White House Revises Jobs Forecast Downward
For the current year, job growth will come in at an anemic 1.5 million or so, far below the number of new jobs needed to accommodate growth of the labor force. Even at 2.1 million new jobs, there will be little positive distance between the new jobs available and the new labor force entrants needing work. More importantly, the Council did not venture to describe the quality of new jobs that will be posted by employers. This has impact in at least several dimensions:
• a "job" is a job in these forecasts, whether the compensation is for $60,000 with full benefits or for minimum wage with no benefits;
• regional variations in hiring may make jobs available in parts of the country other than where jobs are needed most.
Also, in predicting that job formation will be better in 2005 than it was in 2004, the White House is assuming that the economy will grow more robustly than it did this year, an assumption challenged by the inevitability of rising interest rates that will slow down business activity and consumer spending, both of which are key to macroeconomic performance. During the just-concluded Presidential campaign, Mr. Bush was taken to task for predictions during his first term about job growth that proved far too optimistic.
Published 12/20/2004 10:41:48 PM
<< 24 Comments Total
So they're predicting such-and-such a number of new jobs for 2005, but the number they projected for 2004 was...optimistic? And we should trust their projections for 2005 because...?
So we don't have enough jobs for the new kids coming into the workforce, or the old kids looking for new jobs, but we want to outlaw abortion and birth control and "deliberately childless couples", so that everyone out there can have lots more children who will also be looking for jobs, and competing not only with other Americans and desperate starving people in third world countries, but with the illegal immigrants that Bush wants to give work permits to...come on Dark Wraith, stop me here somewhere, I'm sure there's some perfectly understandable logic here somewhere...?
Good evening, Lorri. I'm glad you've come to the Forums.
It's actually worse than all of that. You see, the way the "unemployment rate" is calculated, a part-time job providing one hour per week of work is counted as a "job"! Also, a relatively new trick being used by employers is to kill a high-paying job and replace it with part-time, much lower-wage jobs, sometimes classifying the workers as "independent contractors" to avoid having to pay them benefits. This means that, on the books, the economy has experienced a net creation of jobs (one job lost, two or three jobs gained, with the two or three gained aggregating less pay than the one lost).
A variation on this trick has been done by public schools, lately. They'll fire a bunch of teachers at the end of the school year, then re-hire them for the next school year. As new hires, the teachers—some of whom have been in service for years—get starting salaries of brand new teachers.
Cute, isn't it?
The games just go on and on.
One part of this whole nonsense I find amusing is how the government and industry brag about the growth in productivity and explain that job formation has been anemic because of the apparent increase in per-worker productivity. Their argument is that, because workers are being more productive, employers don't have to hire as many.
Their reasoning is completely backwards, and if they've had an ounce of training in microeconomics, they should know it.
You see, one of the principles of microeconomics is called the Law of Diminishing Marginal Productivity. As each additional unit of any factor of production is pressed into service, the additional contribution it makes to production is less than that of the unit before it. So, as more labor is hired, the total pool of labor will produce more, but at a diminishing rate. This is just the nature of production. (We see this in all sorts of physical and biological systems, by the way.)
Now, this Law of Diminishing Marginal Productivity works the other way, too. As a unit of labor (or any other factor) is removed, the units still in service will necessarily produce more per unit!
Do you see how these Administration apologists are turning the whole Law of Diminishing Marginal Productivity on its head? Yes, of course, the workers who remain after downsizing will be more productive on a per-person basis: the same amount of work has to be done by fewer people, so more per person gets done!
Where does this lead? It leads to all kinds of health issues in the labor force, and most of those will occur over a long period of time. It also, obviously, leads to higher corporate profits (provided the executives don't run away with all of the extra loot). And it gives our pro-business President and his minions a horn they can toot about how the economy is so darned productive that—gosh, gee whiz—businesses just don't need to make as many jobs as they used to.
