US unemployment falls to 8.5 percent, but job growth remains weak

from Dean Baker

The unemployment rate fell to 8.5 percent in December, the lowest level since the 8.3 percent rate reported for February of 2009, the month that Congress approved the stimulus package. The drop was driven primarily by a 0.3 percentage point decline in the unemployment rate for men to 8.0 percent. The unemployment rate for women edged up slightly to 7.9 percent. Over the last year, the gap in unemployment rates between the sexes has virtually disappeared as the unemployment rate for men fell by 1.4 percentage points, while the rate for women only dropped by 0.2 percentage points. The employment-to-population ratio (EPOP) for women has actually fallen by 0.4 percentage points over this period, while it has risen by 0.8 percentage points for men. Overall, the EPOP stands at 58.5 percent, 0.2 percentage points above its year-ago level and 0.4 percentage points above the lows hit in the summer.

David Brooks is projecting his self indulgence again

from Dean Baker

Undoubtedly projecting from the fact that he can draw a nice 6-figure income for little obvious work, David Brooks complained in his column:

” Today, the country is middle-aged but self-indulgent. Bad habits have accumulated.”

For the most part the column is a confused diatribe against the Obama administration’s economic policies with a lecture on moral rectitude thrown in for good measure. He starts by condemning the efforts to stimulate the economy by telling readers:

Why is Spanish unemployment the highest in the EU (or: never underestimate the housing market)?

from Merijn Knibbe

Spanish unemployment is, with about 23% U-3 unemployment, the highest of the entire European Union. And it is still rising. And it has been rising for 53 months in a stretch. Time for a closer look: what happened, what’s still happening? And the answer is sobering: it still is the housing market, five years after the housing boom changed into the housing bust (graph).

Economic Conflicts with China and Class War in the United States

from Dean Baker

The Commerce Department’s release of trade figures last week showed another large deficit with China for October, albeit slightly lower than the record hit the previous month. This figure will renew the calls for stronger action against China.

Unfortunately the debate over China is often buried in confusion, leading to a situation that is not conducive to effective action. A major reason for this confusion is that there is not a common U.S. interest against China. The interests of the 99 percent differ greatly from the interests of the 1 percent.

Unemployment: Better? Or Worse?

from Peter Radford

Here we go.

The immediate reaction to this morning’s announcement that the US unemployment rate dropped to 8.6%, its lowest level since 2009, is one of excitement and relief. On the surface, which is where the mainstream media seems to dwell permanently, things look as if a corner has been turned. Those who are politically inclined will interpret this as a good sign for Obama, and Republican supporters will be glumly hankering for the good old days when they could hang a rotten jobs market around his neck.

This is, of course, nonsense.

The great Spanish job machine… (charts)

from Merijn Knibbe

Is Mario Draghi, banker in Frankfurt, right when he, implicitly, describes for instance the Spanish labor market as sclerotic and not able to create jobs:

“National economic policies are equally responsible for restoring and maintaining financial stability. Solid public finances and structural reforms – which lay the basis for competitiveness, sustainable growth and job creation – are two of the essential elements”?

Not really.  In fact, for some decades the Spanish job market has been the most dynamic of the entire EZ.

Why Frank Smets, chief economist of the ECB, thinks the ECB economic model is wrong

from Merijn Knibbe

Have you ever wondered why an U-3 unemployment rate of 23% in Spain (and rising) and 18% in Greece (and rising) doesn’t seem to bother the European Central Bank (ECB)? I have. And it might have something to do with the kind of models the European Central Bank uses, like the ECB ‘New Area Wide Model” (NAWM), which does not include unemployment as a variable. It literally defines unemployment away. People using this model don’t see what happens to unemployment – and at the ECB they do use this model… And yes, these are the kind of models which people like Greg Mankiw sell to their students. Let’s take a look at this:

Length of US recessions 1948 to 2011: chart and graph

from David Ruccio

Increasingly long periods of high unemployment have followed the US recessions of the last two decades. From 1945 to the 1980s, employment rebounded roughly six months after GDP did. But in the wake of the 1990–91 and 2001 recessions, it recovered 15 and 39 months, respectively, after GDP had returned to the prerecession peak. At recent rates of job creation, the lag this time will be upward of 60 months.  http://www.mckinseyquarterly.com/newsletters/chartfocus/2011_11.htm

Finally: U-6 unemployment in Europe (chart)

from Merijn Knibbe

Eurostat has, finally, published data on U-6 unemployment in Europe.  It was already possible to calculate U-5 unemployment (see this article). As Eurostat, probably because of unfathomable bureaucratic reasons, only does not calculate U-6 itself but only publishes its constituent parts, it’s worthwhile to publishe these data here (see graph, for a definition of U-6 see this post). U-6 is basically normal unemployment plus (unemployed, searching a job but not immedeately available) plus (unemployed, available but not searching) plus (people who work part time but want to work more).

Number of U6 unemployed per job opening in the US (chart)

from David Ruccio

In September in the United States, the ratio of officially unemployed workers to job openings was 4.17 (which is a decline from a year earlier, when there there 5.4 unemployed workers for every job opening, but still much higher than in 2007, when there was on average about 2 opening for every three unemployed workers).

If we consider the broader, U6 measure of unemployment (counting both unemployed and underemployed workers), the ratio in the US is 7.68 job seekers for every job opening. The chart below shows month by month the number of U6 unemployed per job opening from January 2008 to September 2011. 

