Thursday, April 07, 2011

About Last Week's Employment Numbers

Last week's BLS employment number for March was 216,000 net non-farm payroll additions.

I was discussing this with a friend over the weekend. She's not a business person or economist, so it was an opportunity for me to explain the overall job loss and recent growth dynamics since 2008.

At this point, I can't find a single reliable number for how many jobs have been lost since the recession began in 2007, but it's certainly at least 6 million. In this post from February, discussing Brad Schiller's outlook for unemployment and job growth. He had written, as I quoted in that post,

"The latest employment reports have not been encouraging. At the rate of 36,000 new jobs a month—the number gained in January—we will never get back to full employment. Even if we keep adding jobs at the December rate of 121,000 new jobs, we wouldn't achieve full employment in this millennium.

At the trend growth rate of 1.2% annually, we get another 1.8 million labor force participants a year, and with them, the need for another 1.8 million new jobs.

To get back to full employment tomorrow, we could get by with another seven million new jobs. To reach full employment by the end of this year, we would need at least nine million new jobs (some 750,000 a month). There's simply no way we will experience that kind of job creation.

Each year brings another two million-plus workers to the labor force (new workers plus the re-entry of discouraged workers). Thus we would need monthly job gains of 460,000 to achieve full employment in time for the 2012 presidential elections.

We created that many jobs one time in the last four years (May 2010)."

So let's use the 9 million number. I looked back at last year's posts on monthly employment numbers, and saw that April's was much like last month's.

So despite all the positive comments last year over a few months of 100,000+ job growth, here it is, a year later, and we're only at 216,000.

If job growth doubled to around 400,000/month, we'd still need 22 months to absorb 9 million new jobs. Obviously, at half that rate, you're talking about 4 years. Writing in the wake of January's anemic number, Schiller's math showed it taking forever, because job growth was being outstripped by new entrants into the labor market. We need at least 150,000 net new jobs/month to soak up the incoming flow to the base of job-seekers each year. Right now, we're at 65,000 more than that, in an economy that has rising inflation, increasing regulation and serious government fiscal and monetary challenges.

Explaining this to my friend, I found myself reacquainted with the truth about the current unemployment situation. That is, while the administration and various pundits are cheering the erratic but mostly rising series of monthly BLS employment numbers, the rate of increase and current levels are just too low to support a serious economic recovery anytime soon.

Schiller's focus on the basic math of the challenge is sobering. And March's employment numbers do not, in the larger picture, really constitute sufficiently good news to celebrate much of anything yet.

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