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February 10, 2012

Reading the bump in inventories

Yesterday's wholesale trade report, with its positive surprise in December inventory accumulation, has estimates of fourth quarter gross domestic product (GDP) on the rise again. For the advance GDP release, the U.S. Bureau of Economic Analysis assumed that the book value of merchant wholesale inventories rose by $17 billion (at a seasonally adjusted annual rate, or SAAR) in December. The wholesale trade report suggests the book value instead may have risen by $56 billion SAAR. Our own calculations suggest fourth quarter GDP may be revised up from 2.8 percent to around 3.1 percent. A piece of that revision comes from positive sales activity, which would appear to be an unambiguous plus.

The inventory piece is trickier. Forecasters have a tendency—because the statistics have a tendency—to take a larger-than-expected inventory buildup in one quarter out of growth estimates for the next quarter. The implication in present tense is, of course, that 2012 may start out on the slow side as the fourth quarter inventory swell is run off.

That's not how we see it. Our current read is that it is better to think of the fourth quarter inventory buildup as a payback from a decumulation in the third quarter. Here's a look at overall inventory changes over the recent past, broken down into their various industrial components:


If you look hard, you will see that, though the fourth quarter inventory rise was broad-based, the third to fourth quarter change in wholesale inventories was particularly notable. In fact, the wholesale inventory picture in the back half of 2011 was dominated by a fairly large decumulation of nondurable goods inventories in the third quarter, a decline that was reversed in the last three months of the year:


In the background of those details are some pretty nonthreatening-looking inventory-sales ratios:


So, consider two stories that might frame thinking about the role of inventories in GDP growth in the first quarter or first half of this year. One story is inventory-inflated growth in the fourth quarter of 2011, to be followed by payback in the form of a drag on production in the first quarter (or so) of 2012. Another story is that the drag actually emerged in the third quarter of last year, providing a little extra juice in the fourth quarter, with no particular consequences for the current-year growth trajectory.

Right now, it looks to us like the latter story might be the right one. Of course, that doesn't mean there aren't significant risks to the outlook for domestic production, and hence inventories. For instance, although today's report on international trade in December was relatively benign in terms of fourth quarter GDP revisions, it did show a substantial further weakening in exports to the euro zone. Weaker demand from Europe will weigh on U.S. export growth. The big unknown is how weak that demand will get.

David AltigBy Dave Altig, senior vice president and research director at the Atlanta Fed

 

February 10, 2012 in Data Releases, Economic Growth and Development, Forecasts | Permalink

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February 06, 2012

Employment: Some good news, some bad news

Comparisons can be useful in determining where the economy is at any given point in time, and today's Employment Situation report from the U.S. Bureau of Labor Statistics provides another opportunity to do just that. According to that report, the U.S. economy added 243,000 nonfarm payroll jobs in January 2012. But total nonfarm employment is still 5.6 million lower than at the start of the last recession (December 2007).

For additional comparisons, more than 1 million fewer people filed initial unemployment insurance claims during the last week of January 2012 than during the last week of January 2009 (at the height of the recession). However, 55,000 more people filed initial claims during the last week of January 2012 than during the last week of January 2007 (before the recession started).

When examining layoffs, more than 400,000 fewer workers were laid off or discharged during November 2011 (according to the most recent data) than during the height of the recession in November 2008. Nonetheless, there were roughly a million fewer job openings and hires than during November 2007 (before the recession started).

Nominal average hourly earnings of wage and salary workers were about two dollars (9.6 percent) higher in January 2012 than around the start of the recession (January 2008). Nonetheless, real average hourly earnings (controlling for inflation) were only eight cents (0.8 percent) higher over the same time period.

Considering everything, there is both good news and bad news in the labor market today.

The median three-digit NAICS (North American Industry Classification System) industry lost 7 percent of its jobs during the most recent recession. In other words, half of the industries lost less than 7 percent of their jobs and half of the industries lost more than 7 percent of their jobs. Industries faring the worst (those in the 75th percentile of job losses) shed 13 percent of their jobs. And what might be considered "fortunate" industries (those in the 25th percentile of job losses) saw only 3 percent of their jobs disappear over this time period.


Chart 1 compares the year-over-year employment growth among industries that experienced below-median and above-median job loss, as well as those industries in the 75th and 25th percentiles of job loss. That chart also shows another potential bit of good news—that is, in spite of the dramatic differences in job losses, all four categories of industries are currently adding jobs at about the same rate. And that overall job growth, at about 0.24 percent per month, is roughly the same as the average monthly job growth seen between 1993 and 2000 and exceeds the average monthly growth before the recession, from 2004 through 2007.

Still, there is more bad news. At the current rate of growth, those industries that experienced above-median job loss during the recession will not regain prerecession employment levels until the end of 2015.


Chart 2 illustrates the employment level for those industries with above median job losses along with projections of employment based on three assumptions of monthly employment growth. To even recover before the end of 2013 the jobs that they lost during the recession, these industries as a group would need to experience extraordinary employment growth.

Does the projected labored employment recovery among these particularly hard-hit industries suggest there are more serious structural impediments to the efficient operation of the labor market today than there were after the previous two recessions? Several posts on this blog (here and here, for example) have addressed this question of structural change without coming to a definitive answer. Returning to chart 1 gives us yet another opportunity to speculate on this point.

Note that the category in chart 1 into which each three-digit industry is placed (above-median or below-median job loss, etc.) is based on job losses between January 2008 and June 2009. Plotting the annual growth rates back to 1990 illustrates that the industries that were hardest hit during the most recent recession were also those with the greatest job losses during the previous two recessions. So there appears to be nothing special about these industries that led to their suffering during the most recent recession.

Additionally, the pattern of recovery of these hardest-hit industries is similar to that experienced after the previous two recessions. Like before, the worst performing industries (those with job losses in the 75th percentile) are adding jobs at a faster rate than industries that did not suffer as much. Industries in the 75th percentile of job losses added jobs in 2011 at an average monthly rate of 0.22 percent; industries with below-median losses added jobs at an average monthly rate of 0.12 percent. This analysis does not suggest to me that unique structural features of this recession or recovery are holding employment growth back—it appears that the culprit is simply the extraordinarily deep hole the economy, and thus the job market, fell into this time around. The bad news, then, is that time may be the only answer for those industries to fully recover.

Julie Hotchkiss By Julie Hotchkiss, a research economist and policy adviser in the Atlanta Fed's research department

 

February 6, 2012 in Data Releases, Economic Growth and Development, Employment, Labor Markets | Permalink

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what do you make of the spin on the numbers. some are saying that the labor participation rate is understated, and with a traditional number we would be looking at close to 11% unemployment.

