September Jobs Report Bounces Back From August Doldrums
After a disappointing August, the jobs report for September showed the same good numbers we've seen for much of 2014.
After several months of very strong jobs growth, the August jobs report released last month was a major disappointment, showing only about 140,000 new jobs added, far below ideal levels and possibly indicating that the trend of improving jobs reports that we had seen all year was coming to an end. As I noted at the time, though, there was reason to wait at least another month or two before jumping to any conclusions, not the least because those August numbers were going to be revised, but also because a month’s worth of numbers that are atypical from the pattern we’ve seen this year doesn’t necessarily mean anything. Heading into today’s release of the September report, most analysts were expecting at least a slight bounce back from the August doldrums, with the consensus forecast coming in around 215,000 net new jobs added for the month, which while not necessarily spectacular would certainly have been better than August. As it turned out, though, the numbers came in well above that, and the revisions for previous month are good news as well:
Total nonfarm payroll employment increased by 248,000 in September, and the unemployment rate declined to 5.9 percent, the U.S. Bureau of Labor Statistics reported today. Umployment increased in professional and business services, retail trade, and health care.
In September, the unemployment rate declined by 0.2 percentage point to 5.9 percent. The number of unemployed persons decreased by 329,000 to 9.3 million. Over the year, the unemployment rate and the number of unemployed persons were down by 1.3 percentage points and 1.9 million, respectively. (See table A-1.)
(…)
Total nonfarm payroll employment rose by 248,000 in September, compared with anaverage monthly gain of 213,000 over the prior 12 months. In September, job growth occurred in professional and business services, retail trade, and health care. (See table B-1.)
Professional and business services added 81,000 jobs in September, compared with an average gain of 56,000 per month over the prior 12 months. In September, job gains occurred in employment services (+34,000), management and technical consulting services (+12,000), and architectural and engineering services (+6,000). Employment in legal services declined by 5,000 over the month.
Employment in retail trade rose by 35,000 in September. Food and beverage stores added 20,000 jobs, largely reflecting the return of workers who had been off payrolls in August due to employment disruptions at a grocery store chain in New England. Employment in retail trade has increased by 264,000 over the past 12 months.
Health care added 23,000 jobs in September, in line with the prior 12-month average gain of 20,000 jobs per month. In September, employment rose in home health care services (+7,000) and hospitals (+6,000).
Employment in information increased by 12,000 in September, with a gain of 5,000 in telecommunications. Over the year, employment in information has shown little net change.
Mining employment rose by 9,000 in September, with the majority of the increase occurring in support activities for mining (+7,000). Over the year, mining has added 50,000 jobs.
Within leisure and hospitality, employment in food services and drinking places continued to trend up in September (+20,000) and is up by 290,000 over the year.
In September, construction employment continued on an upward trend (+16,000). Within the industry, employment in residential building increased by 6,000. Over
the year, construction has added 230,000 jobs.Employment in financial activities continued to trend up in September (+12,000) and has added 89,000 jobs over the year. In September, job growth occurred in insurance carriers and related activities (+6,000) and in securities, commodity contracts, and investments (+5,000).
Employment in other major industries, including manufacturing, wholesale trade, transportation and warehousing, and government, showed little change over the month.
In addition, the jobs numbers for July were revised upward from +212,000 to +243,000 and the number for August was revised upward from +142,000 to +180,000, a total net increase for both months of +69,000. Additionally, the top line unemployment number fellow below 6% for the first time since July 2008 and is only 0.4% above the point that the Federal Reserve defines as “full employment,” while the long term unemployment rate fell from 12% to 11.8%. On the downside, wage growth was flat for the month, and labor force participation dipped slightly to another thirty-six year low. At the same time, though, recent numbers can’t be characterized as anything but good news For the past twelve months we have averaged 219,583 net new jobs created per month. Since the start of 2014, that average is 225,667 new jobs, while it stands at 223,667 new jobs although that number will likely end up ticking upwards with the final revision to August’s numbers, which will be released next month. Additionally, the fact that there was strong job growth in areas like construction and leisure activities bodes well for the future and for the economic figures for the second and third quarters that will be released over the coming months.
The New York Times summarizes the report and mostly hits on the good points:
American companies are hiring again at a healthy pace, adding 248,000 jobs in September, the Bureau of Labor Statistics reported Friday.
The unemployment rate fell to 5.9 percent, the first time it had been below 6 percent since July 2008 and a continued decline from its recession peak of 10 percent.
The strong report — the last one before the midterm elections — was likely to buoy the outlook of economists who had worried the post-recession recovery was being sidetracked. Those fears were prompted by the government’s earlier report on Sept. 5 that fewer jobs were added in August than in any month so far this year.
The pace of job creation in September, which was above many economists’ expectations, signified a return to the 200,000 level, a mark that had been surpassed each month since midwinter until the August lull.
But even the August numbers weren’t as bad as originally thought. The government made revisions that showed 180,000 jobs were added in August. Originally it said just 142,000 workers were added to payrolls.
Friday’s jobs report was evidence that the end of summer’s poor showing was merely a blip. Still, the nation’s output is far from lifting off the way many economists in the immediate aftermath of the recession predicted would be the case by now.
Instead, it is taking baby steps, slowly inching forward at a rate to which many economists and investors have become accustomed. With housing prices increasing and business investment showing strength, many analysts are optimistic that in the next six months the economy will get even stronger, as incremental as that may be.
“All the conditions for a strong recovery are in place,” said Robert Shapiro, co-founder and chairman of Sonecon, a financial consulting firm, in an interview before the report was released.
But in a report released Thursday, the Center for American Progress, a progressive think tank, pointed out that the labor force participation rate, the share of the working-age population employed or looking for a job, has been declining since the end of the recession.
“The labor market is much healthier today than at any point since the Great Recession,” said the report by Jackie Odum and Michael Madowitz, “but beneath the top-line numbers, it still has a long way to go before it returns to historically healthy conditions.”