And the media swallows this nonsense. So too, apparently, did more than 59 million voters who put their stamp of approval on this new American way of life.
America: one big trailer park just waiting to be built.
The Dark Wraith puts his car up on cinder blocks.
Dark Wraith, I've been wondering about the effect on job numbers, if any, of all those people out there who are working multiple jobs? Is there a mechanism in place to calculate how many of the new jobs, such as they are, are being held by the same persons? I read so many different numbers that claim to reflect the "true" number of people without jobs. But I know some to those numbers discount people who are no longer on unemployment benefits, who have given up looking for a job. Do the jobless numbers include people on welfare or other forms of public assistance?
And I am much enjoying your blog. I have (you may have noticed) no training in any of your fields, but I am endlessly curious. I hope my questions dont' annoy.
Lorri,
You're exactly the kind of person he's hoping to attract.
- oddjob
Hm! I might be too late to post on a "monday" forum. But this is interesting, and though I would like to comment (likely I will pontificate dumbly on this topic in another forum!) I have to run out and get some work done--if I'd like to protect my JOB!
Good GODS!
--cam
And by the way, DW: I am really enjoying your blog. Your calm while relaying bad news is unmatched, no doubt. And spam, to boot.
Good afternoon, everyone in BlogWorld.
I, too, am a bit under the gun, at the moment. Final grades are due in one hour, and I'm still staring at a couple of grade sheets. I was way too easy on the students in a computer skills class, and I was a bit too hard on the folks in a business law night class.
Once I have completed this self flogging ritual, I shall feed myself and get down to the postings for the day.
And by the way, OddJob, you are entirely correct about my enjoyment of doing this blog and answering questions. Ultimately, what I am writing here will become the grist for the books called...
The Dark Wraith Forums: Pulp EconomicsYou folks show me what people want to know about issues and how the underlying economics works.
That means you're doing me quite a favor by being here.
The Dark Wraith returns to putting the final touches on the grades.
Ahhh, jetzt versteh' Ich! The Dark Wraith aspires to write "Economics for Dummies"!
- oddjob
(And no, I wasn't suggesting the rest of us were stupid. I don't think that "Dummies" series assumes that, either. I've got a couple of them and to me they seem much more like texts written for the interested, but uninformed.)
- oddjob
That's okay, oddjob. You pretty much have to knock me upside the head with a two-by-four before I notice I've been insulted. How could anyone do anything but love li'l ole me? Dummies? What dummies? Who is oddjob speaking to?
RE: DW's forthcoming "Economics for Dummies." Oddjob, sorry, but I think your observation is DEAD on. I think we are, as you say, interested but uninformed. But we needn't feel bad on that score; for, most people are similarly uninformed, and worse, they could give a damn. It is already no secret that outside certain kinds of esoteric scholarly knowledge (that is of little use to most people), I'm in over my head!
Oh, wait! I know lots about birds, though. (And embarassingly, also about cooking. If I had a blog, I would do "Friday bird blogging," I've decided.
Unfortunately, in bad ole Boston, there isn't often much interesting to see, let alone photograph! So maybe "Friday cookie blogging" makes more sense, in my instance.
Back to work!
--cam
You're a birder? I'm not but have field guides and pay attention from time to time (as do my parents and my mother's parents before that). What birds do you know about? (And what kinds of esoterica are you good with?)
- oddjob
Is the Council of Economic Advisers appointed by any sitting President? I suppose what I'm really asking is, is this body fairly impartial, or can they be used as a rubber-stamp to make a given President (or alleged one, in this case) look better than he should? Also, what is the best source for honest information regarding the state of the job market, and how most Americans are really doing under current economic conditions?
Good evening, LindiBee. I shall be working my way up this thread through the evening, so allow me to answer your questions first.
The Council of Economic Advisers is supposed to provide the President with object analysis and advice concerning the state of the economy and the likely impact of various policy options. In practical terms, the extent to which the economists on the Council do that is dependent upon the sitting President.
