Did the Unemployment Fever Just Break?

The topline rate of unemployment dropped from 10.0 to 9.7 in this morning's BLS Employment Situation report. Everyone probably had the same reaction I did: "Really??  Or is this some data quirk driven by a collapsing labor force denominator?" 

In fact, the labor force has stopped collapsing. It still has a long way to recover after nearly 2 million stopped looking for work over the last year. The numbers from this survey (the CPS household survey) tend to vary more than alternatives, but the trend lines are more reliable (for instance, one big story today is that the CES payroll numbers were adjusted down by nearly a million jobs. I think the case is closed that payroll figures are not reliable barometers during turning points).

Indeed, my sense that the the recession of 2007-09 might be turning is based on the trend view of the three big CPS components: net employment, net unemployment, and net labor force in the following chart:

   
 
 Hopefully these trends imply a solid employment recovery.  It's too soon to exuberate, first because two data points are not a trend, and second because the Fed will have to raise rates at some point ....

UPDATE: the second chart is not showing title and source line in the original post.  This revised chart should work.  Also, note the turning points I hint at in the title are not those approved by the NBER, rather what looks to appear from this data series only.

Comments

[Frank Ruscica]

From OpportuniTV.com/many-jobs/:

Popular online markets for customized education (CE) can be expected to catalyze the creation of many jobs.

From a November 6, 2009 article in the Wall Street Journal:

"According to the Census Bureau, nearly all net job creation in the U.S. since 1980 occurred in firms less than five years old. A Kauffman Foundation report released yesterday shows that as recently as 2007, two-thirds of the jobs created were in such firms. Put more starkly, without new businesses, job creation in the American economy would have been negative for many years."

From a 2005 report by The Nielsen Company:

"By enabling entrepreneurs to start a business online and immediately reach a market of 157.3 million registered users worldwide, eBay has become the best place to start, grow and operate a small business."

Harvard Business School professor Clayton Christensen is the originator of the canonical Model of Disruptive Innovation, and a co-author of the 2008 book Disrupting Class: How Disruptive Innovation Will Change the Way the World Learns. From Disrupting Class:

"Students need customized pathways and paces to learn.

…The second [phase of the disruption of standardized education] will be the emergence of a user network, whose analogues in other industries would be eBay…"

Stanford economist Paul Romer is the originator of New Growth Theory, which updates growth economics for the information age. From Romer’s entry on Economic Growth in the 2007 edition of The Concise Encyclopedia of Economics:

“The country that takes the lead in the twenty-first century will be the one that implements an innovation that more effectively supports the production of new ideas in the private sector.”

“Perhaps the most important ideas of all are…ideas about how to support the production and transmission of other ideas…North Americans invented the modern research university…As national markets for talent and education merge into unified global markets, opportunities for important policy innovation will surely emerge.”

From The Mystery of Economic Growth, a 2004 book by Harvard economist Elhanan Helpman:

"Interest in growth theory abruptly revived…in the 1980s. The two key papers were by Romer (1986) and Lucas (1988).

…Romer (1990) also initiated the second wave of research on the “new” growth theory.

…A more detailed study of the U.S. economy is provided by Jones (2002). He found that between 1950 and 1993 improvements in educational attainments, which amounted to an increase of four years of schooling on average, explain about 30 percent of growth of output per hour. The remaining 70 percent is attributable to the rise in the stock of ideas that was produced in the United States, France, West Germany, the United Kingdom, and Japan."

In particular, CE markets can be expected to attract many buyers and sellers of corporate training.

From a May 20, 2004 article in The Economist:

"“There has been a huge swing to custom programmes,” says Fiona van Haeringen of IESE, who attended a recent annual conference of business-education providers in America…Looking to this year, most saw growth coming mainly from customised education."

From Seeing What’s Next: Using the Theories of Innovation to Predict Industry Change, a 2004 book co-authored by Christensen:

"Modular, customizable corporate training has an advantage that interdependent M.B.A. programs can’t match — a product specifically designed for each employee’s needs.

…In contrast to the leading schools’ integrated structure, the on-the-job management education industry is a disintegrated one. Hundreds of specialized firms develop materials, others design courses, and others produce and teach them."

...Companies that introduce a CE market will race to:

1. provide loans to CE consumers
2. become a bank, as a means of increasing the amount of money that the company can lend
3. introduce more loan programs and financial services that complement the market (e.g., loans to small businesses, so more jobs are available to CE consumers)

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