The government reported the labor-force participation rate was 62.7 percent in September. The last time the participation rate was that low was 1978, a point Republicans seized on.
As does The Wall Street Journal:
WASHINGTON—U.S. job growth rebounded in September and the jobless rate fell below 6% for the first time since mid-2008, suggesting the labor market is improving faster than previously thought.
Nonfarm payrolls grew a seasonally adjusted 248,000 last month, the fastest pace since June, the Labor Department said Friday.
Friday’s report suggested the labor market resumed the steady growth it posted in late spring and early summer after hitting a soft patch in August.
Over the past three months, the economy added an average of 224,000 jobs, roughly in line with the average of 228,000 in the first six months of the year.
(…)
Stronger job creation this year has boosted hopes the economy will emerge from the subpar 2% growth pace of recent years and into a stronger phase. There are early signs of that happening.
Gross domestic product—the broadest measure of U.S. output—grew at a 4.6% annual rate in the second quarter, equaling the fastest pace of the recovery. That partly reflected a rebound from a winter contraction. But many economists expect GDP growth to clock in near 3% in the third quarter, suggesting sustained momentum.
The Federal Reserve is looking for signs of sturdier progress as it concludes its efforts dating from the recession to pump up the economy. The Fed is set to end a bond-buying program this month that was designed to push down long-term interest rates and stimulate hiring, spending and investment.
The central bank is also debating when to raise short-term interest rates, and it is looking at reports like Friday’s for evidence that the economy can stand on its own. Most officials expect to start raising rates next year. Fed Chairwoman Janet Yellen has said the central bank could move to raise rates sooner than expected if labor-market progress accelerates beyond current projections.
This isn’t to say that there aren’t causes for concern still when it comes to the labor market. There are still some 9.3 million people who lost their jobs during the recession that are still looking for work, and some 7.1 million who are in part-time labor mostly because full-time jobs have not been available. Combined with the stagnant wage growth, which isn’t surprising when you look at the labor market from a supply-and-demand perspective, this means that the jobs recovery is still somewhat lackluster for large numbers of Americans. Additionally, the continually low rate of participation in the labor force remains a cause for concern. As always, at least some part of that number is no doubt due to normal retirements or baby boomers taking early retirement, but that wouldn’t account for the fact that we are at the lowest level of participation in the labor force since the Carter Administration. Obviously, there is still a significant population of people who have quite simply given up looking for work and, whether they are relying on support by other means or, as some statistics suggests, by applying for Social Security Disability as a source of income.
For the most part, though, this was a good report and, hopefully, an indication of better things to come in the future.
248,000 got jobs.
315,000 dropped out of the labor force altogether and therefore aren’t counted as “unemployed.”
Some good news. Some recovery.
http://www.zerohedge.com/news/2014-10-03/labor-participation-rate-drops-36-year-low-record-926-million-americans-not-labor-fo
At the revised figure of 180,000 new jobs created, August is not quite so doldrummy (if that’s a word).
Even the liberal Wall Street Journal acknowledges the good numbers. Slow steady growth has characterized the economy since the depths of the recession in 2009.
@Jeremy:
Are you allowing for boomer retirees?
This is good report. Kudos to Doug for mentioning that the August and July reports are revised upward. You proved me wrong there.
Now cue the conservative talking points . “This actually isn’t a good report, because blah blah…” I see Jeremy has already weighed in, and I’m sure Jenos et al. aren’t far behind. They’re just taking a minute to get their talking points from Blaze, The Daily Caller, etc.
Context is what matters here. We’re recovering not from a typical post WW2 recession but from a Great Depression 2 type depression. Considering that at this point in the Great Depression, unemployment rates were in the high teens, we’re doing great. Of course, the Administration’s message has really sucked in terms of explaining just how catastrophic 2008 really was. Had we applied the conservative nostrums of austerity and tax cuts instead of an (inadequate) Keynesian stimulus in 2009, we would most likely still be looking at double digit unemployment now, just like the Europeans (They tried austerity. It didn’t work).
What’s sad is that we would be doing even better if we had tried a second round of stimulus, and if we had kept up public sector unemployment. Thank the Republicans for that, who have engaged in one of the more successful economic sabotage campaigns in history(debt ceiling showdowns, sequestration, government shutdowns, etc). To a certain extent, we’re doing as well as we are because they ran out of tricks this year.
Here’s hoping the Democrats will get their heads out of their a$$es and tell the public just why it is that a weak recovery isn’t even better this election season.
@anjin-san:
Na, he’s just picking the worst number he can find and presenting it without context. He’s trolling, not explaining
If I recall correctly, the last labor report showed that the loss of participation was more among younger workers. Retirees are actually hanging out longer. The unemployment rate among under-30’s still remains very high.
The report is good but not great (great would be Clinton-era 300-500 k per month). At least it means we can go another month before Republican austerity if blamed for everything.
(Edit: Ah, here’s Forbes on what’s driving the LFP rate).
http://www.forbes.com/sites/realspin/2014/01/15/u-s-unemployment-retirees-are-not-the-labor-exodus-problem/)
An ok-to-good report (given revisions of prior numbers). Wage growth remains anemic, but at least fewer people are unemployed (my understanding is this number is sufficient to be a net gain over the net of working-age pop growth – baby boomer retirements. EDIT: Hal’s post just above mine complicates this a bit. Interesting). This is the sound of one hand clapping. 😉
Now, we could have better results with better policy, but the GOP exists.
