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How Many Jobs Does It Take to Keep Pace With the Growth of the Labor Force? Print
Thursday, 01 September 2011 19:55

I have been saying that it takes roughly 90,000 jobs a month to keep pace with the underlying growth rate of the labor force. This means that more rapid growth should lead to declines in the unemployment rate while less rapid growth would lead to increases.

Many other analysts have used higher numbers. For example, in her NYT blognote, Catherine Rampell suggested that the necessary number for keeping pace with the growth of the labor force is 150,000 jobs a month. People have often asked me to explain the difference.

I can't say where others are getting their higher numbers from, but I know where I get my numbers. The Congressional Budget Office projects that the labor force will grow 0.7 percent annually for the next several years. If we go back to the pre-recession level of payroll employment (140 million), this implies 980,000 jobs a year or 82,500 a month.

There is another way to back out a growth number. The Bureau of Labor Statistics estimates that the civilian non-institutionalized population over age 16 increased by 1,781,000 people over the last 12 months. If we assume that 64 percent of this increment to the above age 16 population is employed (roughly the 2000 percent) then this would imply an increase in employment of 1,140,000. 

However, this would overstate payroll employment slightly since roughly 6 percent of the workforce is self-employed. If we assume that 6 percent of the increment is also self-employed, this implies that roughly 1,070,000 payroll jobs are needed to keep pace with the growth of the labor force, or just under 90,000 a month. 

Anyhow, that is how I get my job growth estimate.

Mortgage Servicers Are Still Making It Up Print
Thursday, 01 September 2011 16:55
That's what readers of Kate Berry's articles at American Banker know, why aren't readers of the NYT, WAPO, and the WSJ learning this? Apparently the servicers are still inventing documents and forging signatures just like nothing ever happened.
Creating Jobs: Oh, It's So Complicated! Print
Thursday, 01 September 2011 05:22

The Post notes the division among the members of the Fed's Open Market Committee over the best course to reduce unemployment and maintain price stability. It then tells readers,

"The Fed will always have its critics, internal as well as external, and that is as it should be in a democracy. It would be more honest, though, if purveyors of economic solutions — whether in Washington, on Wall Street or in the media — displayed a little more humility and a little less certitude."

It is worth noting that these lines were written by people who are employed at relatively well-paying jobs. People who are not employed or working at low-paying jobs with little security and few benefits might feel more need for action.

It is remarkable that the relatively well-paid Post editorial writers failed to notice the specifics of the division in views at the Fed. There are 5 Federal Reserve district bank presidents who are voting members of the open market committee. For practical purposes, these bank presidents are appointed by the banks within the district. These 5 bank presidents voted 3 to 2 against the statement committing the Fed to maintaining a near zero interest rate for the next two years.

By contrast, the 5 governors, all of whom are appointed by the President (3 appointed by President Obama, 1 appointed by President Bush and 1 [Chairman Bernanke] appointed by both) and approved by Congress voted unanimously in favor of this statement. This remarkable gap between the views of people appointed by democratically elected officials and the views of people selected by the financial industry should have jumped out at anyone reviewing the minutes and the vote. 

The financial industry tends to be very concerned about inflation, since this erodes the value of its assets. They are less concerned about unemployment, since top executives in the industry can do very well even in a time of high unemployment. Profits for the financial industry hit a record as a share of corporate profits in 2010. On the other hand, Fed governors who are appointed through the political process are likely to be concerned about unemployment, since this jobs are the primary concern for most people.

This break suggests that it is not just confusion that caused the divisions within the Fed, it was fundamental differences in interests. The Post editorial writers should have been able to see this.

The Impact of Cuts to the Military Budget Print
Thursday, 01 September 2011 05:00

The Post reported on a speech that General David Petraeus gave at the ceremony marking his retirement from the military. It noted that he warned against excessive cuts in the military. The piece notes that cuts in the range of $400 billion to $1 trillion over the next decade have been suggested by President Obama and members of Congress.

It would have been helpful to put these numbers in context for readers. The current projections show a baseline where the government will spend just under $8 trillion on the military over the next decade. This is approximately 4 percent of GDP and 17.0 percent of the total budget. (This does not count many military related expenditures like veterans benefits.)

If the larger $1 trillion sum was deducted from projected spending, the country would still be spending roughly 3.5 percent of GDP on the military. By contrast, it was spending just 3.0 percent in 2000. At the time, spending was projected to fall relative to the size of the economy. This means that even with the larger cuts mentioned in the article the country would still be spending far more on the military than was envisioned before the September 11th attacks.  

Spain Had Budget Surpluses Prior to the Recession Print
Wednesday, 31 August 2011 04:54

In an article on plans by the Spanish government to pass a constitutional amendment requiring a balanced budget, the Post told readers that:

"annual deficits spiked during the recession."

This statement implies that the country was already running deficits before the recession. In fact, Spain had budget surpluses in the three years prior to the downturn.

