A Good Jobs Report

Today’s jobs data exceeded expectations. Payrolls expanded by 114,000 in September, in line with expectations, but upward revisions to July and August added another 86,000 jobs, so the overall payroll picture is better than the headline.

The big news, though, is that the unemployment rate fell to 7.8%. That’s big economically and symbolically. Indeed, it’s so big that conspiracy-mongerers are suggesting the BLS cooked the numbers to help President Obama get re-elected. Let there be no doubt: That’s utter nonsense.

Other numbers also indicate an improving job market: the labor force participation rate ticked up to 63.6%, the employment-to-population ratio rose 0.4 percentage points to 58.7%, and the average workweek increased by 0.1 hours. All remain far below healthy levels, but in September they moved in the right direction.

Despite the drop, unemployment and underemployment both remain very high, as well. After peaking at 10% in October 2009, the unemployment rate has declined a bit more than 2 percentage points. The U-6 measure of underemployment, meanwhile, peaked at 17.2% and now stands at 14.7%:

As you may recall, the U-6 measures includes the officially unemployed, marginally attached workers, and those who are working part-time but want full-time work. One anomaly in the September data is that the unemployment rate fell from 8.1% to 7.8%, but the U-6 remained unchanged at 14.7%. Why? Because the number of workers with part-time work who want full-time work spiked up from 8.0 million to 8.6 million.

The U.S. Economy is Uncertain, Fragile, and … Growing

Over at the Kauffman Foundation, Tim Kane has released his latest quarterly survey of economic bloggers. Here’s the usual word cloud reflecting the adjectives (up to five per respondent) that we econobloggers offered up to describe the U.S. economy:

That’s much better than last quarter, when you needed a magnifying glass to find any optimistic sentiments:

As usual, the survey also includes various questions about economics, policy, and haiku. Yes, the survey solicited haiku about the European debt crisis. My inner muse didn’t speak that day, so I don’t have my own to share. So let me offer up Jeff Miller’s (A Dash of Insight) as food for thought … and not just for Europe:

When the task is great

take but one step at a time

Compromise builds strength

The U.S. Economy is Weak, Uncertain, and Fragile

At least according to the latest Kauffman survey of economics bloggers by Tim Kane. Here’s the word cloud of responses when the bloggers (including me) were asked for up to five adjectives to describe the U.S. economy in Q4 2011:

Comparing this to the last survey in July, the good news is that “vulnerable” has gotten smaller. The bad news is that “recovering” has disappeared (at least I couldn’t find it):

Regulatory Uncertainty and Our Weak Economy

Over at the Economist’s Free Exchange blog, Grep Ip offers an excellent, balanced analysis of regulatory uncertainty and our weak economy. Here’s a short excerpt:

How much of our economic malaise can be blamed on regulatory uncertainty? Conservatives argue that a wave of Obama administration regulations and the threat of more to come are the primary hindrance to business confidence and hiring. Liberals say that the weak economy is far more important and that any regulations being enacted more than pay for themselves in economic terms.

I’ve been struggling with this question for months and have found the debate frustrating: the terminology is wrong and the subject poorly framed, the evidence fragmentary and unhelpful, and generalisations are rampant. So what follows are a few thoughts that I think clarify the debate, though without necessarily resolving it.

First, it is not “uncertainty” per se that bothers business. Whether uncertainty is unwelcome depends entirely on what’s at stake. What would you prefer: 100% probability of dying next year, or 50%? Most of us would choose the latter. Similarly, business would prefer zero probability of a burdensome new rule, but if that’s not possible, would certainly take 50% probability over 100%. The administration’s decision to delay implementation of a new ozone standard perpetuates uncertainty. Business welcomed it nonetheless because now they do not have to spend money to meet it for at least two years, and perhaps forever if in the interim a new president chooses never to implement it. Does the Federal Reserve create some uncertainty when it undertakes quantitative easing? Probably, but in the process it makes the stability of inflation around 2% much more certain, and that, most businesses would say, is a reasonable trade-off.

Second, “regulation” doesn’t capture the breadth of government activity that affects business confidence, investment and hiring. The threat that America might default must surely have been one of the most toxic sources of uncertainty America’s political classes have yet inflicted on the economy, something you’ll see mentioned in the Federal Reserve’s latest beige book. This speaks to a more deep-rooted alienation between business and Washington.

Read the whole thing, it’s the best treatment I’ve seen.

Economy is Worse Than We Knew; Uncertainty Still Reigns

Tim Kane at the Kauffman Foundation is out with his latest survey of economics bloggers (full disclosure: I am both an adviser to the survey and a participant in it).

In light of today’s abysmal GDP report, the results for one question are particularly relevant:

The latest revisions shows that GDP growth in recent quarters was much lower than previously reported (e.g., only 0.4% in the first quarter versus the prior estimate of 1.9%). So score this one for the 44% of economics bloggers who answered “worse”. (I wrongly answered “same”.)

As always, it’s also fun to look at the word cloud of adjectives the bloggers used to describe the current state of the economy:

Uncertainty still dominates the middle of the nation, but weakness, vulnerability, and fragility have, unfortunately, being gaining territory.

For results from previous surveys, see this earlier post.