Government policy isn’t the main driver, but can help or hurt. This is something the GOP recognizes by claiming that tax cuts help (which, all else equal, they can be stimulative – basic Keynes, really) and regulation hurts (which I view as mostly but not entirely bullshit). So, we could be running a higher deficit (borrowed at near-zero rates), pumping more money into the private sector and thus helping households deleverage, or we can continue what we’ve been doing since the GOP took over the House: mild austerity at the federal level (coupled with harsher austerity at the state and local levels), essentially on auto-pilot because neither party can pass its agenda. Result: lower federal deficits but less money in the private sector, resulting in slower jobs and/or wage growth. [note: this is all short to medium term. We have other issues that hurt us that I think go back a long ways and should prompt a major re-think in policy that would take a long time to enact – turning the oceanliner, as it were].
I mean, hell, it’s better than what the Europeans have been doing, but it’s not great policy either. So yes, GOP austerity politics gets blamed for a weaker-than-necessary recovery. The Dems get some blame too, mostly for not going bigger back in 2009.
@Rob in CT:
This is a one line explanation for about 90 per cent of what’s gone wrong since 2000.
@Hal_10000: Actually, one of the interesting facets of this report is that it had shown a rise in participation rate among the young and and a fall among older cohorts, which would be consistent with theory that overall fall in participation rate has both cyclical and structural factors.
As for the austerity angle: look, there are two basic facts about this crisis
1. Recovery from a financial crisis is slower than a recovery from a cyclical one, due to debt overhangs.
2. In an international perspective, there is more or less direct correlation betweent he depth of the depression and the extent of post 2010 austerity.
In the United States, the GOP is the party of austerity, pure and simple. Had it not taken the House in 2010, we would in all probability would be having higher deficits, lower unemployment and more rapid growth.
Do you want people to stop talking about that?
@Rob in CT: In this context, it is really worth looking at the happenings in NJ. Long story short: Christie gets elected in 2009, scraps a major stimulus funded construction project of a major Manhattan tunnel. The argument: can’t afford it, government must live within means and so forth. (in reality, Christie takes money and puts it into highway fund, so that he doesn’t have to raise fuel taxes, but his successor will). This draws money away from the NJ economy, helping to make it more sluggish than neighbors. In 2012, Sandy hits. In 2014, Amtrak has to shut down existing tunnels for repairs, making traffic a nightmare for years to come. This clusterf*k will probably cost the state more money than the “savings” enacted by Christie, and by the time he leaves office, the gas taxes will need to be raised too.
Conclusions.
1. Austerity is insanity.
2. In most of the Western world, austerians are at least consistent. Republicans, however, are both austerity-driven and profligate.
3. The standards for policy success for the GOP is to be able to keep things going until your successor enters the room and then blame him for the ensuing chaos. Christie almost, but not quite managed it. Bush managed to keep things loose until 3 months before his election, setting the scene for the Republican comeback in 2010. Brownback in KS seems to be the one republican true believer who actually engineered all his programs to come into being during his first term, and is suffering the consequences..
@anjin-san:
No…of course not.
As far as I can tell no one has a handle on what that number is …but I’ll bet it’s significant.
@humanoid.panda:
Kansas flat out just no longer exists in the conservative world. It’s like right wing commenters have taken a vow of silence about what happened there over the last four years. Here’s hoping more Democrats talk about what happened in Tea Party Utopia.
Austerity for the poor + shower more money on the rich. The basic Republican formulation about what’s wrong with America’s economy is that the poor have it too easy and the rich (and middle-class*) are overburdened. Ergo, the 47% thing (which is bog-standard Right-wing rhetoric that many of us with Republican relatives or friends had heard long before Romney opened his mouth). Ergo every budget or tax plan Ryan or his fellow travelers put out (except that one guy who was basically instantly excommunicated. I forget his name. This was relatively recent, and IIRC his tax reform proposal was less than godawful, though still tilted toward the haves over the have-nots).
Right-wing dogma holds that the key to economic success is to “take the boot off the neck” of capital. This is darkly amusing to those of us who challenge the baseline assumption that said boot is on said neck in any meaningful way, but millions of people take this as a given. Why, if we just tax ’em a little less & loosen those annoying regulations, the jobs will rain down and everyone will get a raise. That it is utterly false doesn’t mean anything. It’s hard to reason someone out received wisdom.
* – this is, of course, less wrong: the middle class has been getting squeezed (via a combination of low wage growth and rising costs of specific important things like healthcare & college). But if you break down GOP policies, they don’t do jack for the middle class, unless you define middle class so loosely as to include the top 5% or more of the population, which is pretty silly.
@stonetools:
Pennsylvania, as well. A major issue in this fall’s Governor’s race (where the Republican, Tom Corbett, is losing by 15+ points and will almost certainly be the first governor since Pennsylvania allowed consecutive terms in 1970 to not be re-elected, though unfortunately the Republicans look safe in both houses of the legislature) is that Pennsylvania is the only state with shale gas drilling going on which does not charge an extraction tax, has cut corporate taxes rather than increase education funding to replace the monies which went away at the end of the 2009 stimulus (but raised the gas tax at the pump, since it is regressive).
In this week’s debate, the Democrat, Tom Wolf noted that the state ranked 45th in job creation over the last 4 year, Tom Corbett’s response was no — it was 36th. A shining example of the successes of letting Grover Norquist set government policy.
@Moosebreath: As a fellow Pennsylvanian, I am pleasantly surprised that the people in the middle of the state are upset, not celebrating, about the education cuts, given that they hurt the “moochers” in Philly so bad.
@Rob in CT: You are thinking about Dave Camp, the retiring Chairman of the House WAys and Means Committee. His tax proposal was not all that bad, as he took the idea of revenue neutrality seriously, and really did went for all sorts of deductions benefitting the finance industry. Surprisingly enough, the Tea Party which as so many observers assure us hates Wall Street as much as the government, went silent while lobbyist strangled that poroposal in the crib.