Bill Clinton was a man known for long sessions with his circle of people. Some have criticized him as having run his White House like a daily graduate seminar, where he and his people were endlessly grinding out what-ifs and why-nots of various policy options.
George W. Bush's style is more like an MBA-laden corporate office. Policy is made in an opaque pipeline, and Bush's people are then charged with making it happen.
Those advisers that just revised their forecast were carrying out policy, both in forecasting 3.6 million jobs for 2005, then in revising that figure downward by almost 42% to 2.1 million jobs a month and a half after the Election. No economist acting on his own would proudly declare that his forecast needed to be changed by such a magnitude: that's not statistics; it's propaganda.
Now, as to where you can go to get some honest numbers, I have always recommended the Congressional Budget Office as an objective source of analysis. Another useful place to look is at the publications that come from the regional Federal Reserve Banks; but for these sources, you really have to be good at reading tea leaves.
However, of all the sources I could recommend, here's the one I think is the most reliable: the neck.
Huh?
Yes, the neck. Turn your head back and forth on your neck, and look at what you see in the job world around you. In statistics, we call that "sampling"; in your own life, it's called the reality check. Do you see lots and lots of jobs at great pay? Are you happy where you are, and are you at peace with the road ahead for you? What about your friends? Are they okay in the job world?
The world can tell you a lot... certainly as much as, if not more than, politically motivated economists will tell you.
But you should still visit The Dark Wraith Forums all the time. It's good for the soul.
The Dark Wraith continues the blogfest.
Good evening, Lorri T. Thank you, again, for joining The Dark Wraith Forums as a regular visitor. I hope you continue to ask questions; you're hitting some of the classics that we address in a principles of macroeconomics course, and that helps me lay out the foundation here on this blog as we build a substrate of knowledge for everyone to use.
The "unemployment rate" is calculated by first determining how many people are in the U.S. labor force. Roughly speaking, to be counted, you must be 16 years old; and you must have, or you must be actively seeking, gainful employment. Right there, you'll see the first issue: if you are what is called a "discouraged worker"—someone no longer "actively seeking" employment—you are no longer in the labor force, so you cannot be counted as an "unemployed" person because unemployed people are a subset only of those people in the labor force.
Okay, now let's get down to what constitutes "employed": essentially, if you are working, you're employed. This means that working one hour a week makes you an employed labor force participant. All kinds of problems pop up, here:
• Underemployment: people who want to work more, but cannot, are counted as employed.
• Misemployment: A rocket scientist working at a fast food restaurant is counted as being just as employed flipping burgers as he would be building spaceships, even though the economy would probably be better off allocating this scarce resource to a better end use.
• Multiple employments: This one's a bit opaque. I have tried to learn from government resources how the Bureau of Labor Statistics counts a person who works more than one job. This research is to the end of trying to kill in my own heart a nagging suspicion I have that the BLS is counting such a person as two employed workers for the number of employed persons, but as one person for the purpose of labor force numbers. This would make the numerator of the employment rate fraction (the number of people employed) too large with respect to the denominator (the number of people in the labor force).
Now, above, I talked about the employment rate. In mathematical form, this is it:
The number of people in the labor force who are employed
divided by
number of people in the labor force.
Suppose we have a labor force of 100 people, of whom 94 are employed. The employment rate would be 94 divided by 100, or 94%. To get the unemployment rate, you merely subtract this number from 100%. Hence, the unemployment rate in my example is 100% - 94%, or 6%.
But remember all of the problems I noted above with this calculation.
We are not counting "discouraged workers." How many of those are there? We don't know, and the estimates are all over the board.
We are not looking at "full-time" equivalents, which would count a 10-hour-per-week job as, say, 25% of a full-time job (10 hours divided by 40 hours full time).
We don't adjust downward for displaced workers whose labor and human capital are not in their "highest and best use" (to use a real estate term rather loosely).
