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The Atlanta Fed's macroblog provides commentary and analysis on economic topics including monetary policy, macroeconomic developments, inflation, labor economics, and financial issues.

Authors for macroblog are Dave Altig, John Robertson, and other Atlanta Fed economists and researchers.


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February 13, 2009


How bad is the employment picture, really?

Could it be worse than I thought? We quite likely have not hit bottom in the labor market yet, and the percent loss in nonfarm payroll employment since the beginning of the current recession is already worse than all of the previous seven recessions save the 1981–82 contraction:

090213a

I thought that was not so great, until I took a look at Spencer England's chart posted by Barry Ritholtz at the Big Picture. (The graph had shown up earlier at Angry Bear and was noted in turn by William Polley.)

Like my graph above, Spencer England's provides a cross-recession look at employment losses, but based on data from a survey of households (as opposed to payroll data collected from business establishments). Here's my version of that chart:

090213b

From that look, the labor market in this recession is off-the-charts bad.

There are several reasons the payroll and household employment statistics might differ, and I was puzzling over them when Menbere Shiferaw, one of the many ace analysts here at the Atlanta Fed, came to my assistance. Deep in the details of the latest Bureau of Labor Statistics employment report is this:

"Effective with data for January 2009, updated population estimates have been used in the household survey… Each year, the Census Bureau updates the estimates to reflect new information and assumptions about the growth of the population during the decade. The change in population reflected in the new estimates results primarily from adjustments for net international migration, updated vital statistics information, and some methodological changes in the estimation process…

"Data users are cautioned that these annual population adjustments affect the comparability of household data series over time. Estimates of large levels such as total labor force and employment are impacted most."

So it may not be such a good idea to use the household employment data to benchmark the job picture with past recessions. And I think I'll stick with the payroll series for historical reference. Nonetheless, I think we can readily agree that both series are giving us a similar message about the labor market in the here and now, and that message isn't a good one.

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

February 13, 2009 in Business Cycles , Labor Markets | Permalink

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Dear Dr. Altig,

I found a link that confirms and discusses extensively why payroll data are more reliable than household survey data for historical comparisons.

http://www.epi.org/publications/entry/briefingpapers_bp148/

I hope this helps

Posted by: Dario | February 13, 2009 at 03:47 PM

I would agree the employment picture is bleak. I would assert that the stimulus package will do nothing to help employment. As a matter of fact, we calculated that at the top, unemployment will easily top 10%. With the history of government spending increases and employment, and a record amount of government spending, we suspect that unemployment will spike to higher levels than the 80-82 recession.

Besides that, it is a global mess, with a severely damaged credit system. this is a very tricky problem to solve, filled with unseen landmines. you can't help but think that they will avoid them all.

Posted by: jeff | February 13, 2009 at 06:39 PM

Since the 90's millions of workers have left corporate employment and set up home offices and/or other self employed businesses. Many times at the urging of their former employers in their effort to overhead by cutting employee benefits.

Those millions of self employed now have no customers, they are for all intents and purposes unemployed, except they are not part of the government statistics and ineligible for government assistance.

Posted by: Organic George | February 14, 2009 at 08:06 AM

I can understand why comparisons of levels in the household survey over time is difficult (and likely to yield invalid results). The question is whether this extends to calculations of ercentage changes in employment, whether the revisions over the past year are that significant.

What the BLS statement seems to suggest is that, compared with previous annual benchmarking, employment estimates have been revised downward. This would, again based on their explanation, result from lower estimates of US population than before the rebenchmarking. The lower estimates of the US population, in turn, would come from lower estimates of births (irrelevant for short-run labor force calculations), or from higher estimates of death rates, or from lower estimates of immigration. It would seem that it's the last of these that would be relevant...

Posted by: Donald A. Coffin | February 16, 2009 at 02:04 PM

Heh...just look over the historical BLS stats and you will realize that long before the dramatic cratering of the economy, the US had the slowest employment "recovery" during 2002-2007 since the Great Depression.

The labor market has collapsed recently because the economy as a whole was hollowed out from 2002 on...the RE bubble just hid it...please post a bar chart showing 5 year job growth figures (in particular private sector jobs) and you'll clearly see how badly we've been doing for *years*...

Posted by: cas127 | February 17, 2009 at 06:38 PM

Add in government mandated rule compliance imposed on the private sector, and then you really understand the level of the house of cards that is collapsing, and the private sector's inability to right itself.

Posted by: William Stiles | February 25, 2009 at 09:07 AM

Did your assumptions and predictions come true 3 months later?

Posted by: Career Education | May 14, 2009 at 05:45 PM

There are mixed signs of recovery/easing up of the recession. I hope the signs lean more towards the positive.

Posted by: employment screening services | June 15, 2009 at 07:12 PM

it's not that bad yet. wait till the unemployment runs out and states start to go bankrupt trying to pay for the huge increase in welfare and other social services. middle america is screwed. rich america should be ok as the washington elite and hollywood crowd look after their own. you many no longer be a financial anyalyst at bear sterns or aig but your contacts will at least insure you remain employed somewhere, even if it's flipping burgers at mcdonalds. tens of millions will be walking the streets, begging for food and a roof over their head. not to worry though obama will have a roof and food waiting, at the FEMA reeducation camps, that is, for those of you who can be taught to sqawk on command. those who can't will be led a little further into the forest for what shall we call it, orderly disposal?

Posted by: wb | July 17, 2009 at 07:51 PM

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