Spain's problems have nothing to do with excessive government spending or budget deficits, they stem from the collapse of a huge housing bubble that the European Central Bank (ECB) was too incompetent to notice and/or take steps to rein in. The same ECB officials responsible for this disaster are now dictating terms to the countries that face deficit problems as a result of the collapse of speculative bubbles across Europe and the rest of the world.

The Post and Iowa Assistant Attorney General Patrick Madigan Mislead Readers on Bank Settlement (see addendum) Print
Wednesday, 31 August 2011 04:40

The Post ran an article on efforts to reach a settlement between 50 states suing banks over their mortgage issuance and foreclosure practices. The piece is about dissension among the plaintiffs, most notably New York Attorney General Eric Schneiderman, who is insisting on a stronger settlement that will address a wide range of abuses by the banks.

The piece is told primarily from the standpoint of those pushing for a quick settlement. Without comment it presents the clearly inaccurate assertion from Mr. Madigan in reference to Schneiderman's efforts to pursue a broader range of issues that:

"We don’t want to stop them from doing their investigation, and even if we wanted to, we couldn’t,  ... All states are sovereign.”

This is completely untrue. If there is a settlement, to which New York State is a party, that includes a list of abuses that the banks practiced in prior years, then New York State would be prohibited from taking further action on these issues. It is inconceivable that Mr. Madigan does not know this, so he was deliberately misrepresenting issues in his comment to the Post. The Post's reporters and editors should understand this basic fact as well.


[Addendum: Mr. Madigan notified me that his comment to the Post was in the context of saying that New York state could not be forced to be a party to a settlement that it felt was inappropriate. In this sense, it is true that Iowa's attorney general and the other attorney generals could not prevent NY from taking action on its own. He also said that the attorney generals have focused only on issues related to the servicing mortgages and not other potential legal problems stemming from issuance and securitization of mortgages.]

Post Tells Readers that Super Committee Staff Pick Raises Fears of Spending Cutbacks, Deeper Downturn Print
Wednesday, 31 August 2011 04:25

Actually, the Post (a.k.a. Fox on 15th Street) would never be concerned about such things. However, the first paragraph of an article on the appointment of a staff director to the Super Committee told readers the selection of Mark Prater was:

"buoying hopes that the panel would produce a plan to tame borrowing."

The way that borrowing is "tamed" is either by raising taxes or cutting spending. With prospect for tax increases limited given the current make-up of Congress, most of the story here is likely to be spending cuts. This prospect no doubt buoys the hopes of the Post, as it routinely uses both its editorial and news pages to tell us, but the prospect of cuts to programs like Social Security and Medicare are probably not as encouraging to the rest of the population.

With Detroit Leading the American League Central Division, the Republicans Are Now Demanding Budget Cuts to Pay for Disaster Relief Print
Wednesday, 31 August 2011 03:42

This true statement would have been much better than the sentence in an NYT article on whether disaster relief funding should be offset by other budget cuts that told readers:

"But with the federal debt now more than $14 trillion, the dialogue has shifted on Capitol Hill, and Republicans are under pressure to hold firm on spending."

It's not clear that the size of the debt is in any way requiring Republicans to "hold firm" on spending, apart from their own efforts to press the issue. The economic reality is that the debt is posing no problem whatsoever for the government in its efforts to borrow. Long-term interest rates are at the lowest level since the Great Depression.

Furthermore, the economy is in desperate need of additional stimulus. It would have also been reasonable to point out that the Republican efforts to cut other spending at a time when the economy is already suffering from 9.1 percent unemployment.

COMMERCIAL ANNOUNCEMENT -- "The End of Loser Liberalism: Making Markets Progressive" is now available Print
Monday, 29 August 2011 14:41

You don't have to be ignorant all your life. You can download my new book free.

[Addendum: In reponse to some questions posted, we do not store contributor's information. And, the Bichon on the cover is one of my three dogs. The others are an adorable doberman and a lab shepherd mix. All three are shelter dogs.]

Have the Double-Dippers Been Dipping Too Much? Print
Monday, 29 August 2011 07:46

The Commerce Department just released data showing that real consumption spending rose by 0.5 percent in July. This makes it highly unlikely that growth will turn negative in the current quarter. Consumption is 70 percent of GDP and this figure implies a 6.0 percent annual growth rate.

Of course consumption is not really growing that fast, more likely it is increasing at near a 2.0 percent annual rate, but maybe this number will shut up the arithmetic challenged economists who keep talking about a double-dip recession.

The economy's problem is pathetically slow growth. We should be seeing growth of 5-7 percent as the economy rebounds from the worst downturn of the post-war period. Instead, we will be lucky if growth just keep pace with the growth of the labor force, preventing unemployment rate from rising further.

The implication is that tens of millions of people will remain unemployed or underemployed because of the Wall Street sleazes and the incompetent economists who could not see an $8 trillion housing bubble and still don't know a damn thing about the economy. It's a crime that they still have their jobs.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.