Posted by: Jeff Carter | February 05, 2012 at 02:26 PM

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January 12, 2012

Keeping an eye on inflation

Where's inflation heading? Well, here's what the minutes of the December meeting of the Federal Open Market Committee (FOMC) had to say on the subject:

"Participants observed that inflation had moderated in recent months as the effects of the earlier run-up in commodity prices subsided . . . many participants judged that the moderate expansion in economic activity that they were projecting . . . would be consistent with subdued inflation going forward."

But not all FOMC meeting participants viewed these trends with equanimity:

"Indeed, some expressed the concern that, with the persistence of considerable resource slack, inflation might run below mandate consistent levels for some time."

According to Reuters, San Francisco Fed President John Williams said it this way:

"The data so far on the inflation front are confirming my view that inflation is ebbing and moving to be too low, and that is an important driver of my thinking about policy."

But as you might expect, some see the inflation risks weighing a bit on the other side of the scale. Again, from the December FOMC meeting minutes:

"Some participants were concerned that inflation could rise as the recovery continued . . . A few participants argued that maintaining a highly accommodative stance of monetary policy over the medium run would erode the stability of inflation expectations."

In fact, Philadelphia Fed President Charles Plosser had this to say in a speech earlier this week:

"I do anticipate that with many commodity prices now leveling off or falling, and inflation expectations relatively stable, inflation will moderate in the near term . . .

"But as a policymaker, my focus is less on the near term and more on the medium term. Looking further ahead, I believe we must monitor the inflation situation very carefully, particularly in this environment of very accommodative monetary policy. Inflation most often develops gradually, and if monetary policy waits too long to respond, it can be very costly to correct. Measures of slack such as the unemployment rate are often thought to prevent inflation from rising. But that did not turn out to be true in the 1970s. Thus, we need to proceed with caution as to the degree of monetary accommodation we supply to the economy."

What doesn't seem to be in dispute is that monitoring the data for any sign that the inflation trend is shifting—either higher or lower—is probably a good idea. And there are a lot of data to watch. In a speech last year to the Calhoun County Chamber of Commerce, Atlanta Fed President Dennis Lockhart had this to say about reading the inflation data:

"To achieve price stability, policymakers must detect inflation in its early stages before it is firmly established, especially in the psychology of consumers and businesses. This early detection is a challenge because inflation is not easily measured in the short term with any precision. No single price statistic enjoys a sufficient vantage point from which to assess inflation in the short term. With imperfect tools, inflation is more easily monitored than precisely measured."

The research department of the Federal Reserve Bank of Atlanta has taken pretty seriously the task of monitoring inflation developments. Where there are gaps in our information, we've been working to fill them with data, and we've aggregated it all into one place: the Inflation Project web page.

On the Inflation Project, we now report a sticky-price CPI statistic calculated from consumer price index data using only those components whose prices are slow to change. Joint research with the Cleveland Fed has shown this measure to be helpful when thinking about inflation expectations. Using Treasury Inflation-Protected Securities data, we now produce a weekly measure of the probability of a sustained deflation. And come January 27, we'll begin reporting the results of a monthly survey of business inflation expectations that examines firms' price-setting environment and the pricing pressures they face. From the responses, we'll generate a monthly measure of respondents' year-ahead unit cost expectations.

But of course, there are already a lot of data to keep an eye on. To make it a little easier to gain some perspective, we're also unveiling our inflation dashboard. The dashboard provides a platform for visualizing some of the data we commonly monitor to keep abreast of emerging inflation developments. It tracks 30 data series grouped into six major categories—retail prices, inflation expectations, labor costs, producer prices, material and commodity costs, and money and credit.

Our data and the inflation dashboard are available on the Inflation Project web page. Let us know what you think.

Mike Bryan Mike Bryan, vice president and senior economist,



Laurel Graefe Laurel Graefe, economic policy analysis specialist, and



Nicholas Parker Nicholas Parker, economic research analyst, all with the Atlanta Fed

January 12, 2012 in Business Inflation Expectations, Data Releases, Federal Reserve and Monetary Policy, Inflation, Monetary Policy | Permalink

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I like the Inflation Project setup and will put some links on www.inflationinfo.com, the website for the Inflation-Indexed Investing Association.

But the insouciance of the FRB when it comes to inflation, given that core inflation has been in a trend the consistency of which we haven't seen in a while (and given that core ex-housing is nearing 3%), is amazing to me. Not that there is much the Fed can do except try and talk down inflation expectations since we're not going to see tightening with Unemployment >8% and Europe struggling, but it seems to me the Board is risking credibility by suddenly focusing on headline inflation because the trend looks better. IMO.

Posted by: Michael Ashton | January 12, 2012 at 01:24 PM

I like the webpage but have one small critique. The monetary base visual is misleading due to the huge outliers. For this one visual perhaps a trimmed range with an asterisk might be better.

Like I said, minutiae.

Posted by: Mike McCracken | January 19, 2012 at 11:25 AM

Where's the unemployment dashboard? I thought there was a dual mandate.

Now that the "Three Blind Mice" dissenters on the FOMC (Fisher, Kocherlakota and Plosser) have backed off, maybe it's time for the current trend towards transparency to find its way to the selection process for regional Fed presidents. The fear was always that political involvement would lead to populist policies resulting in higher inflation. Instead we seem to be held hostage to the interests of the rentier class. Small wonder that "End the Fed" signs can be seen both in Tea Party and OWS rallies. A more activist policy up front might have just damped down these protests. A primary was just held in your district. If this trend continues, there is no telling where this will end up. You'll look like Trichet, spouting "We delivered price stability" while everything around him was crumbling.

Posted by: Rich888 | January 24, 2012 at 01:52 PM

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December 21, 2011

In search of an agenda for job creation

In a macroblog post yesterday, Dave Altig, research director at the Atlanta Fed, discussed some recent research from the Federal Reserve Bank of Cleveland focused on the relationship between uncertainty and job creation by small businesses. That research, which is based on survey responses from members of the National Federation of Independent Businesses (NFIB), found that a high degree of uncertainty was correlated with a scaling back in hiring plans.

Yesterday's macroblog post also delved into the connection between small business hiring plans and actual job creation, pointing out that this connection requires further examination because job creation has not, contrary to popular conversation, been a broad characteristic of the population of small businesses. Instead, it has tended to be young businesses (and especially businesses less than seven years old) that account for most of the job creation. Most young businesses are small, but relatively few small businesses are young.

I believe that understanding the job creation challenges we currently confront may require that we increasingly turn our attention to the factors restraining the high growth sectors of the economy. Some evidence from this segment of the business universe came from a recent poll of fast-growing firms that the Kauffman Foundation conducted at the Inc. 500/5000 conference in September. This table summarizes the results of that poll, which are juxtaposed with roughly comparable responses from the NFIB survey.


