TCS Daily

New Economy, Old Math

By David Dreier - February 21, 2006 12:00 AM

Anyone looking for a job in 1940 couldn't email a headhunter or search the web for openings. They could, however, bring a mimeographed copy of their resume to the interview. If hired, odds were they became lifetime employees of the company, most likely a heavy industrial manufacturer.

Over six and a half decades, Americans have experienced a sea change in how we look for work, where we work and how often we find new work. We have progressed into a wired, upwardly mobile, flexible workforce. Small businesses, self-employment and independent contracting have become the hallmarks of our entrepreneurial, innovation-driven economy.

With such a drastic transformation, one might expect the way we measure employment has evolved too. Yet our most frequently cited survey of job creation remains mired in a Depression-era mind-set and research method. The Bureau of Labor Statistics' Current Employment Statistics survey, or the payroll survey, tracks payroll employment by surveying established businesses. This results in monthly job creation numbers.

One other important jobs survey is the Current Population Series, or the household survey. The household survey tracks all types of employment -- from someone who holds a lifelong job at a big business to someone who just became their own boss -- and it produces the unemployment rate. The household survey tends to be much more volatile than the payroll survey, which is a main reason it is used less frequently.

In fact, the public and private sectors have historically overlooked the household survey and relied on the payroll survey to gauge national job growth. When we look back to the pre-WWII economy, favoring the payroll survey makes sense. At the time, there was relatively little variety in the types of jobs available or the way they were created. Familiar companies, such as U.S. Steel and General Motors, dominated national employment.

Today, the employment landscape is entirely different. Just look at Southern California, with its biotechnology facilities, independent IT contractors, and small, specialized consulting firms. Yesterday's start-up is today's big business, and today's brainstorm is tomorrow's start-up. It's not surprising, then, that the payroll and household numbers portray quite different results.

The disparity between these jobs surveys became particularly apparent throughout the early stages of the post-recession recovery in 2002 and 2003. While the payroll survey lagged for months, the household survey demonstrated a strong and growing workforce, where self-employment accounted for a third of all job creation.

Following the end of the recession in November 2001, job creation in the household survey had rebounded by the following May. Although there were some ups and downs in the ensuing months, the household jobs numbers never again dipped below the November 2001 level. By November 2003, more than 2.2 million net new jobs had been created, and the pre-recession jobs number had been surpassed.

By contrast, the payroll survey did not demonstrate net job growth until August 2003, and didn't return to the November 2001 level until April 2004, nearly two years after the household survey had caught up. And the payroll survey's pre-recession jobs number was not surpassed until February 2005. This prolonged lag in the payroll survey's job creation numbers led to claims of a "jobless recovery." While every other major indicator of economic strength surged forward, from GDP to productivity, the payroll survey persisted as an anomaly of negative news. In an already dynamic economy, the increased churn created by economic expansion only highlighted the growing inadequacies of a Depression-era payroll survey. Using mid-20th Century methods to take a snapshot of the 21st Century employment picture simply does not work.

To launch an overhaul of our jobs surveys, Majority Leader John Boehner and I introduced H.Res. 14 last year. The resolution called on BLS to review and modernize the way we collect jobs data. In response, the BLS conducted a report that analyzed the two surveys and evaluated options for change. While the report stopped far short of proposing a complete reform of the surveys, it did acknowledge that a growing discrepancy exists between the two numbers and determined that further analysis is necessary. I am pleased that BLS has taken this important first step. But it is only that. We must continue to push for reform so that our jobs surveys effectively track job creation.

Policy makers rely on accurate economic data to draft effective legislation and businesses need the right numbers to plan for their future. In an economy where the only constant is change, unreliable numbers will result in off-target legislation and poor business decisions. A modern economy needs modern statistics.

Congressman David Dreier (R-CA) is Chairman of the House Rules Committee.



even older math
Why rely for the government and its proven incompetence for these numbers?

Why rely on static tax income analysis, known to give wrong answers? As my hero, General Honore, says "we're stuck on stupid". Here's one for you, Dave. Every time a tax rate reduction is enacted, or extended in any form, if (when) the predicted static tax income losses are not realized, the enacted rate should be lowered, stepwise, over time, until that loss is achieved. This way the Laffer curve can be quantitatively calibrated and you guys will be embarassed into reality.

Keep old metrics, add new ones
This is a fine suggestion, to establish some new metrics. I am especially unhappy with unemployment numbers that do not count "discouraged" workers-- i.e. the long-term unemployed who want to work but live in areas with no jobs. To be of any use, employment numbers must be adjusted and fiddled with to the point where every person is measuring something unrelated to the next guy's numbers.

