Jobs Update: Unhappy Times are Here Again

Interesting data on the U.S. employment situation today. The payroll number (-467,000 jobs in June) is bad enough that it should chill the chatter about green shoots, mainly because it is no longer "less bad" than the month before. (Vanity "I told you so" link here).

I'm sorry I can't offer my usual picturing employment chart. New MS Excel software is not allowing me to screen capture the graphic. (Curse you, Steve Ballmer!)

And yet, I still want to share an update on the severity in the change in the unemplyment rate down to the last decimal point. According to the BLS, "Since the start of the recession in December 2007, the number of unemployed persons has increased by 7.2 million, and the unemployment rate has risen by 4.6 percentage points."  That represents a 0.1 increase, right? Not so bad.  But if you look at the 3-decimal change, it is a 0.150 increase. This, actually, is the "less bad" story worth noting, since unemployment rates tend to decelerate very quickly in a turnaround, based on historical behavior of the series.

Let's update the comparison of this recession to the double recession of the early 1980s

U.S. UNEMPLOYMENT RATES AND CHANGES IN 2 RECESSIONS
2007-        1980-                                    
9.507        10.750      Peak (so far)                 
4.902        6.271        Recession Start        
4.380        5.606        Trough
4.605        4.479        Change from NBER Start (so far)      
5.127        5.144        Change from Trough (so far)  

What this means is that (1) it is now the worst postwar NBER recession in terms of increasing unemployment rate but (2) not quite the worst in terms of the rate defined by the time series trough, barely. If initial jobless claims continue to come in over 400,000 per week, I would not be surprised at all by another half-point jump in July to a rate over 10 percent.

Political analysis. David Leonhardt really nailed a great article in the NY Times ("A Forecast with Hope Built In").  Way too much optimism by White House economists:

To make the case for a big stimulus package, they released their economic forecast for the next few years. Without the stimulus, they saw the unemployment rate — then 7.2 percent — rising above 8 percent in 2009 and peaking at 9 percent next year. With the stimulus, the advisers said, unemployment would probably peak at 8 percent late this year. We now know that this forecast was terribly optimistic. 

Ironically, the harshest critics of Obama are also overly optimistic. The White House wants to believe the stimulus is working. The critics want to believe the stimulus wasn't necessary because the economy is getting better already. Both are probably wrong. The stimulus is, in fact, poorly timed for relief in 2009, but the recession will unfortunately last long enough that the timing problem be moot.  There's still the question of effectiveness, and it will be interesting to see how that debate plays out for the next 18 months ... or more.

Forgive the typos. My keyboard is on the fritz. (Ballmer must be watching!!!)

Comments

[Marginally Beneficial]

Good points...I think that you will find some good graphs on my blog with respect to the unemployment rate and net jobs created from the BLS. I would argue that the stimulus is making things worse as it crowds out private investment and the expectations of more government help on the way. These actions imply a longer recession that may look more like an expanded U relative to a V.