The interesting thing about the Kauffman survey is that the overwhelming problem reported by those companies that are in growth mode is the inability to find qualified workers. That observation is important because it bears on such questions as: To what degree is our elevated unemployment rate structural? How do we explain the observation that the number of unemployed workers appears to be elevated relative to the number of reported job vacancies? and so on.

It is obviously not appropriate to extrapolate from a single snapshot of a sample of fast-growing firms to the U.S. economy as a whole—and that is not the message here. But it is increasingly clear that the search for a single smoking gun that will clarify what is happening in labor markets is likely to be a hopeless quest. The answer to the question asking what a jobs agenda would look like is like your Christmas wish list: one size probably does not fit all.

Note: Today's macroblog post is the last for 2011. Look for macroblog's return in early January.

John RobertsonJohn Robertson, vice president and senior economist in the Atlanta Fed's research department

 

December 21, 2011 in Data Releases, Economic Growth and Development, Employment, Labor Markets | Permalink

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This is why Alex Tabarrok's assertions about immigration reform are so important right now and why we need to pair that with some serious job training programs for the unemployed and ultimately reform our education system.

Posted by: Daniel | December 21, 2011 at 04:14 PM

About a year before the firm I used to work for outsourced several hundred IT jobs to India they fired all their internal IT trainers and cancelled their decades-long IT talent development program.

Why train US workers when you can simply import the workers you need. It's only a little harder now when the "real unemployment rate" (the U6 rate) is at 20%.

To bring in more cheap labor today you also need to hire a PR firm to plant stories about "Structural Unemployment" and phony schemes like these;

http://boss.blogs.nytimes.com/2011/12/14/the-start-up-boat/

As Dean Baker is fond of saying, when firms complain of not being able to "find qualified employees" they leave off the "who are willing to work for the wage we are offering."

There is no STEM worker shortage in the US. The salaries of US-based STEM workers have been stagnant for the past 12 years.

Posted by: The OutSourced One | December 23, 2011 at 02:59 AM

Presumably small businesses that are not well known and have small HR departments find it difficult to find qualified people all the time. The question at issue is: what is different about the present situation, as against before the financial crisis or during previous recoveries?

The best piece of analysis I have seen on this (I forget where) simply charted the NFIB survey responses through time. The response that jumps sharply after 2007 is the state of the economy. That supports the idea that what is unusual about the present situation is the sluggish economy.

It would be interesting to see some analysis on the components of the index in the previous post. It appears to be highly correlated with recessions.

Posted by: John Butters | December 28, 2011 at 09:30 AM

Was being rather lazy -- I had a look at the components. It strikes me that the "policy uncertainty" that the index captures likely arises from events that have a negative or uncertain impact on the economy -- hence the spikes during wars and the upward trend during recessions. If this is the case, then it is not possible to infer that the situation would be better if Republicans and Democrats would just get along.

On the same topic, you reminded me of a piece I wrote a while ago:

I have been thinking a bit more about "confidence," which I talked about yesterday. In the 1980's TV series "The A Team," when a member of the team or the team as a whole was in the mood for intelligent risk-taking it was said that they were "on the jazz." Why is it "confidence" that is lacking in the economy, and not "the jazz?" When one is on the jazz, one enjoys taking calculated risks in the pursuit of an objective, and it strikes me that this is just the kind of attitude that the economy needs -- a bit of entrepreneurial spirit. What is more, unlike the "confidence" analysis, there is empirical support for my jazz theory, inasmuch as growth in the US was stronger in the three decades of macroeconomic volatility before 1980 than in the three decades of stability that followed that year. The jazz, you see, requires real danger, and less danger means less jazz. As B.A. Baracus says to John "Hannibal" Smith on one occasion: "Hannibal, when you're on the jazz, you're dangerous". In the present environment the problem is that, to be on the jazz, one needs to see a reasonable prospect of success in a dangerous situation. Deleveraging, austerity and weak economy have robbed people of this prospect. Thus the prescriptions of the jazz analysis are just those policies that will create enough macroeconomic volatility to bring some success to people (and thus to give everyone the prospect of success and promote a general restoration of the jazz). This means debt- or money-financed fiscal stimulus and further unconventional monetary easing measures.

Of course, neither the "jazz" analysis nor the "confidence" analysis is a good one. My point is that the former is just as compelling as, and has more empirical support than, the latter. But neither is a proper model of how the economy works. I think that the popularity highlights the fact that the most common mode of human reasoning is not deduction or induction, but analogy. The "confidence" theory is appealing because, when a person loses his confidence, he looks depressed -- and the economy looks depressed. What this means is that we have to be careful with the analogies we use. There are reasons to think that we cannot understand the economy intuitively like we understand a person: empirically, this method does not seem to allow people to make good predictions, and other successful theories about the world (such as quantum physics) are not intuitive; and theoretically, mathematicians have given us the theory of complex systems that tells us that the outputs of such systems can be highly counterintuitive. 

Posted by: John Butters | December 28, 2011 at 09:44 AM

It really strikes me that the kind of business matters a good deal more than the age of the business for the macroeconomic growth, though I understand that the age of businesses makes for easy-to-come-by data. Jobs programs ought to be aimed at the best growth-contributing businesses.

For example, the age of a dentist's office doesn't matter too much, as there should be a more or less slowly increasing number of offices with the increasing number of teeth, and not a big net growth contributor. Drywall contractors would seem to cycle up and down with booms, but employment-wise not contribute a great deal on average, with productivity possibly even balancing population gains.

My own high-tech widget and gadget firm, on the other hand, ought to be able to grow not only the number of number of our own employees, but the qualitatively new products should help grow other new businesses that otherwise cannot be built without our devices.

The small business innovative research program (SBIR/STTR, sbir.gov) supports exactly this sort of business development, currently employing about 25k people in small firms on 1-to-3 person development projects. Ramp this up by a factor of 100 for 2 to 4 years, which would prime the macroeconomic demand pump while also developing new services and products and while investing in the broader human technical and business capital needed for such efforts. The federal infrastructure to ramp these programs essentially overnight and supervise them already exists.

(And, FWIW, Alex Tabarrok's immigration assertions are nuts. Pay a little more, and I have found you can hardly swing a stick without knocking over a couple of domestic Ph.D. engineers and skilled technical staff.)

Posted by: MSM | December 29, 2011 at 07:39 PM

i think is also good to know that what makes a business to stand the test of time is not its level of age or size but the good and grounded knowledge of the business, the market field and analsyis of final consumers. Then the sustainability of the business through several means

Posted by: binary options brokers | January 07, 2012 at 08:15 PM

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December 20, 2011

Uncertainty about uncertainty

One of the hotly debated issues among those debating policy in the pages of various Fed publications (virtual and otherwise) is why job creation in the United States cannot seem to break out of its sluggish mode. One potential source is an elevated level of uncertainty about the political and economic future that is damping business enthusiasm for risk and, consequently, holding back the expansion.

