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February 09, 2004

JOB GROWTH REVISITED....Brad DeLong, demonstrating once again why he's an economist and I'm not, explains that the latest job growth figures from the White House are actually more peculiar than I suggested this morning.

In particular, the White House is projecting that non-farm payrolls will rise from 130.1 million at the end of 2003 to an average of 132.7 131.9 million for 2004. To me (and to Reuters) that sounded like an increase of 2.6 1.8 million, but Brad notes that to get an average of 132.7 131.9 million jobs we need to end the year at about 135.3 133.6 million This is, to put it mildly, extremely unlikely.

Here is Brad's first post, after which he shakes his head, does a bit of Googling to convince himself that this is really what the White House said, and then explains why this number is, um, unlikely. Then, still bemused by the whole thing, he takes to the keyboard yet again and speculates about how the Bushies pulled this number out of their collective hat.

After that, presumably, his head imploded.

UPDATE: Numbers updated because Brad changed his mind for reasons that are not 100% clear to me. These lowered numbers are, perhaps, no longer extremely unlikely but merely very unlikely.

Posted by Kevin Drum at February 9, 2004 02:10 PM | TrackBack


Comments

I think my head's gonna explode too. I saw a clip of the shrub in Missouri a few minutes ago at a campaign stop earlier today attempting to explain the stock market.

And this man has a Harvard MBA? they should be asking for their diploma back.

Posted by: four legs good at February 9, 2004 02:16 PM | PERMALINK

Yeah - that's the ticket - they are pulling numbers out of thin air (which, come to think of it, is exactly where economic FORECASTS come from - meterologists can't their forecasts right, why are we surprised that economists can't either?!)

Posted by: Charlie at February 9, 2004 02:16 PM | PERMALINK

So what? Unicorns, unicorns, bam -- ObL!

Shape of Earth: Views Differ

Posted by: Al at February 9, 2004 02:20 PM | PERMALINK

I believe in the 21st century that mankind has finally moved beyond pulling things out of its collective hat, and moved on to pulling things out of its collective ass.

Posted by: bryan at February 9, 2004 02:21 PM | PERMALINK

Do you lay awake and pray for more unemployment and more dead soldiers or something?

I am an American first and a right-wing extremist second. I root for our success regardless of who is in power.

Stop spitting on our flag.

Posted by: Right-Wing Vegetarian at February 9, 2004 02:22 PM | PERMALINK

...pulled this number out of their collective hat.

I know it was pulled out of something, but I'm not thinking "hat."

Dirk

Posted by: Prince of Dirkness at February 9, 2004 02:27 PM | PERMALINK

it's always out their ass, not head.

thelrd in TEXAS

Posted by: Larry Davis at February 9, 2004 02:33 PM | PERMALINK

What a mindless troll. Let's see, RWV, if we're praying for more dead soldiers and more unemployment, we'd better stay the course with Shrub in '04. He's done so well at giving us both of those things so far.

I'm an American first and an American second. Stop wrapping your lying hypocritical body in my flag.

Posted by: Ted at February 9, 2004 02:35 PM | PERMALINK

Rooting for more unemployment or more dead soldiers?

No. But then, I wasn't the one who skewed fiscal stimulus to be so inefficient at job creation. And I wasn't the one who moved 140,000 or so of our finest folks within maximum effective range of RPGs, AK-47s and roadside bombs (Iraq's only *real* weapons), either.

Stop spitting on our flag? Well, if you'd stop wrapping yourself in it, it wouldn't be subject to that kind of collateral damage.

Posted by: DrZhivodka at February 9, 2004 02:41 PM | PERMALINK

Clearly, once the 8-9 million illegal immigrants get temporary worker permits, that'll mean 8-9 million new jobs were "created" this year. Instant solution.

Posted by: Azrael at February 9, 2004 02:47 PM | PERMALINK

"Do you lay awake and pray for more unemployment and more dead soldiers or something?"

Uh...No, but I wouldn't be surprised if good ol' karl lies awake at night praying for another Big Event or saleable rationale to start a war before November 04. There's no policy, no leadership, just all politics all the time, and no Accountability. As the MTP interview so clearly demonstrated, Bush is clueless.