Chart: US long-term unemployment 1967-2011

from David Ruccio

Between the third quarter of 2009 (when the recovery is said to have begun) and the third quarter of this year, the percentage of workers who had been jobless for a year or longer nearly doubled from 16 percent to 31.8 percent. The number of workers who have been unemployed for a year or longer has jumped, during the same period, from 2.5 million to 4.4 million.

Weak jobs gain in the US

from Peter Radford

There is not much to say about yesterday’s unemployment and jobs reports. In way the data contains slightly contradictory stories. This is because there are two sources for the information we lump together in the report: the survey of business and the survey of households. The two sometimes diverge in their narrative. Perhaps now is one of those moments. 

US economy generates 80,000 jobs in October, EPOP edges higher

from Dean Baker

The economy added just 80,000 jobs in October, continuing a pattern of weak job growth. Upward revisions to the growth numbers for the prior two months brought the average for the last three months to 114,000, slightly higher than the 90,000 needed to keep pace with the growth of the labor force. At this pace it would take more than 33 years to return to the pre-recession rates of unemployment. 

Meanwhile in Europe…(21). Unemployment, time to panic edition.

from Merijn Knibbe

At the very moment that I’m writing this, European unemployment may already have hit a new record. In september the old record of 10,2% was reached. And that’s not all. The number of unemployed has been increasing for seven months in a row. Youth unemployment in Greece and Spain is well over 40%. Differences within the Euro area are increasing at an astonishing speed. In countries like Germany, Austria, Belgium and the Netherlands unemployment has declined, up to about July 2011. In some other countries, however… see the graph. 

What skills shortage?

from John Schmitt

I remember well the gas shortages of the 1970s. Long lines at the pumps and gas prices through the roof. Higher prices are, of course, the textbook free-market response to a shortage.

Some economic analysts argue that an important reason we have high unemployment today  is because we have a shortage of skilled workers. Employers have good jobs to fill, but they can’t find qualified workers to fill them.

If there really is a shortage of skilled workers, though, we’d expect to see skilled workers’ wages rising.

The false promise of Obama’s trade deals

Kevin P. Gallagher and Timothy A. Wise

It is bad enough that President Obama is reversing his campaign pledge and supporting Bush-era trade deals with Korea, Colombia and Panama. Starting this week in Chicago, the US will be hosting the first major trade negotiations since the “Battle in Seattle” World Trade Organisation talks came here in 1999. This occasion is for the Trans-Pacific Partnership (TPP) with a wide range of industrialised and developing Pacific Rim countries.

As part of his plan to revive the US economy and create jobs, Obama claims he will be unveiling “a trade agreement for the 21st century”. Ironically, though, he will be pushing the same “Nafta-style” trade pacts he campaigned against, and to howls of protest from his own electoral base. Let us not forget what he said: 

Are we there yet?

from Peter Radford

Where?

At the point where we dip into a second recession.

No.

This is despite last Friday’s abysmal US employment number. For those of you distracted by storms and earthquakes: the US economy added no jobs – as in zero – last month. That is appalling. Terrible. Corrosive of our national wealth. It is outrageous. It is a scandal. And it is an affront to all of us concerned about our common wellbeing.

And it will not be solved by our worthy leadership elite any time soon. They are all too deeply involved in their childish and destructive political posturing, and in their self imposed austerity driven charge towards a replica of 1937.

Meanwhile, in Europe…18. Jobs, jobs, jobs?

from Merijn Knibbe

Recently, Eurostat published new data on unemployment – which is stuck at an unacceptable 10%. Large differences hide behind this average. Unemployment in Austria is 3,7% (and falling). Unemployment in Spain is 21,2% (and rising). One of the remarkable aspects of EU unemployment is a fast decline of (still double-digit) unemployment in the Baltics (Estonia, Latvia, Lithuania). Between the second quarter of 2011 and the second quarter of 2010, Estonian unemployment fell with 5,1% – which is, in a historical as well as in a comparative perspective, staggering. Do neo-liberal policies work after all? Remember, the Baltics are neo-liberal prodigies who pursued ruthless austerity policies. Do neo-liberal economists finally know how to shape societies and did they earn their badge as ‘social engineers’? Are crises good, after all, and do we only have to endure some short years of pain to live happily ever after (or at least to pay our creditors forever after)?

U.S. zero job growth in august, as unemployment rate remains stable

from Dean Baker

The Labor Department reported that there was no growth in jobs in August, while it revised down its job growth numbers for the prior two months by 58,000. Job growth over the last three months has now averaged 35,000, well below the 90,000 needed to keep pace with the growth of the labor force. The Verizon strike reduced the number of jobs reported in August by 45,000. Adjusting for this factor, job growth would have averaged 50,000 over the last three months.
 
The household measure showed that the unemployment rate remained unchanged at 9.1 percent; although, the employment-to-population ratio (EPOP) did edge up from its recession low to 58.2 percent. The number of people involuntarily working part-time jumped up by 430,000, to 8.8 million.

President Obama discovers how serious the recession is

from Dean Baker

That’s what he told an audience in Chicago last week. To be fair, he was referring to revised data from the Commerce Department showing that the falloff in GDP was larger than originally reported. However, ridicule is appropriate. He and we knew all along how many people were out of work. The employment numbers told us the size of the hole and the desperate need for government action.

This sort of ridiculous comment, and President Obama’s weak response to the recession over the first two and a half years of his presidency, explains the tidal wave of skepticism facing President Obama’s widely hyped upcoming speech on jobs.  The list of remedies leaked ahead of time does little to inspire hope.