Heightened uncertainty as an impediment to growth has intuitive appeal to many and, in our Reserve Bank's experience, considerable anecdotal support from business contacts. Unfortunately, intuition and anecdote don't quite rise to the level of evidence. Fortunately, the work of uncovering the evidence (one way or the other) is under way. One example is a recent entry by Mark Schweitzer and Scott Shane in the Federal Reserve Bank of Cleveland's Economic Commentary series:

"In this Commentary, we empirically examine the hypothesis that 'policy uncertainty' adversely impacts small business owners' expansion plans. To do this, we looked at the statistical association between data on small business plans to hire and make capital expenditures and a measure of 'policy uncertainty.' The data on small business plans cover January 1986 through July 2011 and were collected by the National Federation of Independent Business (NFIB)."

The picture relating the claims of respondents to the NFIB survey and the uncertainty measure employed by the authors is pretty compelling:


The correlation that can clearly be seen in this chart survives more formal statistical analysis:

"We find statistically significant negative effects of policy uncertainty on small business owners' plans to hire and make capital expenditures over the 1986 to 2011 period. We also find a large effect of the economic downturn on small business plans, but the two effects do appear to be independent. The negative effects of policy uncertainty show up even when we weight the components of policy uncertainty in several different ways. The results also stand up when consumer confidence is controlled for, suggesting that the effects are distinct from consumer sentiment."

The authors note the appropriate caveats but are pretty clear about how they read the results of the analysis:

"While this statistical analysis is informative about the relationship between policy uncertainty and small business expansion plans, we cannot say that 'policy uncertainty' causes small business hiring and capital expenditure plans to decline. That is because a purely statistical model cannot identify fundamental causes. But whatever the fundamental cause, our analysis indicates that adding information about policy uncertainty improves our ability to explain the survey responses provided by the NFIB's survey respondents.

"In that sense, we can say that the correlations between the two are strong enough to reject the argument that policy uncertainty is irrelevant for currently weak small business expansion plans. In our view, policymakers should take seriously the widespread anecdotal reports that policy uncertainty is adversely affecting small business owners' expansion plans."

I think this study is really intriguing, but I would add another caveat to the results, emphasized not too many posts back here at macroblog:

"Talking about the role of the average or typical small business in job creation is problematic. Discussing it is challenging because job creation is highly skewed along the age dimension of small firms."

Smallness per se is not the defining characteristic of the businesses that are responsible for driving job creation. In fact, research shows that once firm age is controlled for, no systematic relationship exists between net growth and firm size. The distinction between young and mature firms—which our own regular poll of small businesses verifies is important—is absent in the NFIB data that Schweitzer and Shane exploit.

Although the Schweitzer-Shane study is a good start to turning anecdotal reports into evidence, the results would be more compelling if they pertained to the actual universe of companies that we would expect to be creating jobs—that is, firms that are young, not just small.

David AltigBy Dave Altig, senior vice president and research director at the Atlanta Fed

 

December 20, 2011 in Data Releases, Economic Growth and Development, Employment, Labor Markets | Permalink

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In a historical study like this, why are we calculating a correlation with "planning to hire"? Who cares whether a someone told a pollster 2 years ago that they were planning to hire someone? Why not look at whether they actually did hire or not? Similarly, why are we counting number of business owners rather than number of jobs?

Posted by: DirkKS | December 20, 2011 at 05:29 PM

I am of the opinion that the number of small business owners is significant, because they represent the largest number and basic core of our economy.
Unfortunately, the sector is being ignored. Any significant recovery must begin from modest growth of business in this area, that will lead to new hirings.

Posted by: Hugo A. Castro | December 27, 2011 at 02:39 PM

I believe the focus should be on hoe to provide sufficient jobs and not just count the number of successful businesses.

Posted by: ultrasonic cleaner | January 03, 2012 at 08:33 AM

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October 21, 2011

Is the growth tide turning?

It has been a tough year for forecasters, as the Atlanta Fed's President Dennis Lockhart explained in a speech delivered Tuesday evening:

"The basic story of the first half of this year was one of disappointment versus expectations. At the beginning of the year, the consensus forecast had gross domestic product (GDP) growth for 2011 in the range of 3 to 4 percent. Though the Atlanta Fed's forecast was at the lower end of that range, we generally shared the view that the recovery was firmly established…

"A pretty clear picture of just how bad the first quarter was became apparent toward the end of the second quarter, when the FOMC met in late June. At that point, notwithstanding weakness in the early months of the year, the widely held outlook was that growth would rebound in the second half. Many anticipated that the effects of the price and disaster shocks would quickly dissipate…

"As the summer progressed, the data surprises were unrelenting and on the negative side of expectations.

By the time of the early August FOMC meeting it was clear to my Atlanta Fed colleagues and me that we had to rethink our position. The momentum of the economy looked a lot weaker than was our assessment earlier in the summer."

That story is well-captured by a picture of the evolution of Blue Chip consensus forecasts over the course of the year:


As President Lockhart explains, what has been most worrisome is the cumulative nature of the forecast errors implied in the above chart:

"Let me mention parenthetically that, given the complexity and dynamism of the economy, forecasting is fraught with errors and misses. One of my colleagues says the only thing he can forecast with certainty is that his forecast will be wrong. It's when forecasts are persistently wrong in the same direction, and by a substantial measure, that you worry you've missed the real story."

That reality can, of course, work in a positive direction as well as a negative direction. The encouraging news is that the forecasting mistakes have been accumulating in the direction of excess pessimism:

"We at the Atlanta Fed regularly monitor the data series that directly enter into the GDP calculation, along with important other series, including employment… In the months leading up to July, the downside surprises in the data dominated. In August and September, upside and downside surprises were roughly equal. But in October, the surprises have generally been to the upside."

One aspect of this analysis is called a "nowcasting" exercise that generates quarterly GDP estimates in real time. The technical details of this exercise are described here, but the idea is fairly simple. We use incoming data on 100-plus economic series to forecast 17 components of GDP for the current quarter. Those forecasts of GDP components are then aggregated to get a current-quarter estimate of overall GDP growth.

The outcomes of this exercise have been as positive in the third quarter as they were negative for the first two quarters of the year:


At this point, we'll interrupt this blog post to offer a few disclaimers. First, we wouldn't want to put too much weight on the specific number cranked out by this exercise. Also, beyond the usual warnings about the imprecision of statistical estimates, we'll add that much of the data being used in the estimates are subject to revision—and we don't yet have very much information on activity in October. Finally, even with the improvements in performance versus expectations, the view of the moment is still centered on near-term growth that is less than stellar, as President Lockhart described in his remarks:

"[M]ost private sector forecasters envision growth in 2012 approaching 2.5 percent. In the opinion of many economists, that 2.5 percent approximates the steady-state growth rate of the economy's potential. This rate would certainly be an improvement over 2011 as a whole. The problem is without growth measurably better than 2.5 percent, little progress will be made in absorbing slack in the economy—above all, labor market slack."