I can't understand why there won't be a challenge to the incumbent this year.


Posted by: bcinaz at February 9, 2004 02:47 PM | PERMALINK

Despite the hate and venom spewed around here, I bless each one of you.

I can't pretend to understand your hatred, but I pray that you all can find a way to combat the demons which haunt your souls.

It isn't the president. It is something inside your hearts. A deep self-loathing.

I must mediate on this now.

Posted by: Right-Wing Vegetarian at February 9, 2004 02:49 PM | PERMALINK

Despite the hate and venom spewed around here, I bless each one of you.

I can't pretend to understand your hatred, but I pray that you all can find a way to combat the demons which haunt your souls.

It isn't the president. It is something inside your hearts. A deep self-loathing.

I must meditate on this now.

Posted by: Right-Wing Vegetarian at February 9, 2004 02:50 PM | PERMALINK

>> ... haunt your souls.

Save your prayers, I have no soul.

Posted by: Satan aka ed at February 9, 2004 02:56 PM | PERMALINK

Damn, RWV

That's some funny stuff, even though I'm sure that wasn't your intention.

Posted by: self-loather at February 9, 2004 02:57 PM | PERMALINK

How fantastic: Right-wing vegetarian, Al, and Charlie, all in a row!

Economic forecasting isn't a precise science, but there are models out there that provide a reasonable indication of the affects of different policy choices, and there is a large amount of history in terms of what constitutes effective stimulus.

Sadly, the Bush administration, in its typical way, didn't care about reality, only about its ideologically blinkered view of reality.

Posted by: howard at February 9, 2004 02:58 PM | PERMALINK

With so many Rightys slamming Bush, you'd think they were orchestrating a dump Cheney AND Bush maneuver. If GOP rules allow it, or can be bent (Torricelli-Lautenberg), maybe they'll pinch hit with McCain.

Posted by: Yesh at February 9, 2004 02:59 PM | PERMALINK

If our right-wing friends had read the posts linked to by Kevin, they would realize that one doesn't have to lay awake nights wishing for lost jobs to make Bush's projections fail to come true. For Bush's projections to come true, we'd have to have the most job growth since the 1940-1941 years when the US ramped up for WWII industrial production.

Posted by: cafl at February 9, 2004 03:30 PM | PERMALINK

Dumping an incumbent president is an almost impossible task... I am thusly reminded of the following lyrics:


you?re down and confused, and you don?t remember who you?re talkin? to. Concentration slip away, ?cause your baby is so far away.

Well there?s a rose in the fisted glove and the eagle flies with the dove, and if you can?t be with the one you love, honey, love the one you?re with, love the one you?re with, love the one you?re with, love the one you?re with.

Posted by: Right-Wing Vegetarian at February 9, 2004 03:30 PM | PERMALINK
I saw a clip of the shrub .... attempting to explain the stock market. And this man has a Harvard MBA?

Well I sure as hell don't, but after reading a piece in Salon and doing some digging on Electrolux shipping out of Greenville, MI after 127 years, it seems like nobody's got a handle on this shit--people are freaking. Naturally, I attempt to muddy it up some more here.

Posted by: fouro at February 9, 2004 03:31 PM | PERMALINK

The monthly payroll figures, if they follow the usual pattern in pervious upturns should follow an approximately convex path. The linear Assumption therefore overstates the increase required to produce the requisite average increase. Its not a convinent approximation to work out the neede increase but a slight of hand.

Anyway even if we take delongs figure as gsopel it represents an increase of 5.3 million on a 130 million labor force - which is a 4 % increase.

Look at the BLS table of percentage changes for the post war ; the largest are a whooping 10% change in 1951 increase in 1947. Beyond that other years in which there are one or more 12 month periods when the payroll total has increased 5% or more are
1952
1955
1959
1966
1978
1979
1984

What’s odd about these figures? Well the 90’s are the only decade for which there was no 12 month period when non farm employment grew by more than 5% - or even 4% in fact! Perhaps the 90’s were the exception and we’re now returning to a norm?


4% growth "is, to put it mildly, extremely unlikely."