Jon Chait, as usual when he’s talking about issues other than unions and education, has the best take on Camp and his plan:
http://nymag.com/daily/intelligencer/2014/02/republican-designs-tax-reform-plan-thats-good.html
@humanoid.panda:
My impression is that the cuts are hurting the schools in the Pennsyltucky part of the state as well, just not as much. While it did not create class sizes of 40+, nor 1 nurse rotating among 4 schools, nor no clerical staff for principals (as it did for Philly), it hurt enough that the school boards had to make unpopular cuts or raise taxes.
A couple possible reasons why labor force participation may be declining in the prime 25 – 54 category even as the job market improves:
a) Women leaving the workforce. Yesterday’s dowdy, passive housewife has given way to today’s fashionable, empowered stay-at-home-mom. It’s trendy for women with children to stay home. It would help if we could see the LFPR broken down by gender.
b) More immigration. I’m basing this on supposition rather than statistics, but it’s my distinct impression that immigrants are more likely than the native-born to work off the books and therefore not show up as being in the workforce.
@Jeremy: Indeed so. And guess who was running things 36 years ago? (Hint: Think Peanuts)
Same stupid policies, same epic economic failure.
I see in the thread some [people calling for more than the headline view, and a question trying be exculpatory about retirees. Do you really?
1) Total increase in jobs from recessionary trough (the most charitable way to portray this administration): 1.1MM. That’s 1.1MM for 5 years work and very liberal monetary and fiscal policy help. That’s horrible.
2) The unemployment rate is only lower because the participation rate is as low as its been since the late 70’s.
3) Is it the baby boomers? No, the over 55 set’s number of employed just reached an all time high, at 32MM. It has climbed steadily since the downturn. Prime age types have fallen out of the workforce.
4) Why has the participation rate fallen? It sure doesn’t seem to be the boomers. I don’t know the answer. They have given up? Some are OK with living on income support? Careful inspection of the participation rate shows it had leveled off at 66%. Its now in the 62-63 range. Said another way, that number dominates the 1.1MM jobs created and support #2, above.
And the quality of jobs? I haven’t seen the numbers first hand, but its been reported that 4 of 5 of the jobs were min or low wage. (think part time, leisure, hospitality) In other words they suck. Expect no movement in wages and income, peoples.
This is only a good report in the eyes of the chattering class on CNBC etc.
@Guarneri:
Link? Pretty sure there’s no possible way that’s true.
@anjin-san: I don’t think boomers are retiring as much as other people think they are. They’re still working in order to take care of themselves, since their retirement funds were hit with the recession. There’s also this:
That’s still not good.
The WSJ this morning called for a return to supply-side economics…because the Bush economy was so good. Wait…there were zero private sector jobs created under Bush? Oh.
http://www.calculatedriskblog.com/2013/12/public-and-private-sector-payroll-jobs.html
And Paul Ryan is talking about instituting dynamic scoring in CBO analysis, when and if Republicans control both houses of Congress.. This would use magic fairy dust to account for growth from tax cuts…which in fact barely happens…and even when it does never pays for the tax cuts themselves.
Republicans just can’t quit their failed policies.
@Guarneri:
You’re gonna have to link to that 1.1M jobs number, bub.
@Jeremy:
This makes sense for retirees around 2008/2009, but not so much now.
Reading this thread, I want to know how people are defining austerity. In 2008 we spent $2.9 trillion, IIRC – an already far too high sum. In 2013 we spent $3.8 trillion, an increase of 24% if I’ve done that math right.
How is that “austerity”? Perhaps you’re using a different definition. In which case, please define it.
Furthermore, I want to know why people think that more spending is going to get us out of this problem. Didn’t this begin with spending beyond our means, with subprime home loans and people going into debt? This is a debt problem. How is accumulating more debt going to get us out of a debt problem? And what happens when government spending ends? Everything ends eventually, so you’re going to know what happens after, right? Or is government spending supposed to continue going on ad infinitum?
http://globaleconomicanalysis.blogspot.com/2009/07/no-amount-of-stimulus-will-work.html
@David M: How so? The economy is still pretty crap.
@Jeremy:
Let us know how that works out as % of GDP.
Gross numbers without context mean nothing.
@Jeremy:
Spending by individuals isn’t comparable or related to spending by the government.
As far as the federal stimulus was concerned, it was greatly offset by state and local spending cuts.
@Eric Florack:
Failure is a 9% contraction of GDP in 1 quarter…you know…like the last supply-sider did.
55 straight months of private sector job growth is not failure.
David M- I think Drew mistyped. Since the trough, this admin has added roughly 10 million jobs. It has only added about 1 million since the last peak.
http://www.bls.gov/web/jolts/jlt_labstatgraphs.pdf
If you want to look at jobs added by each president, can go here.
http://en.wikipedia.org/wiki/Jobs_created_during_U.S._presidential_terms
Best, comprehensive paper I have seen on labor force participation at following link. Breaks down by age and by reason they are not in labor force.
http://macroblog.typepad.com/macroblog/2014/01/what-accounts-for-the-decrease-in-the-labor-force-participation-rate.html
The decline in labor force participation was 0.1% if the report I read was correct. That’s hardly worth all the discussion and pondering what happened this particular month. Could be a round off error at that level.
The trend toward a lower labor participation rate began long before Obama became president, so any explanation that starts with his presidency is wrong.
The most recent decline that began with the recession is partially caused by the slow economy and partially caused by the aging of the baby boomers and partially caused by younger workers staying in school longer. All of these factors combined caused the decline, singling any one of them out isn’t sufficient.
@C. Clavin:
2008: $2.9 trillion of government spending = 19.9% of GDP
2013: $3.8 trillion of government spending = 23.9% of GDP
Your point?
Please show me the austerity.
This link from Calculated Risk has a chart of the labor force participation rate for 25-54 year old men (and several other charts of interest as well). Notice that the decline in labor force participation for men of prime working age began in the late 60s and has been on a fairly steady trajectory downward since then, with bumps up during boom times and troughs during recessions. So keep in mind that any explanation we posit for the decline must reach back that far.
