we are heading. And that is kind of difficult when people are pulling in opposite directions in terms of whether we should cut spending, increase spending, cut taxes, increase taxes, punish the banks, help the banks, etc. But whatever policy choices they make--and they have in fact tried a lot of the things you are suggesting--the most important thing is to create the public perception that they are taking constructive steps to help the economy get back on track.

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  10. I do recognize that the public mood plays on the economy in a short term way. A lot like the way mood plays on the betting line at a sports book in Las Vegas where the wise guys are trying to get a 50/50 split on bettor consensus to set a moving number. It has little to do with reality and outcome. That type of gambling by consumers is different than what I am talking about. I am talking about long term change that saves us from ourselves.

    However, the analogy should still be disturbing to all of us. Very few in Washington or on blogs have the courage to suggest what might work to create jobs and or our address our debt. I know, in your own words "I am not a policy wonk" and you are using this blog to keep the left positive and get Obama re-elected. We could use your mediating skills because neither the far right or far left has a chance in hell of having their agenda implemented in a lasting way. You both depend on the center (thank God).

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  11. My impression is that the administration's economic team agrees with a lot of what both of us are saying. They are not as doctrinaire as a lot of experts on both left and right. They are pretty middle of the road in their policy recommendations. But a lot of experts on the left say, we must have a bigger economic stimulus, or more direct hiring incentives, to reduce unemployment. And those on the right say, we must cut taxes and cut spending and reduce regulations, and that will reduce unemployment. Since these prescriptions are contradictory, what it seems like the administration has to do is just get a consensus plan enacted that moves us forward. And it seems to me that is much more important than the details of that plan, because that is what makes everybody think that the economy is under control and getting better. And if everybody believes that, it will get better.

    If we are depending on Congress to get something done, it has to be a consensus plan anyway. Unfortunately, too many in Congress think that everything has to be their way or the highway, and that is why we have stalemate and a sense of crisis, which is really not helpful for the economy.

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  12. << more direct hiring incentives, to reduce unemployment. >>

    That is the route I think can be bipartisan. We will need to incentivize corporations to bring home trillions of dollars that are sitting over seas. It would mean slowing the demonization of big business.

    Rosa Delaurco (D) CT has discussed an Infrastructure bank. While I think her motive is to finance infrastructure rebuiilding via the larger government I like the idea of getting trillions of dollars back home from overseas and financing the rebuilding through private corporations. This means tax masive incentives.

    Another bipartisan route would be confronting China's trade policies while we still can.

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  13. Since you would think that nobody is against the idea of reducing unemployment, you have to wonder what is stopping us. It must be because we either don't know how to do it, or we can't agree on how to do it, or we're just unwilling to spend the money to do it.

    Of course there might also be some who benefit from the current crisis, either politically or economically, and they really don't want to solve this problem, but one hopes they are a small minority.

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  14. I think your comments/questions above are forceful and cogent. We know how to fix this.

    I don't mean to speak for you as you are more than capable of expressing your point of view: but most of Americans who understand the serious issues we are facing today know resolution hinges on compromise. By definition, anyone who does not understand this is part of a minority. Save your ideology for another decade. This is the time to get stuff done.

    You have already made the point that America's mood has enormous influence over the economy. Look back over the last year. Obama was well received by 70% of Americans when he was able to lead congress toward compromise. At the same time he was attacked by the far left and far right. When we see the right and left complain at the same time the rest of America has a decent chance to prosper.

    On part two: the political environment is fueled by the two extremes. Until they admit they are a big part of the problem ….

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  15. "Speaking of history, I learned this week that Paul Revere was actually warning the British that the Americans were coming. How could I have been taught incorrectly that he was warning the Americans that the British were coming?"

    LOL!!

    Many interesting points made here. I'll add this about "Mood" and the economy. I do believe that there is some psychological play that can move the economic needle in one direction or another but ultimately the effects lead to high speculation and "mood" never really effects the underlying structural economy but can only mask them (I agree with KP). Case in point--the housing bubble and crash. When the froth was building, everyone felt great about the economy. They're homes were increasing in value like never before and no end to good times was in sight. But the truth was very different. Those optimistic feelings were dead wrong. So, talking up the economy isn't really a solution. Real structural changes must be made.

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  16. Joe, will you agree with my view that compromise between far left and far right is needed for us to move forward? That an increase in revenue via taxes and a decrease in government spending is the way it is going to happen? If not, what is your plan?

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  17. I don't have a plan. Of course if I did have a plan, it would not involve any overall decrease in government spending. If you compare the level of spending of the US government to any other government in the world that we should be compared to, you will see that, contrary to what John Boehner says, our government does not have a spending problem. Especially when you consider that we maintain a larger military than all other nations in the world combined. What we have is a revenue problems which has been caused by the recession, and some ill-advised tax cuts enacted during the Bush administration. Of course you can always find some programs to cut, but people would probably disagree about which ones are valuable and which are not. I might cut ethanol subsidies, for example, but other people would defend them to the death. Overall, however, spending is not our problem.

    But even if I were the dictator and I could enact my preferred tax and spend program, I would still have to be concerned about whether my program was popular. Because as I said above, the most important thing about economic policy is that it has to make everybody feel better, and that is what will make them invest and spend and hire more. So in that sense I agree with you that we have to do some kind of hybrid plan that makes everybody feel that we are moving forward.

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  18. Like you, if I had my choice, I would not go with the hybrid choice. However, we don't have a choice. The hybrid plan it is; at least short term. The next step is bringing ourselves to promote it. It may not be who we are but it is what we need.

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