Friday, August 15, 2003

So if this is a recovery, where are the jobs?

Krugman writes of "Twilight Zone Economics":

Since November 2001 — which the National Bureau of Economic Research, in a controversial decision, has declared the end of the recession — the U.S. economy has grown at an annual rate of about 2.6 percent. That may not sound so bad, but when it comes to jobs there has been no recovery at all. Nonfarm payrolls have fallen by, on average, 50,000 per month since the "recovery" began, accounting for 1 million of the 2.7 million jobs lost since March 2001. ...

Meanwhile, employment is chasing a moving target because the working-age population continues to grow. Just to keep up with population growth, the U.S. needs to add about 110,000 jobs per month. When it falls short of that, jobs become steadily harder to find. At this point conditions in the labor market are probably the worst they have been for almost 20 years. (The measured unemployment rate isn't all that high, but that's largely because many people have given up looking for work.) ...

Since November 2001 new claims have averaged 414,000 per week. A number a bit lower than that might mean stable or slightly rising payroll employment — but as we've just seen, that's not nearly good enough. For comparison, in 2000 — a year of good but not great employment growth — weekly claims averaged 305,000. My conclusion is that the state of the unemployed won't improve unless claims fall a lot further than they have.

The best guess is that growth in the second half of the year will be faster than in the first half, possibly high enough to create some jobs, but not high enough to make jobs easier to find. In other words, in terms of what matters most, the economy will continue to deteriorate.

All this is, of course, an indictment of our economic policy — a policy that has managed the remarkable trick of generating immense budget deficits without giving the economy much stimulus.

I can't pay the bills by telling the phone company that industrial production went up 0.5%. Too bad!