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Home Publications Blogs Beat the Press The Big March Job Report Celebration

The Big March Job Report Celebration

Saturday, 02 April 2011 07:54

Okay, this celebration around the jobs report is really getting out of hand. Both the Post and Times had front page pieces touting the good news. The Post gets the award for being the more breathless of the two:

"The jobs numbers come amid other promising signs that the recovery is building momentum. The stock market wrapped up the first quarter this week with a 6.4 percent gain in the Dow Jones industrial average and continued to tack upward Friday, adding another 0.5 percent. Investors were pleased that the job growth was continuing — but not so fast that the Federal Reserve might want to apply the brakes by raising interest rates anytime soon.

"Also contributing to the buoyant markets were reports from automakers Friday showing that auto sales rose in March. Sales of new vehicles were up 11 percent over a year before at General Motors, 16 percent at Ford and 23 percent at Honda.

"A separate report Friday also showed continued strong growth in the manufacturing sector, with the Institute for Supply Management’s index of activity at the nation’s factories edging down to 61.2 from 61.4. Numbers above 50 indicate expansion."

First off, no one should include the stock market as indicator of the economy's well-being. Rich people are happy -- that's nice -- it has little to do with the economy. The car buying is positive, but with so many of the cars now imported or largely comprised of imported parts the impact of this surge in sales is much less than would have been the case 30 years ago. The drop in the Institute for Supply Management's index suggests that manufacturing is likely to make a marginally smaller contribution to growth in the months ahead, not good news. (The Bureau of Labor Statistics employment diffusion index for manufacturing, a measure of the percent of sectors that expect to add workers, fell from 66.0 in February to 63.0 in March, it had been 73.5 in January.)

As noted above, 216,000 jobs is not especially impressive, especially given the depth of the hole that our economic policymakers put us in. In only 15 of the 52 months from February 1996 to May of 2000 did the economy create fewer than 216,000 jobs. In most cases the weakness was caused by bad weather. And this was at a time when the working-age population was more than 10 percent less than today.

It is also striking that neither paper seems to have mentioned the Commerce Department's report on construction in February, which showed a 1.4 percent decline in February, following even larger declines in December and January. (The big news in this report was the 2.6 percent downward revision to the data originally reported for January.) Much of the story here is in non-residential construction as the building boom that resulted from the bubble in that sector is leading to a bust. The largest declines are in manufacturing construction where bio-fuel subsidies had led to a boom in ethanol plants in 2009-2010.

Anyhow, construction is certain to be a big drag on growth in the first quarter. It should knock at least a percentage point off GDP growth for the quarter. I am forecasting many surprised economists and reporters.

I have one more point skunk to toss over at the celebrators. Here is the path of the employment to population ratio (EPOP) over the downturn. Note that we have only risen slightly from the low hit in December of 2009 and the EPOP is actually a hair lower today that it was a year ago. The drop in the unemployment rate over this period was entirely due to people leaving the labor force. Now is that good news or what?


Employment to Population Ratio in the Dowturn




Source: Bureau of Labor Statistics.

Comments (10)Add Comment
Baker Ally for Job Growth Norquist Gets Stiffed by Coburn
written by izzatzo, April 02, 2011 9:34
The largest declines are in manufacturing construction where bio-fuel subsidies had led to a boom in ethanol plants in 2009-2010.

Tom Coburn, Senator from Oklahoma disagrees with Baker, noting that Grover Norquist and his socialist buddies are effectively attempting to boost job growth with Keynesian tax cuts consisting of more ethanol subsidies.

Coburn, a Physiocrat with historical family values from way back explained that doctors who treat only symptoms rather than causes never cure diseases.
Use basis point system
written by Paine, April 02, 2011 11:53
The rate is small when using month to month changes
A nice number like 300k out of a job force of say 150 million
Is only what ? 20 basis points ?
Maybe you use an annualized rate that gets you above 2 percent
Comment response by blogger
written by Paine, April 02, 2011 12:05
A cursory fly thru suggests some time ago you stopped responding to coments

Is this best practice?

It's certainly a trend among big hitters
But ......you're a job peoples guy shoulder level talk seems like it ought be your meat
written by Dean, April 02, 2011 2:31

it wasn't deliberate -- technical difficulties (now solved) coupled with lots of traveling.
only 8 cylinder econ con blog with a consistent sense of five o'clock shadow humor
written by paine, April 02, 2011 6:23
"no one should include the stock market as indicator of the economy's well-being. Rich people are happy -- that's nice -- it has little to do with the economy"

i love it
Framing for the shutdown
written by MicronEcon, April 02, 2011 6:35
Celebrating the jobs thing is setting up the story that the Republicans killed the promising recovery.

The Republicans are killing the recovery through State and local cuts, because they want to make Obama a one-term President. The theory is that nobody will remember all the statehouse fights when the economy tanks a year from now, they will blame Obama.

But if the shutdown drama plays out with Obama telling the tale that JOBS WERE GROWING until the Republicans screwed things up, that can become the theme for the 2012 campaign.

It's a really terrible contest, to see who gets blamed for the disaster that everyone in D.C. can see coming.
written by Bruce Krasting, April 03, 2011 6:15
Good line from Dean:

First off, no one should include the stock market as indicator of the economy's well-being. Rich people are happy -- that's nice -- it has little to do with the economy.

But Dean, you and Paul Krugman have been lauding the Fed for for what they have been doing for months now. Bernanke has said again and again that his goal his been to raise asset prices as a mechanism to expand consumption (the good old wealth effect). The objective of QE2 was to raise stock prices.

Do you support a monetary policy that has as its goal raising equity prices or not?

written by skeptonomist, April 03, 2011 7:56
Employment in the private sector has actually increased fairly steadily if slowly since the start of 2010, but government employment continues to decrease. Federal employment has been increasing very slowly, and state employment has so far declined only slightly. The largest decreases in government employment - and in the economy as a whole since the beginning of 2010 - have been in local government.

Myth Busting
written by Benedict@Large, April 03, 2011 9:32
@MicronEcon ~ The Republicans are NOT killing jobs because they want to make Obama a one-term President. They are killing jobs because because their ideology tells them that killing jobs creates jobs. It never works out that way, but does work out the way the people who buy Republican politicians want, so they keep buying those politicians.

And as long as I'm myth-busting here, I've got two more. (1) Obama doesn't have a 487 IQ, and (2) Obama is not playing 11-dimensional chess. Face it, the man just sucks at his job.
QE2 is Better Than Nothing
written by Dean, April 04, 2011 10:24

I am not a big backer of QE2 in that I expect its impact to be very modest. Some of it may be in boosting stock prices and thereby increasing consumption, but this would almost certainly be very small. (A 5 percent rise in stock prices would about $850 billion in wealth, which would translate into $26 billion to $35 billion in annual consumption or around 0.2 percent of GDP). I actually felt the bigger impact might be on home refinancing and some modest impact on investment. However, I think the net effect is likely to be very modest in any case. I would much prefer to see the Fed target a higher rate of inflation (e.g. 3-4 percent) as Krugman, Bernanke and others have advocated. But, you take what you can get.

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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.