Really? Not if the past is any guide.

Posted by: Giles at February 9, 2004 03:32 PM | PERMALINK

Odd, RWV, I am reminded of:

Rape me
Rape me my friend
Rape me
Rape me again

I’m not the only one

Hate me
Do it and do it again
Waste me
Rape me my friend

***

Your mileage may vary.

fouro

Posted by: fouro at February 9, 2004 03:36 PM | PERMALINK

cafl:

"For Bush's projections to come true, we'd have to have the most job growth since the 1940-1941 years when the US ramped up for WWII industrial production."

Shhh! You know you aren't supposed to reveal THAT for the VRWC memo!!!

Posted by

Posted by: Charlie at February 9, 2004 03:36 PM | PERMALINK

Whether you like it or not, we have a bull market right now. The charts are showing that by Nov., both major indices will be above where they were when W. took office, a remarkably quick comeback from the dotcom crash.

The effect of this? People will see their 401ks getting fat again, which will lead to more consumer spending as people begin to "feel" richer.

Posted by: Right-Wing Vegetarian at February 9, 2004 03:41 PM | PERMALINK

Well, this consumer is already spending like a drunken sailor on shore leave . . . whoopsie daisies - wrong analogy : )

Posted by: Charlie at February 9, 2004 03:43 PM | PERMALINK

So, do vegans include cannabis in their diet?

A bull market does not a bullish job or comsumer outlook make. Especially when the bullish returns are based on giving your downsized people bigger shovels to move a stagnating bullshit pile around.

A bullish market does not imply an increase in manure production. Merely an increase in the bullshitters.

Second, the stock market is a funny thing. One must always protect one's capital. 10% annual return on a 401K that's lost 50% of it's value does not mean in 5 years you're back to break even. This precludes the obvious fact that one needs a job to feed said 401k.

The only thing people are feeling, RWV, is... well, look at the song lyrics above.

Posted by: fouro at February 9, 2004 03:53 PM | PERMALINK

See, the market has tread water during the Bush presidency! Rejoice! Sure the dot com crash happened a year before he took office, but still look at the magic Bush has performed!

Posted by: Rob at February 9, 2004 03:58 PM | PERMALINK
Whether you like it or not, we have a bull market right now. The charts are showing that by Nov., both major indices will be above where they were when W. took office, a remarkably quick comeback from the dotcom crash.

And what would the charts be showing just before the dot-com crash? You don't project sensibly by looking at charts and extending lines, you do it by looking at underlying factors.

The effect of this? People will see their 401ks getting fat again, which will lead to more consumer spending as people begin to "feel" richer.

Even granting your naive projections, with a smaller and smaller percentage of the working age population employed -- we haven't yet seen job growth that keeps pace with the working age population -- less and less of the population even has a 401k to look at, and even among those who do, most probably don't bases their day-to-day spending decisions on the size of their retirement accounts. And, among those who are effected, the effect may be adverse, as a perceived strong market makes putting larger amounts of your current income into your 401k more attractive -- with the weak markets a few years back, most people I know cut back on putting funds into their 401k. Which means more investing, less money available for current spending.

Posted by: cmdicely at February 9, 2004 03:58 PM | PERMALINK

Hey vegemite---you sound awfully familiar. Then again, there are quite a few clones of your sort around. Do you play chess by chance?

Posted by: snarky at February 9, 2004 04:06 PM | PERMALINK

Giles, how refreshing to see someone comment more or less favorably towards Bush without simply inventing things, like right-wing vegetarian (the guy quotes stephen stills lyrics - 33-year-old stephen stills lyrics at that - which pretty much tells us all we need to know).

I'm of mixed mind whether percentage job increase is an appropriate measure here (as distinct from the deficit as a percentage of GDP rather than absolute, which i do think is appropriate). But rather than quibble, fine, i'm happy to say that the kind of job growth the backbone adminstration is projecting hasn't happened in 20 years, and there's nothing on either the demand side of the economy or the cost-containment side of the corporate world that would suggest that we will even come close.