Note that women’s participation in the labor force has been basically stable for about 40 years, so this appears to be a phenomenon of men in the labor force.
(This article is from January of this year, but it’s unlikely that there has been a significant change in the long term trends since then).
@Jeremy:
Oh…I see…you are trying to skip Bush’s last year…understandable….but yes, the 2009 budget belongs to him.
Federal spending as a % of GDP was 20% in 2008 and 21% in 2013, though some interesting things happened between those two (we were sliding into recession in the second half of 2008, IIRC). That’s not a dramatic difference, and I’ll grant that it doesn’t scream “austerity.” The issue those of us on the left have with this is that the economic crisis in 2008-2009 was really, really awful and needed a vigorous response. We got fairly weak tea, and the results have been underwhelming.
So I’ll change “mild austerity at the federal level” to “mild spending growth at the federal level” and still note the state and local austerity. Also, regarding federal spending, not all spending is equal. Spending more to blow sh*t up in the Middle East < spending more to improve domestic infrastructure or somesuch. Priorities matter.
You confuse the government and private households.
Private households did indeed take on too much debt during the housing bubble (I’d argue they took on too much debt in the 90s too, actually). That debt overhang still largely exists and is holding down consumer spending (perfectly rational behavior, that), resulting in weak GDP growth. We could tackle this via aggressive cram-downs – decreasing household debt loads, but that would be attacked as a give-away to people who spent beyond their means, so that’s a no-go.
The point of federal stimulus is that it (indirectly, to be sure) takes a chunk of that private household debt and transfers it onto the federal balance sheet. The federal government has things it can do with debt that households cannot do. The feds can manage debt a lot easier than you or I can with our family budgets, for a number or reasons (including issuing its own currency and immortality). Therefore, this should be done, particularly since interest on federal debt is so low.
What do you even mean here? Of course the government will always spend money. Or are you saying “will it increase forever?” Even there, what do you mean? Nominal spending, yes of course. Population growth and inflation ensure that. Spending adjusted for pop growth, GDP growth and inflation may or may not increase. That depends on what we want the government to do. Generally, the federal government spends roughly 20% of GDP. My position is that this isn’t problematic in itself, though consistently refusing to raise ~20% of GDP in taxes is (technically, we don’t have to exactly balance every year. However, since the business cycle means periodic booms and busts, we should generally aim for balance in “normal” or “boom” times).
Federal debt does need to be managed, yes. It is, however, a much less worrisome problem than the degree of unemployment/underemployment and household debt we face. Given this, I’d rather the feds took on more debt in the near term.
@David M:
You still haven’t defined “austerity.”
The federal government has overall spent more money and has increased the debt. As for state and local spending, I’d like to see the data. Have they cut back tremendously? Considering that some places are thinking about defaulting and are still dealing with debt, I dunno if that’s really the case.
In any case, there is no austerity going on. There have not been any significant cuts to government spending at any level. Governments are still spending taxpayers dollars all over the place. Maybe it’s not where you want it to go, but they’re spending it.
@Jeremy:
FY2009 is probably a more useful number than FY2008. And the austerity has been the lack of significant spending increases between 2009 and 2012.
The biggest austerity problem we have has been the decrease in public sector employment.
@Jeremy:
Well, we are talking about jobs here. Have governments been adding jobs, or shedding them?
@David M:
There are a series of posts, with data, over the past couple days at zerohedge. You can see all you need (facts, not spin) by just taking the headline data apart. Its actually rudimentary analysis that anyone could do. The only open issue really is what the cause of the declining participation rate is. But it ain’t retiring old folks.
Another issue that needs addressing is trade policy. We bleed ~3% of GDP every year via our trade deficit.
So even if I got the stimulus (or debt cram downs) I want, that issue would remain a problem, and neither party has a plan to fix it.
@Jeremy:
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/10/30/congratulations-america-your-deficit-fell-37-percent-in-2013/
Key takeaway:
$84B here, $84B there…pretty soon you’re talking about real money.
@Jeremy:
That’s all basically true. It ISN’T good. We just disagree on root causes and what we need to do in order to fix things.
Also: most of these bad trends pre-date both Bush the Younger and Obama. A lot of this goes back to the 1970s (where many policy makers seem to still live, in their minds, btw).
@Guarneri:
Zerohedge are a bunch of cranks, so the numbers may be valid, but the words accompanying them aren’t really useful. And again, 10 million jobs added is believable, 1 million is not. Just following the jobs reports should make that obvious without needing to verify anything.
@Guarneri:
Well you say it’s not retiring people…but you have no idea. That’s your dogma barking.
Zerohedge is way past it’s use-by date.
@Guarneri:
And we still need a link for 1.1M….
Why is taking toxic debt and putting it on the public balance sheet a good thing? I mean first we’re creating a moral hazard issue where people who screw up get off, and you’re basically giving handouts not only to those people who took on debt they couldn’t afford but also to the lenders and the housing industry. So that’s not a good thing. But now you have all this debt on the public sheet, which means that all the taxpayers are now going to have to pay it off. And this is a good thing? You say the federal government can manage debt a lot easier than we can…but history doesn’t seem to agree with you. Debt continues to pile up.
Step 1: Read the link I provided in my comment. I’ll blockquote the relevant part here:
What I mean by spending is “stimulus.” According to many on the left, we need to keep spending in order to get out of this mess…but how is that going to work out when the problem with this recession is a debt problem? I’m okay with a small budget and a reasonable government. Heck I’m probably okay with a larger government than most other libertarians. But it sounds to me that some in this thread think the stimulus and more economic intervention somehow saved us from the economic recession, when I don’t see that happening, I see a record number of people dropping out of the labor force, I see a ton of debt we’re going to have to pay back reaching astronomic levels, and while I do think we’re going to right this ship, I see a painful path before we get there.