But after the long run of negative news that has characterized most of this year, we are for now at least moving in the right direction.

David AltigBy Dave Altig, senior vice president and research director at the Atlanta Fed

 

and

Patrick HigginsPatrick Higgins, economist at the Atlanta Fed

 

 

October 21, 2011 in Data Releases, Economic Growth and Development | Permalink

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Whether you’re in the ‘”ore optimistic” or the “less optimistic” camp, the latest improvements in the various forecasts reflect an assumption that there will be no major negative surprises this year. I’m not at all sure that such an assumption is a safe bet this year. There are still plenty of things that can go wrong in this delicate economy and slowly thawing credit environment.

Posted by: Stop Foreclosure | October 23, 2011 at 09:38 AM

I suspect there's been some inventory clearing that has pushed GDP up temporarily.

I also suspect that many people are like me and suffering from Thrift Fatigue. I've been splurging a bit on resaurants and also splurged on a excercise machine (which was marked down 60%) to get me through the winter without having to go to the gym. I also bought a plane ticket to visit family over christmas.

This is cutting into my saving, which are already inadequate, and I will need to really buckle-down this winter.

Posted by: aaron | October 24, 2011 at 07:18 AM

My clothes are also getting threadbare and will need to be replaced.

Posted by: aaron | October 24, 2011 at 07:19 AM

In a word, no. Consumption rose by 2.4% in Q3, hooray! The savings rate in September was 3.6%, compared to 5.3% in June. Sound sustainable to you? Friday's payroll number looks like another whopping 100K. Of course, we need to be vigilant about inflation, right? Let's see the employment cost index in q3 rose at a 2-year low of +0.3%. Core PCE "the Fed's preferred inflation measure" in September came in, uh, negative. Of course it could get better next year except unemployment benefit extensions will expire along with payroll tax breaks.

Dave, are you deliberately trying to foment social unrest and stoke the "occupy wall street" crowd with comments like this?

Posted by: Rich888 | October 29, 2011 at 12:19 PM

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October 07, 2011

Two more job market charts

Correction: One of macroblog's careful readers noted we mistakenly stated that the job creation pace from January 2011 through the date of the blog posting averaged 96,000 jobs per month. The 96,000 jobs per month actually applies to the average job creation pace over the previous three months at the time of the posting. We made this correction in the last sentence of the second paragraph. (10/21/11)


If you are looking for the full rundown on the September employment report, there is, as usual, plenty of good commentary to be found in the blogosphere. I'll add a couple more graphs to the pile, similar to exercises we have done with gross domestic product in the past.

Payroll employment growth has averaged about 110,000 jobs a month since February 2010, the jobs low point associated with the crisis and recession. This growth level compares, unfavorably, with the 158,000 jobs added per month during the last jobs recovery period from August 2003 (the low point following the 2001 recession) through November 2007 (the month before the recent recession began). One hundred and ten thousand jobs a month compares favorably, however, to the 96,000 job creation pace for the past three months.

Are these sorts of differences material? If the economy can find its way to creating jobs at the same rate as the last recovery—which nobody remembers as particularly off-the-chart spectacular—we would be back to the prerecession level of overall employment by spring 2015. If, on the other hand, we can only eke out the sub-100k pace we've seen this year, that date moves out to 2017:


So we do eventually get there in terms of recovering the jobs lost during the course of the past four years. The same, unfortunately, cannot be said of the unemployment rate. Because the unemployment rate has more moving pieces—like assumptions about labor force participation rates (or how many people jump in and out of looking for jobs)—back-of-the-envelope calculations are a bit more speculative than the simple employment paths in the previous chart. But with a few assumptions, such as the presumptions that the labor force will grow at the same rate as census population projections (for the aficionados, my calculations also assume that the ratio of household employment to establishment employment is equal to its average value since January of this year), the unemployment rates associated with job growth of 158,000, 110,000, and 96,000 per month would look something like this:


These paths are just suggestive, of course, but I think they tell the story. The same jobs recovery rate of the prerecession period would get the unemployment rate down below 7 percent in four years or so. But at the pace we have been going this year, things get worse, not better.

Update: Many other fine pictures are available at Angry Bear, Mish's Global Economic Trend Analysis, The Capital Spectator, Modeled Behavior, and lots from Calculated Risk (here and here, the latter with related links). At Econbrowser, guest blogger Mike Duecker delivers forecasts for 150,000 jobs per month—but not until mid-2012.


David Altig By Dave Altig, senior vice president and research director at the Atlanta Fed

 

October 7, 2011 in Data Releases, Employment | Permalink

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it would be interesting to compare public sector job losses in this recession to the last and see if that's the difference...

i believe ~600,000 jobs have been lost in state & local govt. this time around...

Posted by: rjs | October 08, 2011 at 04:44 AM

Does it matter that the job growth is in the private sector? We are losing jobs in the public sector, so growth in the private sector, if I recall correctly, is not that far off from what we had in the last recovery.

Steve

Posted by: steve | October 08, 2011 at 10:55 AM

Absolutely fascinating work. I can't help but notice a re-pricing going on as well. Certainly in regard to consumer durable's, real prices seem to have been falling, domestic wages as well appear in some sectors to be re-adjusting as well. Is there something going on in the economy of which unemployment is just a symptom?

Posted by: Thomas A. Coss | October 09, 2011 at 01:16 PM

steve,

Private sector employment, as of mid-September, was 109.3 mln (says the payroll survey). In January of 2008 (the peak), it was 115.6 mln. So here we are, 19 months from the trough in private payroll employment, and still 6.3 mln shy of the peak in private employment. If the growth pace is as good as it was in some prior recessions, it is still a far cry from what is needed to restore the prior peak in private employment, much less absorb new labor market entrants.

Government employment, at 22 mln in September, was 582k below the peak (ex-census), and still falling. Public sector job losses are vastly smaller than the current shortfall in private jobs. It would be good to have an increase in any form of employment, but it is weak demand for workers in the private sector which is at the root of our labor market problems.

Posted by: kharris | October 11, 2011 at 12:59 PM

Why hire when you can do more with less? This American system of labor is not only broken, it's dead. All of you are better educated, and more productive than any of your ancestors for what? A "manufacturing" job? Please.

Perhaps a job isn't what Americans should be looking for anymore. Let the Asians work, I'll surf the web.

