Monday, May 11, 2009

A context for 150,000 jobs 

We have had a little fun poking at the "save or create" distinction, and I expect more now given CEA chair Christina Romer's note that the administration does not expect positive job growth in 2009. But what is lacking in my view is a context for what 150k jobs means.

In short, the 150,000 jobs is a gross number. That is, the employment change reported last Friday represents a net figure; it represents the total number of workers hired minus the total number of jobs lost (through either separations -- layoffs or firings -- or through workers quitting.) BLS collects that data. It is reported more slowly than the Current Employment Survey and Current Population Survey that form the unemployment rate and the payroll employment estimates. They are, in fact, the way we check to see if those two surveys need any correction.

One of those is JOLTS, for Job Openings and Labor Turnover Survey. It tells us that 4.36 million workers were hired into a job in February and 4.825 million workers separated from their jobs in that month. 150,000 jobs is 0.15 million, so that it represents 3-4% of one month's total jobs generated by ARRA. It appears from the most recent data that the problem is not job shedding but that most businesses simply stopped hiring in the fourth quarter. (Why? Interesting question that we should defer.)

The other survey is Business Employment Dynamics, which comes from a quarterly census of employers. It has a much longer lag time, so the most recent data comes from the first half of 2008. These are quarterly measures, and the same institution can expand in one month and contract the next so there are many cancellations in the lower-frequency series. Nevertheless, in the second quarter of 2008 there were 7.3 million jobs created in expanding or new businesses and 7.8 million jobs lost in contracting or closing businesses. And as I showed on Friday this is a pretty shallow period for job losses.

Ed Morrissey points to this chart that the stimulus is not helping as the Romer CEA argued three months ago and calls for a new CEA. It's a shame -- Prof. Romer most certainly knows how to tell the story of gross versus net jobs. Why won't she explain? I expect it's because to show how little government can really do to change the jobs picture would damage the omnipotence that the Administration tries to project. The concession today is at least a beginning to provide some of that context, but she has much, much more to do.

P.S. In the New York Times article linked in the first paragraph Robert Reich argues that we would need a 4.5% GDP growth rate to reduce unemployment. Yet the CBO is saying the potential GDP growth rate is 2.7% and slowing. Reich's number seems high to me.