193,000 New Payroll Jobs

Woohoo, life is great and nobody should be complaing! After all, the economy added a whopping 193,000 payroll jobs! It can’t get any better than that! I tell ya’ those idiots on Wall Street don’t know what is good for them.

Okay, maybe not. Despite all of President Bush’s “Rah-rah, the economy is strong pap,” these payroll numbers are frankly anemic by historical standards. The decrease in the unemployment rate is good news, but overall it isn’t great. Acceptable…at best. Consider what payroll employment looked like from 1992 to 2000–i.e. during the last expansion:

Payroll Employment from 1992 to 2000

If one were to look at the average net change over that time period the number of payroll jobs would be around 225,000 new jobs per month. If we look at the average from 2002 (i.e., about the same amount of time from the end of the last recession) we see a paltry average of 78 thousand new payroll jobs per month. Even if we look at only 2004, 2005 and January of 2006 the final number is still an underwhelming 170,000 new jobs on average per month. That is nothing to be happy about or describe as strong when the last recession was over 4 years ago.

So I find it rather pathetic when Bush goes out and proclaims that his tax policy the direct cause of the…well to be perfectly honest rather disappointing payroll numbers. Will keeping taxes low help continue this kind of job growth? If so, then the economy is in trouble since this kind of job growth is sub-par.

I don’t know what the solution is. Frankly, I don’t think to many economists know either. This is one reason why the Bush Administration kept making all the erroneous job growth predictions. They looked at past recessions, and economic policies of previous presidents and concluded that this last recession would be pretty much the same. That when the recession ended, employment would spring back. But this didn’t happen. Why? I don’t know. Some research has suggested structural changes in the economy and employment which have made the employment situation more uncertain than in the past. Maybe that is part of the answer. However, it isn’t clear that keeping taxes lower, increasing spending, and running large deficits will solve this problem.

Still the cheering for the recent unemployment report by some on the Right strikes me as naive and foolish. These numbers are okay at best, and nothing to be bragging about.

FILED UNDER: Economics and Business, , , , ,
Steve Verdon
About Steve Verdon
Steve has a B.A. in Economics from the University of California, Los Angeles and attended graduate school at The George Washington University, leaving school shortly before staring work on his dissertation when his first child was born. He works in the energy industry and prior to that worked at the Bureau of Labor Statistics in the Division of Price Index and Number Research. He joined the staff at OTB in November 2004.

Comments

  1. NoZe says:

    Hmmm…let’s see, who was president back in the 1990s? 😉

  2. Soldier's Dad says:

    Acording to http://www.bls.gov

    Employment-population ratioType of data: Percent

    The post WWII high employment rate was 64.7% of the population over the age of 16.

    The current employment rate is 62.9% of the population over the age of 16.

  3. 3moreyears says:

    You don’t know why? Come on! It’s the return of supply side, “voodoo”, economics. Didn’t work then…doesn’t work now. Maybe it’s the record deficit, record foreign investment, record trade deficit… Hmmm, do any of those things actually matter? I think you guys need to face some hard facts, your boy’s a loser and the sooner we’re done with these assinine policies, the better!

    You forgot to mention that the net wealth of the upper 1% has increased dramatically during these years while everyone from there on down has suffered. Talk about redistribution of wealth!

    By the way, many right wing blogs are too busy touting these wonderful numbers to see the reality behind them. I commend you on your honesty.

  4. ken says:

    However, it isn’t clear that keeping taxes lower, increasing spending, and running large deficits will solve this problem.

    No, but what is clear, from the evidence of historical fact, is that raising taxes to pay for increased spending, or otherwise running sound fiscal policy is consistent with economic growth and prosperity.

  5. DWPittelli says:

    Another factor which could make most of the growth difference all on its own: Oil (and gas) prices were low and trending downward throughout the 1990s, and rising in the last 6 years (from a nadir below $10 per barrel in 1999 to a peak over $45 a few months ago). Both trends were due more to demand from Asia than anything under the control of the US. (Production has been climbing over the least few years, just not as much as demand growth.) The US consumes 20 million barrels per day, so a $35 price increase amounts to over $250 billion per year in extra costs, a little over half of which money ends up overseas; these cost increases also necessitated tougher Fed action (markedly higher interest rates) to prevent Consumer Price Index increases (i.e., inflation).

  6. floyd says:

    it seems strange that a system that sees wages as theft of profit would be proud of 193000 new payroll jobs

  7. Just curious, but has OTB been hacked? I can’t believe what I’m reading over here tonight.

  8. spencer says:

    It is the flip side of productivity growth.

    From 1960 to 1974 productivity growth was about 66% of real GDP growth. In the low productivity era of 1975-95 productivity growth was about 50% of real gdp growth. Since 1995 it has been almost 90%. This meant that from 1960 to 1974 a 1% increase in real gdp generated a 0.3% increse in employment — technically hours worked. From 1975 to 95 it was 0.5%, but now each 1% increase in real gdp only generates a 0.1% icrease in employment.

    So if you have average growth and above average productivity you have to have below average employment growth.

  9. What Spencer said: the relatively weak increases in payroll employment have coincided with unusually strong, and consistent until last month, growth in labor productivity. It may make the jobs picture weak for now, but it will pay huge dividends in the long run.

  10. Econbrowser says:

    Latest employment data…

    The latest employment data are quite encouraging, though some may have overstated the case for enthusiasm.

  11. Steve Verdon says:

    No, but what is clear, from the evidence of historical fact, is that raising taxes to pay for increased spending, or otherwise running sound fiscal policy is consistent with economic growth and prosperity.

    I’m sorry Ken, but that is just nonsense. While there are good arguments for not running deficits and even in certain circumstances raising taxes, this is not one of them.

    Spencer,

    Good point. I hadn’t consider that one.