Posted by: FormerSSResident | October 13, 2011 at 07:43 PM

Another view at the same topic. It is better to use real GDP per capita instead of job creation in order to predict unemployment: http://mechonomic.blogspot.com/2011/10/some-corrections-to-david-altigs-job.html

Although, for employment is should work by definition.

Posted by: kio | October 15, 2011 at 05:46 AM

Wow, so you're saying a 2 year shock will take ~15 years to undo assuming best case scenario...

Posted by: Ess | October 16, 2011 at 01:51 AM

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September 08, 2011

Another cut at the postrecession job picture

There is not much to be said about the August employment report released last Friday—or not much good, anyway. The ongoing updates at Calculated Risk provide a chronicle of the questions and challenges that have characterized the postrecession period. An exhaustive set of graphs are spread across several posts, here, here, and here. The last post in the series focused on construction employment specifically and includes this observation, which is based on the addition of 26,000 construction jobs in 2011 through August:

"After five consecutive years of job losses for residential construction (and four years for total construction), this is a baby step in the right direction. However there will not be a strong increase in residential construction until the excess supply of housing is absorbed."

Given the likely pace of turnaround in the housing market, that sounds like a problem. It is not much surprise that employment in the construction sector is, and likely will continue to be, significantly weaker than it was before the recession. Can the same be said of most other sectors? The following chart shows pre- and postrecession, cross-sector average monthly changes in payroll employment, broadly defined according to U.S. Bureau of Labor Statistics' classifications. For reference, the size of the circles in the chart reflect the relative prerecession size of the sector in terms of employment.


A few points:

  • The 45-degree line represents points where average monthly employment changes before the recession (from December 2001 through November 2007, precisely) are exactly the same as the average changes after the recession (July 2009 through August 2011). Consistent with the slow pace of overall employment growth during this recovery, the majority of circles representing different sectors lie below the 45-degree line.
  • In general, the pattern of circles is such that those sectors with relatively high employment changes prerecession are those that have exhibited relatively high changes during the recovery. In other words, we have not yet seen a widespread reshuffling of cross-sectoral employment trends outside of the recession. For example, employment changes in the education and health care sector led the pack before the recession, and that sector has led the pack thus far in the recovery. At the opposite end of the scale, job growth in the information sector has remained on a negative trend in the recovery period, just as it was prior to the recession.
  • I want to note a few exceptions to the preceding observation, which discusses the sectors with relatively high employment changes before the recession being the same ones that exhibited relatively high changes during the recovery. As noted, employment in the construction sector is well off its prerecession pace. What may be less appreciated is the fact that manufacturing employment, outside of the motor vehicles and auto parts sector, has experienced monthly employment gains that are better than the prerecession rate. Employment in the government sector, on the other hand, has noticeably flipped from positive to negative. This shift is also true of job growth in the financial activities sector, though the change is less dramatic than in the government sector.


Manufacturing and government represent relatively big shares of employment. Including motor vehicles and parts, manufacturing payroll employment was over 11 percent of total U.S. jobs for the period from 2002 through 2007. Government employment was about 16.5 percent (and had the largest single share of sectoral employment in the breakdown used in the chart above). The bad news in the big picture is that the better performance in manufacturing job creation is really a shift from negative job creation in the prerecession period to zero job creation in the postrecession period. And as for government employment, it seems unlikely that the forces will soon align to move job growth in the public sector back into positive territory. (The same could probably be said of financial activities employment.)

I am not pushing any particular interpretation of these facts, but a couple of questions come to mind. Will non-auto manufacturing employment revert to the contracting trend in place prior to the recession? Will employment in the financial activities and government sectors continue to shrink? If so, will these jobs be absorbed by increased employment in other sectors, and how long will that take?

David Altig By Dave Altig, senior vice president and research director at the Atlanta Fed

 

September 8, 2011 in Data Releases, Employment, Forecasts, Labor Markets | Permalink

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Dave: Can you create a similar graph that measures not number of employed but % of income going to each of those sectors?

Posted by: bryan byrne | September 10, 2011 at 08:30 AM

It's not that hard to figure this out. In 1928, the average workweek was 48 hours. In 1935, the average workweek was 40 hours.

Work is finite and shrinks over time in a productive economy. The 40-hour workweek was the coarse-grained tool to enforce an equality between production and consumption, and government employment has been the fine-grained tool to keep it balanced since 1929.

The only true fix for current situation is to reset the coarse-grained tool to 36 or 32-hour week, which will reset the fine-grained tool.

Posted by: Broward Horne | September 10, 2011 at 01:07 PM

I hope you guys are paying attention:

http://2.bp.blogspot.com/-5rxDm-_8-0I/TnmNJYKW4wI/AAAAAAAAAA8/zhetiAWZL9s/s1600/SPXvsTIPSBetas.bmp

The SPX - TIPS spread beta is a credible tool for resisting calls for more inflation in scenarios that Volker imagines, and for resisting inflation hawks in scenarios like... right now. The policy rule suggested is: Hold the beta near zero. Unlike inflation targeting, the beta has no sharp thresholds - you can under or overshoot slightly without killing people.

I'm putting this here both because it's your most recent post, and because it's a post about structural nonsense. Current economic conditions would require completely fantastic frictions to explain structurally. So people talk in vague ways about employee education, or an overburden of housing inventory. If houses are so plentiful, why does everyone I know rent or live with their parents? It's completely ridiculous. Then you have (as far as I understand it) a sterilized intervention like Twist. Newsflash: sterilized interventions can't do anything at the zero bound. Only inflation can.

Posted by: Carl Lumma | September 26, 2011 at 01:59 PM

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August 01, 2011

Is the economy hitting stall speed?

The news that the U.S. economy is not only growing slowly but has grown more slowly than anyone even knew has justifiably rattled some nerves. The sentiment is captured well enough by this article from Bloomberg:

"The world's largest economy has yet to regain the ground it lost during the recession and may be vulnerable to a relapse.


"Gross domestic product [GDP] expanded at a 1.3 percent annual rate in the second quarter, after a 0.4 percent pace in the prior period, the worst six months since the recovery began in June 2009, Commerce Department figures showed yesterday. Economists said the slowdown leaves the recovery susceptible to being knocked off course by shocks at home or abroad."


At Reuters, James Pethokoukis makes those concerns quantitative:

"...we're in the danger zone for another recession. Research from the Federal Reserve finds that that since 1947, when two-quarter annualized real GDP growth falls below 2 percent, recession follows within a year 48 percent of the time. (And when year-over-year real GDP growth falls below 2 percent, recession follows within a year 70 percent of the time.")


The research being referred to is work done by the Federal Reserve Board's Jeremy Nalewaik, a careful researcher who is clear that the results should be read with, well, care.