I need to run, but quickly re; state & local spending, I hope these links work:
Local: 2008-2015
http://www.usgovernmentspending.com/spending_chart_2009_2015USp_15s2li111mcn_F0l.
State: 2008-2015:
http://www.usgovernmentspending.com/spending_chart_2008_2015USp_15s2li111mcn_F0s
What you see is a bump during the response to the crisis, and then it trends back down to roughly where we were at in 2008.
So, is this or is this not austerity? Well, it’s a reduction in spending during bad economic times. It’s also a return to the pre-crisis norm. Austerity or not? Whatever it is, it’s not good policy, IMO.
Have a good weekend, all.
@Jeremy:
Or not. That’s kind of the point.
@Rob in CT:
Actually, GDP declined by about 2.8% vs 2% in the early 80’s recession. In the early 80’s recession monetary policy and Paul Volker were a huge headwind to beat down inflation, accompanied by fiscal stimulus in the form of tax reduction and mil spending.
In the recent recession, larger than the early 80’s but not outlandishly so, you have had spending – and mil spend has declined from 5 to 3.8% of GDP, so non-mil has been more robust than your citation – and the most ginormous easy money policy ever in the US.
In the early 80’s recession the labor participation rate rose 3% but unemployment fell dramatically – it was a jobs machine. In the recent recession the participation rate has plummeted, largely accounting for the reduction in rate. Its been a jobs limp weener.
@David M, @anjin-san:
Let’s not forget that “public sector employment” takes money out of the economy, and it doesn’t necessarily do anything to make the economy grow any more. So I don’t consider adding public sector jobs to be a plus.
As for private sector job growth, sure, we’ve added a few – but more people have been quitting. We’ve been barely keeping above the water. If the Labor Force Participation Rate was the same as it was, I think in 2008, then the unemployment rate would be around 10% today.
The moral of the story is: The unemployment rate has fallen not because more people are working, but because more people are dropping out of the labor force. That’s not a recovery.
@David M: So the debt just stays there in perpetuity? Never paid off? This must be some crazy definition of debt.
Jeremy, when I say that the feds can handle debt better than we can, I don’t mean “the feds don’t take on debt” I mean the consequences of the feds having debt are less severe than the consequences of a given household having a bunch of debt. Again, the federal government is immortal (which deals with you “debt in perpetuity” issue) and has its own currency it can borrow in. This really matters.
Are you seriously one of these people who thinks comparing the federal balance sheet to a family budget is anything but political rhetoric?
As for stimulus spending: it partially plugged a massive, massive hole in demand, temporarily. It was insufficient to “fix” things, and frankly there was no way to avoid at least some pain, either in the present or the future. Pain was baked into the cake. The point of stimulus is to avoid a spiral into a depression. We did avoid that. I think we could’ve done better, and still can. I have not and will never argue, however, that we can do this without anyone ever taking a hit.
Re: moral hazard, there’s plenty of that to go around. The way things actually shook out was that we bailed out the banks directly. We could have bailed out borrowers (which, as you point out, would also have been an indirect bailout of the banks), which I think would’ve been better. A more balanced moral hazard, if you will. The bailing out of the financial sector had to happen, one way or the other. I prefer the way that reduces household debt levels and involves less screwing of the little guy. It is true, however, that such a policy would unavoidably involve bailing out some people who were just plain idiots or worse. But then, the policy response we got did that too. ANY policy response short of “screw it, let it all burn” would do that.
But I see you’re a liberatarian, so it’s highly unlikely we’re going to come anywhere near common ground here.
And now I REALLY have to go. Ta!
@David M:
You’ll have a long wait. Drew doesn’t do facts, he does right wing talking points.
@David M: What he is trying to say is “from the top of the previous business cycle.” That cycle was of course dictated by an immense bubble, so evertything he says later is gibberish.
http://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/09/monthly%20change.jpg
Its just numbers.
@Jeremy:
No matter how useful the jobs are, cutting public sector employment during a recession and a weak recovery is almost always harmful. I’m fairly confident that adding several million jobs would have helped over the last few years…
@C. Clavin: since Bush’s 2009 budget never saw the light of day in the Democrat Congress, how is that his budget, and not that of the Democrat Congress?
@C. Clavin: Growth? No.weve seen a drop in the U3, but what of the U6, and beyond?
@Jeremy:
Actually, he’s somewhat correct. We rollover our debt routinely. The question becomes one of debt capacity (of which you would measure with something like debt to GDP or debt to income or debt to taxes), what must at some time be a rise in interest rates on the increase in the stock of debt, and what is called “refinancing risk” in the trade.
@Jeremy:
That’s blooming nonsense…deep in the fever-swamp right wing malarkey.
And of course the proof is that every single Republican President has added over a million public sector jobs. In fact Bush 43 added only public sector jobs…zero private sector jobs. Obama is the only President that hasn’t added public sector jobs…and that is one of the main things holding back the recovery. Imagine for a minute that we had about 2 million more jobs (net) in the mix. UE would be at about 4.5%.
http://www.calculatedriskblog.com/2013/12/public-and-private-sector-payroll-jobs.html
http://www.calculatedriskblog.com/2013/12/public-and-private-sector-payroll-jobs.html
@Eric Florack:
Wrong. You are always wrong. Always. The only people willing to attribute the 2009 budget to Obama are the same people who like to forget that 9.11 happened on Republicans watch.
You’re a far right wing-nut. But at least you are consistently wrong.
@David M:
I’d prefer to call them permabears. But data is data.
Their biggest beef right now is the stock market. It used to be the housing market. The problem with predicting the collapse of financial asset bubbles is you really don’t know the timing. But as you scoff at them today, would you have similarly scoffed about housing in 1998–2007??
@Eric Florack:
@Guarneri:
That link doesn’t support your claim of 1.1M jobs since the recessionary trough.