One important thing though. It would be a disastrous mistake to discontinue tracking the old numbers, in that you need baselines to connect present performance with past performance. Nothing is more useless, for instance, than a graph that tracks "Gross National Product" up to a point, then begins a different line labelled "Gross Domestic Product".

Also, the last thing we need is vital stats discontinued for political reasons. I will recall when Nancy Chao, a political flack with only a PR background from industry, was brought in to head the Dept. of Labor. The first thing she did was to decide we didn't need to continue tracking layoffs of over fifty employees. You will recall, of course, that in 2001 this number was a source of particularly noxious publicity for the new administration's attempts to fix the economy. So they stopped tracking it.

So maybe it'll cost us a little more to keep the old statistics while adding a few new ones. But we'll find it to be well worth the trouble.

The Laffer Curve
Don-- Here's a number you might want to track: federal revenues.

I note that since the tax cuts were instituted, revenues have been anemic. More to the point, our return to Reaganomics marked the point where the federal gubmit began again to be swamped in red ink. Read and ponder:

Re: The Laffer Curve

You should get data that is up-to-date. If you had bothered to notice in chart you linked to, revenues for 2004 and 2005 were estimated. The treasury has posted actual revenues for those years (here: and 2005 revenues ($2,197,000,000,000)exceeded revenues for the previous peak in 2000($2,043,000,000,000) at the peak of the dot com boom. Not so anemic after all. In line with Laffer curve predictions, revenues started to rise in 2004 after the tax cuts and increased even more in 2005. Revenues from capital gains have soared in 2005.

Republican numbers
Several comments:

* What you are calling for is a technical adjustment. The present Republican government has not proven adept at the technical (drug benefit, Katrina response, budgets (see Feb 21 NYT editorial), etc.). If you want a technical adjustment, get a bipartisan group of experts.

* If Republicans were interested in accurate numbers, they would support statistical adjustments to census data.

* Is the main purpose of the proposed leglislation to rebut the claim that we have a jobless recovery? If so, you need legislation that corrects other misunderstandings, such as the one that asserts that only the rich are benefitting -- median income is falling, and the one that holds that this is the weakest "recovery" on record.

Touche, mon frere
Duly noted, dp. Looks like the Laffers have the last laff.

Once we have to start paying back all the easy money our recovery has depended on, do you think the tax cut formula to prosperity will still work as well?

"Liberal" Sleight of Hand
The minority objected to the drug benefit on two primary counts: it wasn't expensive enough; and, it wasn't run by a government bureaucracy. "Efficient government" is an oxymoron.

Approximately 1,300 people died when Katrina hit, BECAUSE state and local government officials had failed to evacuate them. (NOTE: Both state and local government are controlled by Democrats in Louisiana.) I am unaware of any deaths documented as directly attributable to FEMA delays, including those caused by the state and local governments.

The NYT editorial page is hardly a "BI-partisan" or "expert" source on any issue. It is, however, the exclusive home of "Dowd-ification".

If Democrats were interested in statistical adjustments to the Census to achieve accurate numbers, they would work aggressively to change the law to include statistical adjustments.

It is virtually impossible to legislate to correct misunderstandings, such as the "misunderstandings" you list, in a country with freedom of speech and freedom of the press. In the US, the federal government cannot even legislate that the NYT be printed on yellow paper, no less require it to report in such a way as to correct "misunderstandings". In fact, as should already be obvious, the federal government cannot even legislate that the NYT not intentionally create "misunderstandings".

Why should the government care how many people have a job, or two or three or...?

Liars and damn liars

The first thing is to take the statistics gathering out of the hands of political hacks. Its a conflict of interest in the simplist terms. Almost all of these metrics have been manipulated so far for political reasons that they no longer hold much meaning.

The damage this manipulation costs to the efficiency of the economy in malinvestment boggles the mind. And for what, so a sitting president can have another go on the country?

The number people refer to as the unemployment rate really is more of a RATE than a absolute percentage. The lay person thinks its the % people that can't find a job when in actuality is more of the change in employment versus time. So a CONSTANT but high unemployment percentage will come out of the metric as low RATE.

Just because a statistic tells a bad story doesn't mean its wrong. Someone losing their admin job at IBM and starting a dog washing business in their back yard isn't a recovery. GDP numbers blown up with asset bubbles isn't a recovery just like receiving a new credit card isn't a pay increase.

The thing I haven't been able to work out is are you guys hopeless optimists or evil geniuses?

One more thing, removing a factor from a metric because its "volatile" is nonsense. This kind of excuse is used for manipulating the CPI numbers. Energy is excluded because its volatile, but what is more fundamental to our energy intensive way of life? But Chinese resin chairs are included, because they're getting cheaper. And claiming to capture housing costs by "equivalent rent" is so bogus because everyone knows that rents are way cheaper than mortgages in these days of the housing bubble. They're trying to have their cake and eat it too- GDP is way up, housing prices are increasing, inflation is low, look how little rents have gone up.