"The dynamics at play in the early part of the 1990s and 2000s expansions may have been different than the dynamics at play in the more-mature part of those and other expansions, and our stall speed models may have omitted an additional phase of the business cycle that has appeared in recent decades, namely the sluggish, jobless recovery phase. If so, the applicability of these stall speed models may be somewhat limited at certain times, such as in the middle of 2010 when the economy evidently slowed while still in the early stages of recovery from the 2007-9 recession."


With caveats like that in mind, Dennis Lockhart, the president of the Atlanta Fed, counseled patience in a speech he delivered on Friday:

"My staff and I have recently been pondering the following questions: Are we experiencing a temporary slowdown—a soft patch—on a recovery path that should return to a rate of 3 to 4 percent GDP growth? Or, instead, are we dealing with an inherently slower pace of economic growth that, because of some combination of persistent economic headwinds and deeper structural adjustment requirements, has the potential to be of much longer duration and more intractable?"


Lockhart said his base case forecast is in line with the greater-strength view.

"I am expecting greater strength in the second half of 2011 and into 2012, accompanied by inflation numbers that converge to around 2 percent. But, as I said, I don't dismiss the possibility that we're in the alternative, more problematic world I described of low and slow growth improving only very gradually. At this juncture, I think we have to wait and see what the incoming data indicate...


"But to try to put some time limit on indecision, I think a continuing flow of weak numbers through the third quarter and into the fourth will call for a serious reconsideration of the situation. The weight of cumulative data could point to a different order of problem—that is, different than just a passing slowdown—if indicators show continued weakness much past year's end."


Of course, Nalewaik's research shows that things could become considerably less comfortable if the 2 percent threshold persists, or the yield curve flattens, or the housing market tanks again. At that point, history is on the side of the recessionists. While Lockhart and our Reserve Bank don't believe we're there yet, it's fair to say we'd feel more comfortable if the incoming third quarter data were a little more positive. And on that count, this morning's Institute for Supply Management report for manufacturing isn't a very promising first step.

David Altig By Dave Altig, senior vice president and research director, and



Mike Bryan Mike Bryan, vice president and senior economist, both of the Atlanta Fed

August 1, 2011 in Business Cycles, Data Releases, Economic Growth and Development, Employment | Permalink

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I think a problem with the US economy these days is the amount of debt and leverage involved in all markets. Even if you're not highly leveraged yourself, you can bet most of the other market participants will be, and that makes for an unstable investment (through no fault of your own) when the global economy has another dip and all asset classes get the jitters.

My biggest fear as an investor right now would be China. A drop in Chinese asset values would not only shake confidence in China's economic vitality, but it would also open debate about whether or not the global economy is over-leveraged and over-reliant on the success of China (it is).

Excessive leverage is partly what made the property bubble aftermath so devastating for Japan, America and Ireland. There's a lot of talk about the Chinese economic bubble and it's potential impact on the global economy. Several months ago, so-called Chinese 'expert' Nick Lardy dismissed worries about what he called the "so-called property bubble" - this was during a conference held at Peterson Institute in DC. However, he now concedes that says a real estate downturn may cause a significant in China, and this is an opinion shared by many other mainstream economic analysts.......

So what changed his opinion? I would suggest a dawning realisation that most of the massive Chinese stimulus, lending and spending during 2009/10 just ended up in property purchases, which drove real estate prices in an alarming and totally unsustainable manner. Also, a realisation that China's economic system frequently produces bubbles, and that's not very likely to change in the near future!!

To understand why excessive debt and leverage is going to have a hugely negative impact on all asset classes going forward, read up on some of the work by Professor Steve Keen (see http://australianpropertyforum.com/blog/main/3567572 ). He's the Australian guy who predicted the GFC, and he has also shown that unsustainable debt to GDP ratios in a country (which you definitely have in the USA, and we have in Australia too) will always result in deflation or depression.

Charles B.

Posted by: Charles Bandridge | August 02, 2011 at 08:26 PM

Hi Dave & Mike, I pop in occasionally but haven't felt the need to kibitz, but I'm lost over what the FED has left in its bag. But first, the working world, at least those in the private sector are way beyond needing to know why "excessive debt & leverage is going to have a hugely negative impact on them". They've been living it for five years, since their spiggots were closed.
My question is, has the FED been largely rendered helpless to turn the mess around that it was so much involved in creating? I'll be the first to admit, I don't know a lot (although I spent many months barking warnings of the impending mortgage implosion), but my guesses are: a QE3 will be toothless & the housing bear market has years to go. So, what's left to encourage Banks to lend & buyers to borrow?

Posted by: bailey | August 10, 2011 at 10:30 PM

Let me toss out what the FED can do to encourage Banks to lend - make it more costly for them NOT to lend. Unfortunately, that raises a better question - if the FED works for the Banks, is it really in its best interest to act to constrain Banks profit?
So, maybe the question is best left to Congress? Oops, isn't that what got us here.

Posted by: bailey | August 14, 2011 at 08:42 AM

Understanding that when all you have is a hammer, everything looks like a nail, I still find it mystifying how monetary policy can be expected to alter business fundamentals by anyone with an ounce of sense, except in illusory ways such as via inflation.

I've never seen an answer to the question whether the US economy can grow at what is considered "reasonable" rates without the aid of a housing bubble, an internet bubble, a finance bubble, or some new kind of bubble, when US wages are being driven down by globalization and costs of production are being driven up by global growth in oil consumption. Unless we can accelerate conversion to natural gas and ultimately renewable energy, this contraction seems likely to last for a long time.

Posted by: George McKee | August 14, 2011 at 07:21 PM

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March 04, 2011

Gaining perspective on the employment picture

The employment report released today indicated a moderate increase of 192,000 in nonfarm payrolls and a slight decline in the unemployment rate from 9 percent in January to 8.9 percent. While certainly an improvement over recent months, employment growth still has not reached a level needed to produce significant drops in the unemployment rate.

In a speech given yesterday, Atlanta Fed President Dennis Lockhart addressed some of the underlying issues that have potentially been holding back job growth. On the supply side, President Lockhart addressed three structural issues, including skill mismatch, house lock, and extended unemployment insurance.

"Skill mismatch exists when work skills of job seekers do not match the requirements of jobs that are available. For example, a construction worker is unlikely to have the particular skills needed in the healthcare industry."

This comment is motivated by the research of Federal Reserve economists (Valetta and Kuang and Barnichon and Figura, among others) that suggests while there is likely some evidence of skill mismatch, it's not materially different than what's been seen during past recessions.

Another possible explanation mentioned by President Lockhart for persistently high unemployment is the existence of  what is sometimes referred to as "house lock."

"Currently many people owe more on their homes than their homes are worth. It's claimed that job seekers don't accept jobs available in other geographic locations because of the difficulty or cost of selling their homes."