All of these are factors that make the unemployment rate look much lower than it actually is. I wish I could recall who the authors were, but I remember last year a couple of economists took a stab at calculating the unemployment rate more realistically. They came up with a rather disturbing number of somewhere (I think) around 12%, or something like that; and they found that this "true" unemployment rate has been progressively diverging from the official unemployment rate. That's not surprising: as people stay unemployed for longer and longer periods of time, they are more and more likely to fall into that No Man's Land of the "discouraged workers," who are not counted.
There's a whole lot more to this subject, Lorri; and you can rest assured that I shall be beating on it endlessly as we move along here.
The Dark Wraith rests his typing fingers for a while.
By the way, Lorri T., let me flog a little point I made above. Suppose the labor force of 100 people has 94 of them employed. Suppose, though, that there are 10 "discouraged workers" who are not in the 100 people counted in the labor force.
Let's put them in and see what happens. There are still 94 people employed, but there are now 110 people in the revised labor force (the original 100 plus the 10 who weren't counted before). The revised employment rate would be 94 divided by 110, which equals 85.45%; so the unemployment rate is now 100% minus 85.45%, which is 14.55%!
Do you see how the unemployment rate popped from rather tepid 6% to a pretty exciting 14.55% just by taking into account a discouraged worker rate of 9.09% (10 people out of 110)?
Interesting, isn't it?
Numbers: you can't live with them, and you can't lie without them.
Or something like that.
The Dark Wraith blogs onward.
DW wrote: "No economist acting on his own would proudly declare that his forecast needed to be changed by such a magnitude: that's not statistics; it's propaganda."
Wraith, I'm not clear on what you mean by the second part of this sentence. Was it propaganda to lower expectations? In what way?
This is rich: The White House revises the jobs forecast, predicting that fewer jobs will be created than expected. John Kerry had been sounding the alarm (maybe too late?) about the economy before the election. If I remember correctly, he stated that Bush painted an overly-rosy picture of the US economy. Kerry also pointed out that under the Bush administration not only would the economy NOT improve, but as the administration (openly) transfers power to the wealthy, the economy would worsen. It was said over and over again that of the jobs that were being created, no distinction was being made between a job over at Blockbuster's and a job at MiddleManagement R Us.
It's virtually impossible for the adminstration to deny any longer the downward spiral. How many companies have had mass layoffs in the past few months? Merck, Bank of America, who else? Yet, read this:
http://story.news.yahoo.com/news?tmpl=story&ncid=1203&e=9&u=/afp/20041218/bs_afp/useconomygrowth&sid=96001027
No bad news on the horizon, is there, DW?
To Oddjob: I am a passionate birder. I'm not a checklist birder, also known as a "twitcher"--someone who chases after rare birds with the purpose of ticking birds off a list. You'll remember the rare red-footed falcon that circled around Martha's Vineyard back in August--I remember thinking how ridiculous (yes, and stupid) those birders seemed, burning up I95 in their smog-producing SUVs to see a bird lost on the wind.
I am incredibly fascinated by all birds, but I probably know most about osprey and woodpeckers (go figure). Both are incredibly amazing birds. The osprey is wonderful because it is conspicuous and common and they aren't secretive. If you are in the right place at the right time (as I was this past March, in Florida) they will practically skim the top of your head as they plunge, feet-first, into the water snatching up fish. It is the most amazing thing to see this very common raptor plunge into the water, grab a large fish with its talons and fly off, seemingly in one motion. Florida, Texas, California, New Mexico and Arizona are exceptional places to go birding, not only for their unique habitats but because each of those places represent a geographical nexus of one sort or another. (Texas and the Gulf of Mexico, for example. Florida is the American mainland and the Caribbean.) You see many unique species as well as interesting hybrids you won't see anywhere else.
Gods! I can't believe I've gone on and on. I couldn't help myself.
