What the Jobs Data Tells Us

One month doesn’t mean much, but FWIW:

1.  As of August, payroll employment had risen 4,142,000 from recession lows, and household employment had risen 4,133,000.  Basically identical.  In September payroll employment rose 114,000 and household employment rose 873,000, meaning it is up over 5 million from the recession lows.

2.  The payroll number is more accurate, but the household number can occasionally pick up people employed at newer firms.  My hunch is that the actual number was around 150,000 – 200,000.

3.  There have been lots of significant revisions in earlier payroll numbers, up 386,000 a few weeks ago, and then today another significant upward revision to earlier data.  We aren’t quite as jobless as we thought we were.  On the other hand:

4.  GDP numbers (real and nominal) are getting revised lower, with RGDP rising only 1.3% in the latest quarter, and NGDP at 2.77%.   We aren’t as productive as we thought we were.   The Great Stagnation intensifies.  On the other hand:

5.  Wages aren’t as sticky as we assumed.  People have asked why we don’t have more wage adjustments occurring, to create new jobs.  Obviously the jobs revisions show that more of this occurred than we realized, and the lower GDP numbers also show that our labor markets are more flexible than we assumed.  It’s really, really hard to create jobs when NGDP is growth at less than 4% (as it has been over the past year) but we are managing to do so—about 1.8 million the payroll survey or 2.8 million in the household survey.  Lower wage demands are gradually equilibrating the labor market.

So there’s something for everyone.  The horrible productivity numbers support Tyler Cowen’s argument that we have a stagnating economy.  But the ability to create significant numbers of jobs despite horrible nominal income growth shows (as the market monetarists claim) that we remain below full employment and are still getting labor market adjustments via slower wage growth.  The natural rate of unemployment is currently elevated, but I doubt it’s over 8%

PS. The report signficantly helps Obama, as the Intrade market shows his election odds rising 2.6 points to 68.6.

PPS.  This link has lots of data.  Asian-American unemployment is 4.8%.  How do you say “full employment” in Chinese?

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