How Ambitious is Pawlenty’s Growth Goal?


In his economic speech on Tuesday, presidential candidate Tim Pawlenty set out an ambitious goal for economic growth:

Let’s grow the economy by 5%, instead of the anemic 2% currently envisioned.  Such a national economic growth target will set our sights on a positive future.  And inspire the actions needed to reach it. By the way, 5% growth is not some pie-in-the-sky number. We’ve done it before. And with the right policies, we can do it again.

Between 1983 and 1987, the Reagan recovery grew at 4.9%.  Between 1996 and 1999, under President Bill Clinton and a Republican Congress the economy grew at more than 4.7%. In each case millions of new jobs were created, incomes rose and unemployment fell to historic lows. The same can happen again.

In the aftermath of the Great Recession, it wouldn’t be surprising to see a couple years of strong growth at some point. Let’s hope it’s soon.

But could we have remarkably strong growth for a full decade, as Pawlenty hopes? His two examples don’t inspire confidence. In each case, strong growth ended in four years or less.

So when was the last time the United States grew at 5% for a full decade?

Mid-1958 through Mid-1968. Over that span, U.S. growth averaged exactly 5.0% per year.

But that’s the only instance since World War II. Economic growth was lower than 5%, usually much lower, in every other decade since 1947:

Growth hasn’t reached even 4% over any decade since the late 60s and early 70s.

Getting up to 5% over the next decade thus seems not merely ambitious, but almost unthinkable.

Of course, a few years back many would have said the same thing about getting the U.S. growth rate down to 2%. Until the Great Recession, there was only one ten-year stretch in the post-war period, ending in early 1983, in which growth averaged as low as 2%.

Sadly, we’ve broken that record handily. Over the past ten years, growth has averaged a meager 1.8%.

So maybe T-Paw’s right, and the economy can break out to the upside just as we’ve done to the down.

But I wouldn’t bet on it, regardless of who is president.

P.S. The quarterly data I use here are available since 1947. Annual data go back to 1929. Perhaps not surprisingly, every ten-year period ending in 1941 through 1951 had an average growth rate of 5% or more, thanks to World War II and the rebound from the Great Depression.   

Uncertainty Still Reigns in the Latest Blogger Word Cloud

Tim Kane at the Kauffman Foundation is out with his latest survey of economics bloggers (full disclosure: I am both an adviser to the survey and a participant in it).

My favorite feature is a word cloud of adjective that respondents offered to an open-ended question about the U.S. economy:

Uncertainty still reigns (as it should), but ”recovering”, “improving”, and “growing” hold some prime real estate. As do “weak”, fragile”, and “sluggish.”

For comparison, here’s last quarter’s word cloud:

A Tepid Quarter for GDP

Thursday morning brought the first official look at GDP growth in the first quarter. Headline growth was a disappointing, if not surprising, 1.8%.

Here’s my usual graph of how various components of the economy contributed to overall growth:

Consumers continued to spend at a moderate pace; their spending grew at a 2.7% rate, thus adding 1.9 percentage points to overall growth. Equipment and software investment (up at a 12.6% rate), inventories, and exports also contributed to growth.

Residential investment fell back into negative territory, reflecting the latest down leg in the housing market. But the real negatives were structures (down at a 21.7% rate, thus cutting 0.6 percentage points from growth) and government (down at a 5.2% rate). Defense spending fell sharply (11.7% rate), and state and local continued its decline (down at a 3.3% rate).

Note: As usual, imports subtracted from growth as conventionally measured. As discussed in this post and this post, I’d like to see GDP contributions data that allocate imports across the other sectors. Such data would reveal, for example, how much consumer spending contributed to growth in the U.S. economy itself. Presumably it’s less than the 1.9 percentage points shown in the chart, which reflects consumer spending that was satisfied by both domestic and international production, but we don’t know by how much.

Developing the Competitiveness Agenda

On Friday I will be speaking at an event sponsored by Hamilton Place Strategies. It came together on short notice, so let me give it a plug:

Developing the Competitiveness Agenda

This week’s first meeting of the President’s Council on Jobs and Competitiveness kicked off a national debate on the economic policies encouraging greater job creation and economic growth in the United States. The Council’s mission is to focus on finding new ways to promote growth by investing in American business to encourage hiring, to educate and train our workers to compete globally, and to attract the best jobs and businesses to the United States.

To contribute to the ongoing debate, we are bringing together noted policy experts and economists to discuss the key policies that will be most effective in achieving America’s economic goals.


Byron Auguste, Director, McKinsey & Company
Donald Marron, Director of the Urban-Brookings Tax Policy Center
Michael E. Porter, Professor, Harvard Business School

Moderated by Matt McDonald, Partner, Hamilton Place Strategies

WHEN: 10:00 am – 11:00 am, Friday, February 25th, 2011

The National Press Club: Holeman Lounge
529 14th Street, NW
Washington, DC 20045

RSVP here

My basic approach will be to emphasize the three key drivers of economic activity: a skilled workforce, capital, and ideas. I generally align myself with Paul Krugman on the idea of “competitiveness“, so if you hear me use the term, I probably mean it as shorthand for productivity. (Well, not shorthand exactly — “competitiveness” has more letters than “productivity” — but you know what I mean.)