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O frabjous day! Callooh! Callay! A Jobs Story

The Bureau of Labor Statistics announced a 386,000 adjustment to its 2012 jobs figures, putting Obama in positive (+125,000) jobs territory for the first time in his Administration. This will no doubt make for good cheering material for the Obama campaign, but it rather misses the larger and far more important point that we still have a jobs deficit since the January 2008 jobs peak of nearly 11 million. That positive 125,000 is achieved by ignoring two major factors: job losses in 2008 before Obama became President (recessions are impolitic and don't wait for Presidential Inaugurations to begin) and 4 1/2 years of population growth in the labor age population.

The Obama story runs something like this. When Obama took office in January 2009, employment (jobs) stood at 133.561 million. Job numbers fell 4.317 million to a low of 129.244 million in February 2010. Since then they recovered to 133.300 million in August. Add in the 386,000 from the latest announced adjustment (which won't be officially added to this year's tally until February of next year) and you get 133.686 million. That gives us the 125,000 jobs more than when he started, or 4.442 million from the February 2010 trough. As we are 30 months out from the trough, that yields a job creation rate of 148,000/month.

It's a good story as far as it goes, but that isn't very far. Indeed it is so incomplete as to be meaningless. Obama came to office halfway down the cliff of job losses. Between January 2008 (with jobs peaking at 138.023 million) and January 2009 (133.561 million) when Obama assumed office, the economy lost 4.462 million jobs. When Obama assumed the Presidency, he did not just take on the responsibility for those job losses which occurred on his watch but all of them. As I said at the start, recessions do not wait on the convenience of Presidents. Neither do Presidents get to pick and choose which parts of a recession they wish to own. Obama's story touches none of the 2008 job losses.

A common problem with all these stories that start at point X and eventually after much wandering return us back to it is that all the time this journey is taking place, our population is growing. Jobs are covered in the Establishment survey, but we can use data from the Household survey (people) to estimate how many jobs are needed to keep up with population growth in the working age labor population (also known as the non-institutional population over 16). From January 2008 to August 2012, the last month for which we have data, the non-institutional population over 16 increased by 10.950 million. Multiplying this by the average of the employment-population ratio over this period (59.4) gives us our estimate of jobs needed to keep up with population growth: 6.504 million.

Add the uncounted 2008 part of the cliff and jobs needed just for population growth and credit Obama with his net 125,000 jobs and you arrive at a jobs deficit from January 2008 through August 2012 of 10.837 million. This is the size of the story that the BLS announcement doesn't tell.

And perhaps I am piling on here but if we apply population growth to Obama's Presidency his small jobs surplus quickly turns into a jobs deficit. Looking at his time in office, the non-insitutional population over 16 increased by 8.827 million and the average of the employment-population ratios was 58.7 or a figure of 5.181 million needed to keep up with population growth. Applying Obama's 125,000 jobs surplus to this still leaves us with a jobs deficit of 5.056 million for his time in office alone.

Context is everything and so easily overlooked. 5 million for Obama to date. Nearly 11 million to take us back to a situation similar to January 2008. But even this is not the end of the story because January 2008 was a peak but a peak after 8 years of crappy job growth. And during those 8 years the population did not stop growing either. Nor did the number of people who would have worked if jobs had been available to them. Finally, beyond the numbers, there is the question: what kind of jobs? What kind of jobs have been lost? What kind of jobs have been created?

It is a lot to keep in mind, but when we forget all these levels of context, it is precisely then that a miniscule fluctuation in the data can be portrayed as a great victory and significant change.

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mtngun's picture
Submitted by mtngun on

When I heard about the 386,000 "missing" jobs, the question that popped into my head was "what about population growth ?"

Of course, it's merely coincidental that the positive adjustment is announced just before an election.

Thanks for the excellent data.

okanogen's picture
Submitted by okanogen on

I had an interesting conversation the other day. He works at an engineering company which develops complex monitoring and automated control systems. It's a small company based locally (around 40-50 people), but this summer they've hired 19 entry-level engineers, they are already 65% above last year's revenue, and he was freaking because he was concerned if anybody else is experiencing the same thing. That isn't 19 receptionists (which in itself would be fine), but 19 well-paid professionals with benefits. Despite his own experience however, he was stressed about the european and chinese ecomony collapses, as well as the stock market, etc.. He was also concerned by earning reports from UPS, FedEx, Caterpillar, etc.. So he asked how my business was going and what I thought. I had to admit that early in the year I was rather scared but now, pretty confident.

My business is basically the infrastructure market, which is not a great bellweather. It takes years to build the financing and planning of a major infrastructure investment, so while they are big projects, they have a lot of inertia, i.e. they take a long time to get rolling, and also a long time to stop rolling. And when they are rolling, they pull a lot of things along with them. That said, they are easier to stop than start. 2008 was our best year, because the projects kept rolling all the way until Dec. 31 when the giant wheels cracked on the financial collapse, 2009 through mid-year 2010 nearly shut our doors. For years, by far our biggest market was the wind industry, as in huge wind projects. When Congress failed to pass an energy bill last year, including an extension of the alternative energy production tax credits, all the existing projects continued to roll along and even accelerated, but only so they could be completed by the end of this year. Investment in new projects was immediately ended. I smelled 2009 all over again and this time, no loans were going to be available, that ended in 2008, capital is impossible for small business now.

But then, a funny thing happened, the fiscal stimulus monies started coming through on infrastructure projects, like roads, bridges, electrical transmission lines, and for us thankfully, levee systems. So while we didn't have a SINGLE wind project since the beginning of the year, we have had plenty of levees, dams, roads, bridges and other projects, and we are looking at starting an absolutely HUGE pipeline integrity project. An even better sign is that we have recently been asked for pricing for a half-dozen large new wind projects. A sure sign that the big money is confident Obama will be elected and they will strike an energy bill deal which includes AE production tax credits. I do believe there was a lot of hand-wringing among big business over the uncertainty of what was going to happen this fall. If we would have a complete Republican government that was going to upset the apple carts. Now they know, we won't, they won't, and it will be business as usual.

I personally don't see a crash, or even a soft landing, more like the same, sustained, soft takeoff. But I could be wrong and the wheels may just break again....

Submitted by lambert on

and it feels like a depression to me, up here in the great state of Maine. The effects are scattered, and let's also remember that Okanagen may be a beneficiary of "Swing State Keynsianism" in a way that

But it also feels to me like something in the wind is shifting, and I hope it's not all the happy talk our famously free press is generating to drag Obama over the finish line.

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We should also remember that, even with a recovery, the powers that be have normalized a permanent downsizing of the employed, which (I would argue) is what Hugh's figures show. Feature, not bug.

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On the perception that the powers that be decided that Romney's toast and turned on the money spigot, I agree. Soros finally unbelted for the Ds, for example.

okanogen's picture
Submitted by okanogen on

We work all over, projects in Texas, Oklahoma, Illinois, the Dakotas, and yeah, Michigan, Iowa, Minnesota, etc.. The iron mines are still going strong, though this may be because recent spending bills have mandated US made steel in federal projects, but typically the mines are a very good barometer of economic activity.

I just don't think our economy is very much affected by the rest of the world economy. If anything, maybe we are a safe haven.