When Growth Looks Bad

Julian Sanchez | November 5, 2004

The lede of this New York Times story on the most recent round of numbers from the Bureau of Labor Statistics should be at least initially double-take inducing:

The economy created 337,000 new jobs in October, nearly double the 169,000 that Wall Street was expecting, but the overall unemployment rate rose marginally to 5.5 percent.

Stay your collective "jigga-wha?" faithful Reasonoids; it's just an artifact of the way unemployent stats are calculated in the U.S. See, reasonably enough, they don't want to count as "unemployed" people who aren't actually looking for work—someone who's voluntarily quit their job to write a book, or a student who's taking some time off after graduation to backpack around before joining the workforce aren't emblems of an infirm economy, after all. (Well, not necessarily: It's hard to gauge what people might do given a different set of opportunities. During the dot-com boom, say, the opportunity cost of a leisurely break after college probably seemed a lot higher. On the other hand, a strong economy might give people a financial cushion such that they feel they can afford to take that time off.) But that means the official figures also don't count people who're so dispirited with the state of the job market that they've at least temporarily stopped looking. So, the Times notes "unemployment rate edged up from 5.4 percent in September as more people joined the search for jobs." In other words, as the economy appears to pick up, more people decide it's worth pounding the streets for work, and the official unemployment rate rises. In honor of Stan Lee, a no-prize to the first commenter who finds someone citing the unemployment stat in isolation as bad news.

Comments

Highway|11.5.04 @ 1:18PM|#

Is the new jobs total figure also subject to that kind of distortions? Or is that just straight data from whichever of the studies they decide to pick (the household or payroll)?

|11.5.04 @ 1:25PM|#

Both numbers together were cited as good news on NPR this morning, although they said the new jobs stats were significantly inflated by post-natural disaster construction in Florida. Hard to see that Florida construction would have _that_ big of an impact, but, really, what the hell do I know?

fyodor|11.5.04 @ 1:34PM|#

I've always thought there were also "seasonal adjustments" that could account for such a seeming paradox. But since I don't know what they are specifically, I have no idea if they would apply here. One might expect teachers to come back to work in September and construction workers to leave the labor market at varying points during the fall or winter and return in the spring. Can't think of any large group of folks whose jobs would return in October....

|11.5.04 @ 1:41PM|#

I always assume the numbers that are announced (for job creation, unemployment, sales, etc.) are always seasonally adjusted, but I also don't have any idea how these seasonal adjustments are actually made or justified.

"Can't think of any large group of folks whose jobs would return in October...."

Judging from the number of jerk-offs who called me in October to say how swell/evil/moral/scary Bush and Kerry are, there must have been millions of temporary telemarketing jobs. But they may have all been in Bangladesh.

|11.5.04 @ 1:57PM|#

Probably too early to be reflected in these statistics, but stores are now starting their seasonal employees. Ramping up for x-mas.

|11.5.04 @ 2:21PM|#

I haven't been over to DeLong's site yet, but I'm going to hazard a guess that he's got something about it.

|11.5.04 @ 2:50PM|#

As a former stockbroker who followed those numbers for years, it seems the unemployment rate has faded in importance except as part of a longer than month-to-month trend.
Still, now that you mention it, Bush was using the unemployment rate toward the end of his campaign while Kerry was still quoting hard numbers.
Taken together, this is a small sign the hoi polloi may slowly be getting a little smarter.

|11.5.04 @ 2:53PM|#

"In honor of Stan Lee, a no-prize to the first commenter who finds someone citing the unemployment stat in isolation as bad news."

The headline at Kiplinger reads, "US Unemployment Rate Rises to 5.5% in October" and the first two paragraphs read:

"WASHINGTON, Nov 5, 2004 (Xinhua via COMTEX) -- The US unemployment rate rose to 5.5 percent in October, compared with 5.4 percent the previous month, the Labor Department said Friday.

"Although employers added 337,000 workers to payrolls in October, the new hiring was offset by increasing numbers of people who came into the labor market during the month, the department said."

It's not exactly in isolation, but they do give the new jobs a pretty bad spin.

http://www.kiplinger.com/news/XmlStoryResult.php?storyid=20041105375.7_6748002013acc28b

|11.5.04 @ 3:05PM|#

Services industries as a whole gained 272,000 jobs. Goods- producing industries hired a net 65,000 extra people, including a gain of 71,000 in construction but a loss of about 6,000 in manufacturing. (from the article Ken referenced)

So, while construction numbers may have had an impact, it doesn't appear to be a large percentage overall as I'm sure not all 71K workers were hired in FL.

I do agree that the numbers tend to go up this time of year for reasons others have said, to include college kids going to school away from home returning to campus and getting jobs for beer money.

Ruthless -

For a side note: Around the 70's most western style governments moved economic policy from the goal of full employement to the goal of stability. So they basically used the policy to hold inflation down and markets stable instead of using policy to effect jobs. Of course they do use policy to effect jobs, but it's not their primary goal.

Anyway, they redefined full employment to be somewhere around 4.5-5.5% or so. Historically the numbers during the entire Bush administration are consistant with the policy and not very high.

|11.5.04 @ 3:42PM|#

Another thing I've noticed as an amateur economist is how jounalists seldom understand the difference between long and short term interest rates, therefore they make a bigger deal out of Federal Reserve moves than they ought to.

|11.5.04 @ 4:48PM|#

Such a promising headline...

Sigh

|11.5.04 @ 7:39PM|#

If I'm not mistaken, something like 75% of those jobs created last month were part-time.

So it probably wasn't a bunch of fat city big-salary jobs.

Ken Shultz writes: "It's not exactly in isolation, but they do give the new jobs a pretty bad spin."

On the other hand, the 5.4% unemployment rate was obviously a positive spin, which didn't match with reality.

So I think it's a wash.

|11.5.04 @ 7:54PM|#

"...the 5.4% unemployment rate was obviously a positive spin, which didn't match with reality."

In what way does citing a rising unemployment rate "obviously" constitute a "positive spin"?

Rodger Morrow|11.6.04 @ 8:12PM|#

You'd think that adding 337,000 new jobs in October would be good news.

But the NYT, LAT and WaPo can always find a cloud in a silver lining�at least when it's GWB's silver lining. Especially when they have help from erstwhile Kerry economic advisors.

More at: http://writingcompany.blogs.com/this_isnt_writing_its_typ/2004/11/no_news_but_bad.html

In the MSM, there's no economic news but bad economic news when there's a Republican in the White House.