TCS Daily

Falling Down on the Jobs

By Jerry Bowyer - August 26, 2005 12:00 AM

"You can look at lots of numbers. If you actually work with economic numbers, you have less respect for them than people who don't. There's a mix of numbers. Some of them are pretty good. The unemployment rate looks pretty good. Lot of other numbers don't look so great. Last month's job growth looked great by a standard of recent years. If you looked at it compared with the Clinton years, it would have ranked 69 out of 96 months, right? So these are not really very good numbers... and the main thing is people don't feel good."
--Paul Krugman on This Week with George Stephanopoulos, August 21, 2005

What numbers could Paul Krugman possibly be looking at?

There's really no place for Krugman and the other doomsayers to hide: all the indicators are pointing in the same direction.

Recently, the government's monthly employment situation for July showed, according to the household survey, 438,000 new jobs. Including these recent gains, the current situation looks like this:

The monthly Establishment Survey typically counts corporate payroll jobs only. Here's what it shows:

Since the President's tax cuts were fully implemented in May 2003 (which is the only baseline which makes sense if one is trying to evaluate the effectiveness of his policies) 3.9 million jobs were added. According to this survey, we've created 1.3 million jobs year-to-date. It also shows the diffusion index at a high 62.8 which means that this job growth is spread out over a wide range of industries. It's not a Keynesian government spending boom. It's not Lenin's imperial war economy driven by defense spending.

The monthly Household Survey counts all jobs, including self-employment. Here's what it shows:

Year-to-date job growth has been 1.9 million according to the household survey. Since full implementation of the President's tax cuts, 4.6 million have found work. Since George W. Bush was initially elected America has created 4.2 million jobs. Because this survey shows strong performance for the President, his critics have begun to malign it. This is unwarranted and unprecedented. This is the survey which is used to determine the unemployment rate, which is at a low 5.0%.

The weekly Jobless Claims Report focuses on people who are filing for or moving off of unemployment compensation. Here's what it shows:

Jobless claims rose by 6,000 this past week but are still at a low 316,000. Anything under 350,000-400,000 is considered expansionary. All told, according to weekly jobless claims are down roughly 50,000 since the beginning of last year. At its high point after 9/11 the insured jobless rate (that is, the proportion of people on unemployment) was 3.0%; now it's 2.0%.

The monthly Job Openings and Labor Turnover Survey, similar to the establishment survey, supplies some of the reasons for this strong jobs picture. It shows 273,000 new payroll jobs in July, which is an even better payroll growth rate than the establishment survey. This is due largely to what calls "a decline in involuntary separations."

Here's the bottom line. Payroll jobs are way up, but self-employment is up even more. Terminations are down, which means fewer and fewer people are applying for unemployment benefits. Unemployment is historically low, because even though new people keep flowing in the pool of those looking for work, the economy keeps absorbing them into gainful employment.

For folks like us, who actually have respect for the numbers and are part of the 'reality-based community', the evidence is overwhelming. However, for guys like Krugman, the unpleasant reality about jobs is that there is no unpleasant reality about jobs. For them, the bad news is that the good news is true.


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