Edward Lazear, former Council of Economic Advisers chairman for President George W Bush, wrote an informative editorial a week ago in the Wall Street Journal.
With all the hoopla surrounding changes of a few tens of thousands of newly-employed in recent monthly BLS numbers, Lazear provided some useful background to these series.
First, Lazear reminded readers that changes in employment are a function of lack of layoffs and new hires- not just the latter- among some 150MM "workers or job seekers."
Recently, net positive monthly employment numbers have been the result of "a decline in the number of layoffs, not from increased hiring."
He notes that,
"In a healthy labor market like the one that prevailed in 2006 and early 2007, American firms hire about 5.5 million workers per month." Meaning that there is tremendous monthly churn in the overall employment base.
Lazear wrote his editorial to argue for lower taxes, less regulatory burden and such to foster more investment that would lead to more hiring.
That all may be true. But my reason for discussing his piece is how it calls into question so much micro-concentration on the series that is the net of hiring and layoffs, rather than paying attention to the current monthly employment base, hires and separations.
Against a 150 million-person workforce, monthly net gains of some 200,000, or .00133%, seems insignificant. By dwelling on the mean and variance of the net series, we miss how woefully inadequate the mean is when set against the overall labor market.
No more 'new jobs created' scenario as the government would like us to believe, but, rather, simply a recognition of less need to shed existing workers.
To now learn that the past two years of net gains have been almost totally accounted for by layoffs ebbing, rather than all new hires, paints a much different picture, doesn't it?
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