Here too, President Lockhart says there is evidence indicating house lock is not a large contributor to the current high level of unemployment (For example, see Schulhofer-Wohl, Kaplan and Schulhofer-Wohl, and Molloy et al.)

More convincing is the argument pointing to the impact of extended unemployment insurance benefits. Research from the most recent recession and recovery—for example, see Valetta and Kuang and Aaronson et al.—suggests extended benefits have added to the unemployment rates, with estimates ranging from 0.4 percentage points to 1.7 percentage points. If that's the case, then President Lockhart says these extended benefits may be acting "as a disincentive to accept an offered job, especially if the job pays less than the one lost."

As President Lockhart indicates, however, standard skill mismatch, house lock, and unemployment insurance disincentives do not provide the full answer. So, he offers some additional factors:

"On the demand side, it's been argued that credit constraints affecting small businesses are holding back hiring. Banks are blamed for this situation and so are regulators. Getting credit at an affordable cost was a challenge during the recession. But credit conditions for established small businesses have been steadily improving for some time now. Recent surveys suggest that most small businesses are cautious about hiring more because of slow sales growth rather than lack of access to credit.

"Furthermore, a recent National Bureau of Economic Research study showed that job creation is more correlated to young businesses than the broad class of small businesses. Start-ups and young businesses are often financed in ways other than direct business loans. Difficulties getting home equity loans and other personal credit appear to have reduced formation of new businesses.

"Strong productivity growth is another much-discussed potential impediment to hiring. Stated simply, increases in productivity allow businesses to support a given level of sales with fewer people. In the longer term, rising productivity expands the economy's output, which in turn generates jobs. But in the short run, productivity investment can be the enemy of employment growth.

"Productivity growth was unusually high during the recession and in the early stages of the recovery, limiting the need for additional workers. Recently, however, productivity growth has slowed below the pace of business sales. If this trend continues, the need to hire additional workers will increase.

"Finally, in recent months, reluctance to hire has been attributed to heightened uncertainty, a common theme among my business contacts. A few weeks ago I argued that uncertainty has abated somewhat with the improving economy, the resolution of the November elections, the extension of tax cuts, and the apparent containment of the European sovereign debt crisis. I said that before Tunisia and before the fiscal struggle in Congress gathered steam. The restraining influence of uncertainty persists, to some extent."

Outside of productivity, it is difficult to measure the impact of these issues. (For example, it is difficult to survey people who did not start up a firm to determine if credit was an issue.) However, the theme of uncertainty has been a consistent factor in discussions on employment with our contacts here at the Atlanta Fed. If a simple explanation for persistent weakness in labor markets has proven elusive, there is little argument with President Lockhart's observation that "the recovery has brought little relief to the labor market."

Should today's employment release change any opinions about the strength of the labor market? In my mind, not really. There are still 7.5 million fewer jobs than at the start of the recession. There are also still over 8 million workers employed part time for economic reasons, and almost 6 million of the unemployed have been so for more than 26 weeks.

But the numbers released today did provide some additional evidence that the labor market is moving in the right direction with a level of growth consistent with at least a modest decline in unemployment. Furthermore, as consumer expenditures continue to rise, profitability increases, and the amount of uncertainty diminishes, hiring should increase. However, as President Lockhart alluded to in his speech, it will likely take time before the labor market recovery catches up to the overall economic recovery.


Photo of Melinda Pitts By Melinda Pitts
Research economist and associate policy adviser at the Atlanta Fed


March 4, 2011 in Data Releases, Employment, Labor Markets, Productivity | Permalink

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"Furthermore, a recent National Bureau of Economic Research study showed that job creation is more correlated to young businesses than the broad class of small businesses."

Correlation and causation? I wouldn't be surprised if the phase of the business cycle is an omitted variable, as that is correlated with young businesses launching, and thus hiring...

Can't find the paper though, so I'm not sure whether the authors did due diligence.

-fischer

Posted by: fischer | March 04, 2011 at 08:58 PM

Of course outsourcing has nothing, nothing to do with the lack of jobs. Move right along folks, nothing to see there. The trade deficit - American demand satisfied by overseas production - is not even worth mentioning.

And of course people are staying unemployed because ... of unemployment insurance. Sure! The fact that there are 5 bodies for every opening? Move right along folks, nothing to see there.

You researchers should really get out more.

Posted by: lark | March 04, 2011 at 11:34 PM

sounds like from your inference and analysis we ought to end the length of jobless benefits.

But what are we doing to engender growth? I don't see tax policy or any other things out there changing.

It's going to be a slow crawl out.

Posted by: Jeff Carter | March 06, 2011 at 09:37 AM

Productivity is exploding, just like it did after Bill Gates gave us Windows. But, there are more complicated structures in place which could mean the benefits are kept only by a select few.

The hard truth is many people's lives are better in unemployment than pawns in the game of professional management at the local corporation.

Posted by: FormerSandySpringsResident | March 06, 2011 at 11:42 PM

Hello,
I'm wondering, with all this talk of unemployment, which "rate" do fed officials "actually" focus on. Given workforce changes, underemployed, etc., it seems silly to discuss one surface level number, and not the details. Please expand when convenient.
Thank you.

Posted by: Friend | March 07, 2011 at 12:57 PM

I really don't buy the UE benefits are causing unemployment line. While there is a bit of state by state variation, generally speaking UE benefits replace about 60% of pre-unemployment earnings, up to a maximum benefit of $400 a week. The average benefit is more like $300 per week. Just how many people with previous productive lives are going to want to sit around and see their long term employment prospects deteriorate sharply so they can get an average of $15,600 per year, with very little security attached to that after 26 weeks? Do the authors of such studies have any clue what it would be like to try to raise a family on $15.6K per year? Don't they realize that according to the most recent JOLTS data, there are 4.7 unemployed for each job opening?

Not much reason to suspect that skills mismatch has increased greatly in the last few years. Housing lock is likely a much more serious problem than Lockhart thinks. Still, the vast majority of the higher UE is due to cyclical factors and the massive incompetence of those running the biggest banks and financial institutions.

Posted by: Dirk van Dijk | March 07, 2011 at 02:52 PM

SHAME on you.

The dip in unemployment has 2% more to do with workers leaving the work force then it does with us turning the corner.

If you examine the following numbers:
Total people employed
Total people looking for work
Total people not looking for work

You see that the change was not from the second group to the first, but from the first group to the third. Discouraged workers is not a good sign.

Posted by: Mark Wusinich | March 09, 2011 at 11:40 AM

If people are not working because of insurance benefits, imagine how many people are working because of the insurance benefits. How does this play into the healthcare debate?

Posted by: Philip | March 11, 2011 at 09:45 AM

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