@Guarneri:
Dude….that’s from before Republicans destroyed the economy. That’s BS and you know it.
“And of course the proof is that every single Republican President has added over a million public sector jobs. In fact Bush 43 added only public sector jobs…zero private sector jobs”
Its not “proof.” Its a value judgment about the relative value of jobs and the effects of financing them. If you want to get into the relative value of jobs you have stepped right into the current morass of part time and low paying jobs, which is not a pretty picture as wages and total income indicate.
I’d also like to know how folks on the board rationalize their supposed concerns about the middle class with Democratic support of wage depressing mass immigration and ZIRP.
Dude….that’s from before Republicans destroyed the economy. That’s BS and you know it.
If you are referring to the housing bubble I know no such thing. Fannie and Freddie bought most of the bad mortgages and were vigorously supported by congressional democrats.
@Kari Q:
One thing you often hear is that the aging of the population can’t be behind the drop in labor force participation because the participation rate for older people has risen. Things are more complicated in reality. While the participation rate for people in the 55-64 range has risen quite a bit, it is still significantly lower than the rate for younger workers, and because of high birth rates in the early 1950’s the percentage of the population in the 55-64 range is higher than it’s ever been.
@C. Clavin: @David M:
You are correct. I was walking down two paths at the same time I was writing, net from the crash and amortizing per year since NFP turned.
@Peter:
That’s a fair point that makes things more murky. However, you can’t ignore a stat that shows that most of the NEW jobs are taken by 55 and olders, the youngers got squat of the new pie, or that the demographic rise you cite should hit 55 and older workers hit in 2005 – 2010 timeframe but significantly precedes it:
http://www.zerohedge.com/news/2014-10-03/hiring-grandparents-only-230k-september-were-added-55-69-age-group-10k-lost-prime-25
What is the real cause?? I really don’t know. But as one who employs in many different businesses and industries I’d say its the lesser productivity in the younger set, and more importantly, the lesser nature of the jobs.
@David M: arguably, in the short term, possibly.
In the long term, government jobs hurt.
@Jeremy: “Let’s not forget that “public sector employment” takes money out of the economy, and it doesn’t necessarily do anything to make the economy grow any more. So I don’t consider adding public sector jobs to be a plus.”
Right. Because if you pay a person to teach a class or enforce the laws or build a highway or monitor food safety, those sneaky government bastards don’t put a penny of that money back into the economy by buying things with it. We all know the only thing that will grow the economy is if we make sure that billionaires don’t have to pay taxes, because they’re the ones who spend that money as soon as it comes in.
Man, it must be painful to be a Republican. Do you have to take refresher classes to remember all the horsesh!t you need to recite?
@Guarneri:
I view zerohedge as cranks mainly due to two issues: Gold & Inflation
@David M:
Ill give you gold. Inflation is a tough one. A price index for whom?? Retiree? Just entering college? People who have a tendency to eat food or buy gas note rising prices. People buying education or medical services note rising prices. Consumer electronics or clothing – a better story. Although I would note that it drives liberals bat shit because they hate Wal-Mart.
As you surely know velocity is low now. If business investment picks up it might increase. I’m not enthusiastic about the consumer though. As an owner and board member in six companies across a variety of industries I know what we talk about. It ain’t tame prices.
@wr:
Excellent rant. But have you heard of the broken window fallacy?
@Guarneri:
Look at zero hedge’s inflation and hyperinflation predictions since 2009. At the same time, most reputable economists were saying that inflation and hyperinflation weren’t something to worry about. We’ve now had time to evaluate predictions from both sides, and determine which one was correct.
In other news, the don’t-have-a-chance Giants just gave showed the Nats how we do things in October 🙂
Florack:
Cato Institute said this (link):
Ludwig von Mises Institute said this (link):
FactCheck.org said this (link):
I realize C. Clavin has also explained this to you.
Jeremy:
The correct number for FY08 is $2,983B, which is not described as “$2.9 trillion” by honest people who understand the concept of rounding. Also, FY08 spending was 20.2% of GDP, not “19.9%.”
And your trickery of ignoring Bush’s FY09 performance has already been noted. FY09 spending was 24.4% of GDP.
The correct number for FY13 is $3,455B. You conveniently inflated that number by 10%. And FY13 spending was 20.8% of GDP, not “23.9%,” another phony number you pulled out of your butt.
Conservatives love phony numbers.
Spending is currently 20.4% of GDP. Average for the 20 years of Reagan-Bush-Bush: 20.8%. Reagan’s lowest number: 20.5%. Reagan’s average: 21.6%. The 40-year average is 20.5%. Spending as a % of GDP is barely higher than FY08 (20.2%), and it’s also not much higher than what Bush spent in FY06 (19.4%) when the GOP controlled both Houses of Congress and the unemployment rate was two points lower than it is right now. It’s also much lower than Bush’s last fiscal year (spending in FY09 was 24.4%).
Conservative hypocrisy is adorable.
In real dollars, spending declined 8.1% from FY09 to FY13.
The idea that government employment “takes money out of the economy” is incredibly stupid.
This is not to say that any given public sector job is an efficient use of resources. It might not be.
But money paid to a public sector employee does absolutely stay in the economy. Damn, that’s one of the most annoying RW tropes.
…
Re: stimulus, short-term vs. long-term:
I think there is some validity to the concern that the only way we can manage a decent economic outcome is via perpetual significant deficit spending (stimulus). If this is so, it indicates that our economy is screwed up.
If one said to your average liberal “the economy is screwed up” most of us would heartily agree. Indeed, the best sign from Occupy Wallstret was “Sh*t is F*cked up and Bullsh*t” Perfectly stated.
So, where is the potential common ground? Well, I think the American middle class has been hollowed out over the course ~35 years. For a long time, increasing consumer debt papered over this. Here, I think I and many Right wingers agree.