You beat me to the punch
Exactly! One can only conclude for political purposes...that is, to blame the opposition when the numbers are "bad" and crow loudly when "good". Good and bad, of course, a function of which side you're on at any given time.
Frankly, I think that we could close the BLS along with many other of the alphabet agencies without skipping a beat. How nice it would be for our pocketbooks too!

To promote the general welfare
That's the $64 question, marjon. Why should the government care?

Here's a quotation you might be able to identify:

"We the people of the United States, in order to form a more perfect union, establish justice, insure domestic tranquility, provide for the common defense, promote the general welfare, and secure the blessings of liberty to ourselves and our posterity, do ordain and establish this Constitution for the United States of America."

Oddly, the people who put this country together felt that it was a basic purpose of government to provide a matrix such that its citizens could share in a general prosperity. It's a fine sentiment that, when taken literally, provides us all a very comfortable standard of living. That is, when we have jobs.

COULD is the operative word. Words are important.
First, the founders didn't "feel", they "believed". "Feeling" became the be all and end all much more recently.

Second, the intent of the Constitution was to assure the opportunity to share in a general prosperity. (COULD, not WOULD)

Third, "sentiment", taken literally or otherwise, provides nothing. The combination of opportunity (government responsibility) and effort (personal responsibility) provides a comfortable standard of living.

The federal government and state governments have arguably failed in their responsibilities primarily by operating an education system which does not offer adequate preparation for the jobs which must be filled in our growing economy. There are many more jobs available in the US economy than there are qualified citizen and legal alien applicants available to fill them. However, there may well be more people without qualifications for jobs than there are jobs requiring no qualifications.

Who is responsible?
Who is repsonsible to be sure you have a job?

lieing with statistics
Are you claiming that the members of the BLS are Republicans?

Nobody was able to demonstrate that statistical adjustments were anymore accurate than the physical counts. They did however present many ways for the politically connected to falsify the numbers for their political benefit. Something the Democrats have always been good at. That and getting the dead to the polls so that they aren't disenfranchised.
You also haven't stated how you plan to get around the constitutions requirement for a physical census, not a politicians best guess.

The claims of a jobless recovery have already been rebutted, they don't have to be rebutted again here.
Everybody is beneffitting for this recovery. That's been proven.
The reason the median income is falling is because so many new jobs are being added. New jobs historically have lower pay than established jobs.
The only reason the recovery has looked weak, is because of reliance on innaccurate statisitics.

Note to the clueless,
the preamble doesn't grant any powers to the govt.

Payroll survey
The payroll survey also misses employment in new companies.

Just semantics?
So do you think the Founding Fathers were just blowing smoke when they inserted that pretty language about *promoting* the general welfare?

Whose rsponsibility?
Your question is, IMO, poorly framed so as to force the desired answer. Of course primary responsibility rests with ourselves.

Nonetheless it is obvious from their words that the Founding Fathers intended that a core purpose of federal government was to provide a fertile environment for the growth of jobs, entrepreneurship, investment, education and other paths leading to the general prosperity.

The Constitution
Mark, the Preamble is a statement of purpose. Everyone on this site likes to go on at endless length about the original intent of the Founding Fathers. This is it. You can't get any clearer about it.

have a beer
Every statistician in the country thinks that adjustments to the census will make it more accurate, except for the hacks for Republican hire you're quoting.

Serious economists think we have a jobless recovery, though there have been counter arguments. However, median income has dropped consistently under Bush policies, first during the downturn, now during the upturn. When you find yourself making contradictory excuses, it's time to look under the hood.

As for firetoice: have we been drinking? I said the drug benefit was bungled in a technical way, something everyone agrees on. As for Katrina, there are huge numbers of temporary shelter mobile homes in Hope Ark (home of Billy C.) that have been paid for but not sent to New Orleans.

You need to re-read Madison, Jefferson et al
The general welfare clause was not ever intended to be an open invitation to all manner of government spending, interference, snooping etc.
Jefferson, for instance, said: "Congress has not unlimited powers to provide for the general welfare,
but only those specifically enumerated." His use of enumerated was of course referring to Articl 1, Section 8 of the Constitution.
Daniel Webster wisely added: "Good intentions will
always be pleaded for any assumption of power. The Constitution was made to
guard the people against the dangers of good intentions. There are men in all ages who mean to govern well, but they mean to govern. They promise to be good masters ... but they mean to be masters."