Posted by: howard at February 9, 2004 04:18 PM | PERMALINK

Howard and Giles:
How does population growth since, say, 1990, compare with that of previous decades?
I have no idea myself, but it's relevant if you want to make a comparison.

Posted by: marky at February 9, 2004 04:20 PM | PERMALINK

Marky, i gave it the 3 minutes of googling effort, and the best i found is this, which only goes back to 1960:

http://www.censusscope.org/us/chart_popl.html

In short, pop growth in the '60s (13.4%); '70s (11.4%); '80s (9.8%); '90s (13.2%).

The relevant factor, though, would be the growth of the working-age population, which i didn't find in the 3-minute survey.

It strikes me as a really complicated question, that would involve factors like the relative maturity of the business mix (older, more mature companies, tend to hire less; newer, growing companies hire more); the role of immigration (immigrants historically will take on jobs that native-born americans won't take on); the role of women in the workplace; the availability and affordability of higher education; and so forth, which is why i didn't push the matter one way or the other.

Regardless, given the lack of job growth last year, even with good GDP numbers, a related question for Giles is whether we've ever seen job growth, even in the good years that he's citing, take off from such a poor "base" (i.e., what was job growth like in '51?).

BTW, i think we can count 1947 out of the discussion altogether, since there was rather a special factor at play....

Posted by: howard at February 9, 2004 04:40 PM | PERMALINK

One "mystery" solved... Bush was a member of both the Guard and Air Force Reserve.

http://www.seanet.com/~johnco/bushdischarge.htm

Posted by: Right-Wing Vegetarian at February 9, 2004 04:51 PM | PERMALINK

also note that he wasn't paid for the time in Alabama, so quit the yapping about "pay stubs".

LOL.

Posted by: Right-Wing Vegetarian at February 9, 2004 04:53 PM | PERMALINK

Go to the Bls website for all the figures - they'll also draw graphs for you so you can make a better judement.

Regarding the takeoff the times when there were big take offs - like in 51 were preceeded by shorter but sharper up falls.


Posted by: Giles at February 9, 2004 04:54 PM | PERMALINK

Heres a more detailed breakdown.

"Ok, let?s use Brad?s figures and periods (from 1940-date) for now. An increase of 5.3 million in the payroll figures from 130.1 million is a 4 % increase.

How likely is this? Well suppose you not only know nothing about economics but you don?t even know what year it is. In the period from 1940 to the present there have been 159 12 month periods when the payroll has increased by more than 4% out of a total of 769 (overlapping) periods. So that means just taking a wild guess, which lets face it is all Bush is capable of, you?d have a 20% chance of getting at least the 4% growth required.

But we?re not guessing that wildly. We know that in the previous 2 years there have been net falls in the payroll numbers.

Since 1940 there have been 9 periods when the payroll numbers have fallen. In 5 out of 9 times payroll growth has exceeded 4% within the next 18 months. If we lower the cutoff to 3.7%, then the answer is 8 out of 9 times ? the exception being the 90?s when payroll growth didn?t exceed 3.7% in the subsequent pick up.

So from a purely probabilistic perspective the projection is, ?to put it mildly, extremely likely? to be met. Unless you'd only lived in the 90's.

The final point is whether the linear average Brad uses to calculate the amount required to increase the average by 2.6 million overstates the required increase. I think it does. The fall in payroll numbers is likely to be front loaded over the next year as jobs are created on the back of the recent strong growth quarters. So rather than requiring growth of 466,000 per month over the next year (5.3 million in total), 4 months where 500, thousand jobs are added, followed by 2 of 400,000 , 2 of 300,000 then tailing off to 4 of 100,000 will increase the yearly average by 2.6 million but only require the addition of 3.8 million jobs ? a 2.9% increase in payroll numbers. And over the last 50 years pay roll numbers have increased by more than 2.9% more often than they haven?t."

Posted by: Giles at February 9, 2004 04:55 PM | PERMALINK

/The effect of this? People will see their 401ks getting fat again, which will lead to more consumer spending as people begin to "feel" richer./

Funny, I thought we the 'wealth effect' theory went out in 2001 or so, since the collapse of the market didn't have the opposite impact on consumer spending.

