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Home Publications Blogs Beat the Press The Post Goes Negative on the Economy

The Post Goes Negative on the Economy

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Saturday, 04 June 2011 08:31

The May jobs report was bad news, but it was not as bad as the Washington Post and many other news outlets made it seem. When we get monthly data it is always important to remember that we are pulling out a snapshot from a longer period of time. Firms do not make their hiring and firing decisions over a single month. They have general impressions of how many people they need and they adjust their workforce accordingly.

For this reason it is important to take the 54,000 jobs created in May against the backdrop of 234,000 jobs added in April. Employers who hired many workers in April were likely to add few or none in May. For example, the retail sector reportedly added 64,000 jobs in April. It lost 8,500 in May. Food manufacturing added 6,300 workers in April, it lost 7,000 in May.

It is more likely that the April numbers overstated the underlying rate of job growth in the economy and the May numbers understate it, than there was some huge shift in the economy between the two months. Still, the average rate of job growth over the last three months was just 160,000.

It takes roughly 90,000 jobs a month to keep even with the rate of growth of the labor force. This means that if the economy stayed on this growth path, it would take almost a decade to get back to normal levels of unemployment. Furthermore, with house prices falling again and another round of state and local cutbacks kicking in next month, it is more likely that the job growth will be slowing than speeding up in the months ahead. 

Comments (5)Add Comment
Retired Guy Living on a Hill
written by Steve Lightner, June 04, 2011 10:55
Well look at the bright side of the press's failure to report accurately. Maybe this will get the President and Washington to start thinking about jobs again instead of how to wreck the economy with frivolous cuts.
growth in working age population?
written by richard marens, June 04, 2011 5:50
Dean

What is the source for labor force growth at about 90,000 per month? I've generally seen estimates ranging from 120,000 to 140,000 per month. Your figure is about half the monthly growth in population, and while I realize that population growth is not the same as the growth in adult population, the difference seems to large to be plausible.

I'll second the question by Richard Marens
written by Roman Berry, June 05, 2011 3:08
What is the source of the 90k to keep up with growth in the labor force? That number seems to be all over the place these last few years with the number showing up these days generally being substantially lower than the number that was being bandied about two or three or four years ago. I used to read (from liberal sources I respect, like you and Paul Krugman) that keeping up with labor force growth required 150k/month job growth. And then that number got reduced to something like 125k. And then 100k. And now we're at 90k? Are any of these numbers real, or are we simply seeing an effort to make things look less bad during a nominally Democratic administration?
Necessary Monthly Job Growth
written by Dean, June 05, 2011 9:32
Roman,

I get the 90,000 figure from the Congressional Budget Office's projection that the labor force is growing at 0.7 percent annual rate. With a current labor force ot around 150 million, this translates into 1,050,000 workers a year or a hair less than 90,000 a month.

It had been higher in prior years because the labor force was growing faster. The slowdown is the result of underlying demographics. The rate at which women are entering the labor force for the first time has now slowed to a trickle. The baby boomers are not retiring in large numbers and the new cohorts that are entering their working years are not very large.
BULLSHIT!
written by Irate DeanBakerHead, June 05, 2011 2:34
90,000 MY ASSHOLE!

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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.

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