And finally:"With respect to the words general welfare, I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators." - James Madison, Letter to James Robertson, April 20, 1831 _Madison_ 1865, IV, pages 171-172

To reiterate
The general welfare clause was not ever intended to be an open invitation to all manner of government spending, interference, snooping etc.
Jefferson, for instance, said: "Congress has not unlimited powers to provide for the general welfare,
but only those specifically enumerated." His use of enumerated was of course referring to Articl 1, Section 8 of the Constitution.
Daniel Webster wisely added: "Good intentions will
always be pleaded for any assumption of power. The Constitution was made to
guard the people against the dangers of good intentions. There are men in all ages who mean to govern well, but they mean to govern. They promise to be good masters ... but they mean to be masters."

And finally:"With respect to the words general welfare, I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators." - James Madison, Letter to James Robertson, April 20, 1831 _Madison_ 1865, IV, pages 171-172

malfeasance, misfeasance and incompetence - let's have a little nonfeasance
It's not just that the bureaucrats and pols can't count, which they demonstrably can't (and don't want to); or, that they don't provide us with enuf jobs; which they don't, and can't.

The real problem is that our government actively destroys our jobs and our prosperity with taxes and regulations.

Given the current state of education and the newspeak definition of welfare, I just wanted to clarify your intent.
The preamble phrase "promote the general welfare" in no way shape or from was ever meant to provide federal charity to anyone.

The general welfare
Nor was that the sense in which I (or the Founding Fathers) used the phrase, marjon.

Promotion of "the general welfare" was intended, as anyone familiar with English usage might expect, to convey the idea that government had an essential hand in creating fertile ground for the establishment of a solid economy, and one that included as many citizens as possible. Do corporations enjoy beneficial conditions that allow them to prosper? Yes, thanks to government regulation. That's good for the general welfare. Do entrepreneurs find the fruits of their labors are theirs to keep, and not forfeit to some monarch or agency? Yes. And that's good for the general welfare.

As is the maintenance of conditions that stimulate the growth of employment. Get it now?

I believe that the Founders understood the difference between "PROVIDING for the common defense" and "PROMOTING the general welfare". More recently, interest has focused on IGNORING the common defense and PROVIDING the general welfare.

I realize that some find the actual words and the original intent of the Constitution (including the Preamble) to be somewhat limiting. However, the Founders did provide a specific, though exacting, process to amend the Constitution. That process does not include a "judicial shortcut" at my last reading.

"..., something everyone agrees on."
There is nothing "everyone agrees on".

No, we have not been drinking. Thank you for asking.

The concept of government efficiency is an oxymoron. FEMA is not the first example.

FEMA was not responsible for the hurricane, or for the deaths. It is responsible for the mobile homes.

Many of the evacuees are apparently responsible for nothing, including themselves.

It's in the eye of the beholder
I don't know of anyone ignoring the common defense any more than the current administration-- which seems to have had no defense up its sleeve to mitigate hurricane damage. I do see where they are farming out administration of our eastern ports to the home of several of the 9/11 perps-- putting our eggs in a foreign basket, as it were.

They do, however, put up a spirited offense. Take the invasion of Iraq, a country with no close relationship to Al Qaeda, no WMD's and no intent to invade our shores.

As for providing rather than promoting welfare, I'm certain you're aware that the dollar amount of corporate welfare not only dwarfs payments to the needy poor but does so by an order of magnitude. In fact virtually all expenditures in the name of either homeland security or the "war on terror" have gone into corporate pockets while providing precious little in the way of substantive defense. And here I will agree with you: this is not the spirit in which our Founding Fathers intended we conduct the affairs of government.

Madison was entitled to his take on the meaning of the founding documents, as was Jefferson. They were but two of our FF's. Had Madison's expanded interpretation of the phrase been agreed to by all the signatories I think the final document would have spelled it out in more detail.

"The general welfare clause was not ever intended to be an open invitation to all manner of government spending, interference, snooping etc."

Of course not. Neither was it meant to convey a prohibition of those same measures. It was a blanket statement, meaning that the government's core charter included whatever activities might be deemed by Congress and the Executive to "promote the general welfare".

I regard this wording to be a great deal less subject to misinterpretation that the familiar right of the citizens to maintain a "well regulated militia". Too many gun nuts take the FF's to have said "maintain the right of every yahoo to own as many guns as possible".

In either case it is refreshing to return to the original wording and to observe how clearly it says what it actually says.

If you think that only economists who work for the DNC and AFL-CIO qualify as serious, then it's understandable why you take the mistaken positions that you do.

What contradictory excuses? Do you mean I contradict the labor unions bought and paid for "experts", then I do so gladly.

The mobile homes haven't been sent, because govt regulations forbid placing them in flood zones. A regulation that existed long before Bush took office.

The preamble states that the purpose of govt is to provide for the common welfare. The rest of the constitution provides the powers by which the govt may do so.

If in your opinion, the preamble grants the govt the power to do anything and everything, provide it's for "the common good", why bother with the rest of the constitution.
Just stop with the preamble.

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