Someone should update their subscriptions and stop reading old back issues of Fast Company...

Posted by: AF at February 9, 2004 05:01 PM | PERMALINK

RWV, can you comment on Brad DeLong's data and the White House's forecasts or not? Because if you can't, find another thread!

Posted by: Constantine at February 9, 2004 05:04 PM | PERMALINK

Sorry (looking sheepish).

Posted by: Right-Wing Vegetarian at February 9, 2004 05:06 PM | PERMALINK

the jobs forecast is incompatible with the growth forecast, barring a sharp decline in productivity.


Discuss.

Posted by: Atrios at February 9, 2004 05:09 PM | PERMALINK

Giles, i appreciate the homework you've done here, but since you're interested in a purely probabilistic outcome, i'll give you odds that it ain't gonna happen (say 3 to 1), and i'll give you even bigger odds that we aren't going to get 500K job growth in any month of the next 12....

That said, i'm suspicious of your "since 1940." Howzabout you start in 1950, so we can eliminate any post-Depression, post-World War II effects? How many periods fit your criteria then?

Posted by: howard at February 9, 2004 05:17 PM | PERMALINK

I know this isn't the topic and it has probably already been beaten to death but I must say that if I wanted America to falter then I would vote FOR Bush and the forces he represents (you know, the people that really pull the strings). They are hell-bent on leading this nation down a destructive path.

I know this may be shocking to right-wing nitwits who spew hateful remarks and then act all shocked and above it all when they get unkind responses in return, but us liberals want America to be a shining example of intelligent democratic freedom instead of an arrogant bully.

Posted by: Eric at February 9, 2004 05:33 PM | PERMALINK
Regarding the takeoff the times when there were big take offs - like in 51 were preceeded by shorter but sharper up falls.

WTF is an "up fall"?

Posted by: cmdicely at February 9, 2004 06:18 PM | PERMALINK

Since 1940 there have been 9 periods when the payroll numbers have fallen.

And, as it turns out, zero when they've fallen for this long, and again zero where they've continued to fall for so long after a recession ended, so just assuming that any recovery now would be like those would be incredibly naive.

This is, truly, a set of scenarios that assumes no knowledge of economics or analysis of underlying factors, and purely cobbling together isolated statistics with no rationale.

Posted by: cmdicely at February 9, 2004 06:22 PM | PERMALINK

"So from a purely probabilistic perspective the projection is, ?to put it mildly, extremely likely? to be met. Unless you'd only lived in the 90's."

Now why would the 1990s be different? I think before dismissing it as an 'exception" wouldn't it make more sense to consider this the most recent trend and indicative of the strutural change in the nature of employment itself? that is, a change from production to the service industry, long-term stable employment a thing of the past, and companies usually setting up shop wherever doing business is the cheapest.

I don't believe at all you can simply dismiss the 90's as an exception.

Posted by: splash at February 9, 2004 06:58 PM | PERMALINK

Billmon has a very good post about this (his economic analyses are typically worth reading).

In essence, the administration has always forecast that there would be net employment growth over its term, and, as jobs fail to appear, the forecast growth rate becomes more optimistic year after year.

This is no different from DeLong's take, but he's got a nice graph.

Posted by: bad Jim at February 9, 2004 08:09 PM | PERMALINK

My understanding is that the Council of Economic Advisers revised their jobs forecast even before the Economic Report of the President was released. The new numbers are reflective of the CEA's lowered expectations. And, this means that even their optimistic forecasts show that the economy will have less jobs at the end of 2004 than when Bush started in January 2001.

From Brad DeLong: Perhaps the most interesting thing about today was the various exchanges with informed sources this afternoon telling me that Table C-1, p. 98 of the 2004 Economic Report of the President is out of date, and that the CEA has lowered its forecast of average employment in 2004 by a considerable amount.

I gather that the CEA no longer expects average payroll unemployment in 2004 to be 132.7 million, but instead something like 130.1 + 5.5 x 0.32 = 131.9 million.

Posted by: Datanerd at February 10, 2004 08:17 AM | PERMALINK

ok

Posted by: penis enlargement at August 10, 2004 09:29 AM | PERMALINK
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