We disagree on the underlying causes of this, and the proper remedies. But the fact is that the median US household has been squeezed, and as a result there is less consumer spending. The only way out of this is either to create a bubble or jack up the deficit, which is less damaging than a bubble but not totally harmless. So, what to do?
This is why I bring up trade policy. While I do think stimulus is preferable at this moment to austerity or status-quo, I don’t think stimulus would “fix” things. The disfunction goes back a long way. Some of it was probably unavoidable as various bits of the world came back from the devastation of WWII and/or the stifling economic effects of communism. There is this concept of “regression to the mean.”
Still, even if you assume we were due to fall back to the pack a bit, I think we’ve messed up. I think “free trade” without any consideration of things like externalities was a mistake. I think dramatically cutting the tax burden of the richest amongst us was a bad move.
There are other things that might end up being not as bad as we think. China has been experiencing terrific economic growth of late, right? Of course, at the same time, they’ve been polluting the everliving f*ck out of their environment, and now they’re wondering whether they really want to breathe their air. We went through this, largely before I was born. Now, for the most part, we can breathe our air and drink our water (disclaimer: not necessarily valid if “Freedom Industries” operates in your state). This is a great boon to the public, but it does not show up in GDP figures (except, perhaps, as a negative).
And with that, I think I’ll get another beer. G’night, ya’ll.
@Guarneri: Yes. And it comes in handy in some instances. But anyone who decides how an entire national economy should run based on a little fable is, with all due respect, a fool. It’s like all the geniuses out there who have been screaming about the crippling inflation that’s going to doom us all in six months… and have been doing so for six years. And no amount of reality can ever persuade them that they’re wrong, because their ideology says they must be right, so reality must be wrong.
Wow, inflation hawks and Austrians, eh?
Well, posting facts will be no good here because those guys don’t deal in facts.
Krugthulu dealt with the inflationistas here:
Ryan is key here, because he connects to that other cult, the Austrians. Noah Smith deals with them in entertaining fashion here:
All this would be amusing, except that these economist versions of creation science are believed by so many conservative policy makers , to the misery of millions.
@anjin-san:
Dammit! Don’t worry, we Nats will cut you guys down to size shortly. We’ve got you just where we want you…..
@Guarneri:
Seriously? Fannie and Freddie? That’s been debunked so many times….
@Guarneri:
I thought you knew about business ?
That’s just stupid.
Republicans have spent 30 years depressing the middle class .
Are you OK?
Usually you try harder.
@stonetools:
Hey, the Nats are good. But it’s not a great idea to bet against the Giants in October…
@stonetools: new DC sports fan?
they let you down and break your heart. every. single. time.
@Jeremy:
Of course government spending is going to continue ad infinitum. The government is not an individual and will never retire, but will just go on and on, taking in taxes and spending, for as long as there’s an America.
@Jeremy:
Yes, it does, basically. It’s continually rolled over. That’s what you get when you have an immortal creditor. Once again, the government never retires.
@Rafer Janders:
That’s the problem with conservatives in general : they think of the government as a very, very, very, big man. As such, he should pay down his debt, balance his budget, limit his spending, etc. ( For non-libertarian conservatives , this doesn’t apply to military spending, which they don’t think of as “government spending”).
Conservatives and Austrians in particular got the Great Depression completely wrong. They honestly thought the problem was that wages were too high, which is why they prescribed austerity and more austerity , even in the midst of economic collapse. They are famous for saying FDR prolonged the Depression with his deficit spending and relief programs, and they have never come to terms with the fact that what pulled the US out of the Great Depression was the massive fiscal stimulus of WW2 spending.
I’m pretty sure that the Jeremys of the 1930s would have been advising Hoover to cut government spending even more and would have warned FDR that hyperinflation was just around the corner when he increased spending in 1933. Delusional thinking is like that. When the reality doesn’t comport with the ideology, you double down on the ideology.
Florack:
Here’s a bit more for you on this, since you are so charmingly obtuse.
On 2/4/08 GWB issued his FY09 budget proposal, asking for $3.1T, a record amount, and he did this with the support of the GOP. That amount is 89% of what was actually spent ($3.5T). FY09 spending was $3.5T instead of $3.1T mostly because a major collapse took place in 2008, months after 2/4. Bush’s number of $3.1T from 2/4/08 did not anticipate such things as TARP, which Bush signed into law with the support of famous R deficit hawks like Paul Ryan, before Obama was even elected. The deficit for FY09 was $1.4T, yet another record set by Bush, and a record that is still unbroken.
In 4 of his 8 years, Bush set a new record for biggest deficit ever. In 2003 Bush set a new record for largest deficit ever, and then he broke his own record and set a new record in 2004. He did this with the GOP in control of both Houses of Congress. ‘Conservatives’ then re-elected him. The current deficit (as a % of GDP) is lower than the FY03 and FY04 deficits.
Tell us about the mind control used by the Democrats to get Bush and the GOP to propose that bloated $3.1T budget for FY09.
I realize this overlaps with what C. Clavin explained to you earlier.
David M:
An understatement. Federal spending went down between FY11 and FY12, and another decline occurred in FY13. The last time federal spending went down two years in a row Mick Jagger was 12.
@Anjin-san @stonetools
what’d i tell you.
every. single. time.
@T:
This is how the Giants roll in October. The bigger the moment, the better they are.
@Jeremy:
Meaningless statistics. Here’s a thought exercise… if the budget was a trillion dollar deficit in 2008 but a trillion dollar surplus in 2013 then that would certainly be austerity no matter how much money the government spent.
But here are the percentage changes for all of government spending in America, adjusted for inflation:
http://krugman.blogs.nytimes.com/2013/12/12/unprecedented-austerity/
@anjin-san:
you dont understand. this isnt about the giants.
you could have fielded a team of cats and DC sports teams would still find a way to lose. on and off the field.