Academic minutae that I know a lot about: how to debunk the myths of feminine and cultural aesthetics. And the utter nonsense of poststructuralism. Now, that last one deserves a "GAWD!" A reactionary movement can't come along in academia before another one comes along and shoots it in the head. Actually, what I'm currently working on trying to make a case for relevance of just plain ole feminism, since post-feminism has already declared it dead and buried.
OK, this bad, ungainly post ends...now!
This post has been removed by a blog administrator.
oops, sorry for the double post! I tried to stop the first one, because it didn't have my name. Then I signed it, sent it and realized...it was too late.
--cam
Good evening, Cam. A cookie blog, huh?
It could work.
The Dark Wraith awaits his share of the promotional samples.
Good evening, once again, Cam. I was posting to you about your nascent cookie blog at the same time you were posting back to me.
Propaganda is a process whose individual elements serve a larger purpose. Propaganda is like a fractal: structures at the level of the small are part of similar, yet more spectacular, structures in the large.
If I tell you in February of 2004 that the year 2005 will see 3.6 million new jobs created, I mean for you to hope that the year 2005 will be good; and any problems or worries you have for the current year will lessen as time goes forward. "Elect me, and you will be better off next year."
When I then tell you, after you have re-elected me President, that the number of jobs formed next year will be 2.1 million, I am relying upon you not to remember what I said in February: what I am saying now is the rock upon which I shall stand. If anyone brings up that 3.6 million number, I shall derisively and summarily dismiss that person as a naysayer.
If you don't want to be a naysayer, Cam, then you need to get that 3.6 million number out of your mind.
Once I've conditioned you to react like this to information sequences I provide, you become something far more important than a mere supporter.
You become a believer.
The Dark Wraith has spoken.
This is a point that oftens concerns me. I noted that, on blogs like AmericaBlog, the Freepers will parade labor and economic statistics out of nowhere, then say things like, "the unemployment rate now is 5.4%, that's only 0.1% higher than it was under Clinton, so you can't complain", and I sit there thinking, "what planet are these guys broadcasting from? During the nineties, employers here couldn't find workers to fill good-paying positions because there were too many job opportunities, and the tech boom afforded people numerous opportunities that paid well even if a few businesses were downsizing. I'm now seeing people doing an hour and a half commute for jobs that pay $9 to $10 an hour in Columbus, with no relief in site. Is Rush Limpballs making this stuff up, or do they rely on NeoCon thinktanks to generate these numbers?
Good evening, Cam. Boy, that sure didn't work out very well. I was trying to fix your post that had the "blog ripper" in it, and I ended up deleting your post. Fortunately, it was the second of a double-post, so the first one is still there. Please accept my apology. The blog policy is not to delete posts except under the most extreme circumstances of abuse or stupidity, and certainly never to intentionally delete a post of one of the blog's early and erudite members.
Gawd, that could have been a catastrophe if that had been the only copy of that post of yours.
By the way, a "blog ripper" is a string of characters (with no spaces) in a post that exceeds the comment field length. The most common way this happens is with non-hyperlinked URLs that are long. I was going to put the URL in your post inside an A HREF tag.
I should have left well enough alone.
The Dark Wraith apologizes and hangs his head.
Good evening, LindiBee.
Columbus, huh? Home of my alma mater, The Ohio State University.
Yes, I have seen that strange phenomenon you describe: numbers pulled out of the air and waived around as if they're something other than the product of a fertile imagination. I have even found myself on several occasions actually going through historical data to verify that I wasn't crazy when I heard their statistics that I didn't think were correct.
I cannot say for sure whether or not they get these numbers from the Right-wing radio commentators, since I have a personal policy of not listening to socio-political pornography. Don't get me wrong: I support the right of everyone to engage in that kind of behavior, provided the conduct is carried out in the privacy of the car or home.
Their listening habits become a matter of public concern only when their activities occur where others can see them or where children could be affected by the long-term behavioral changes that are known to occur in socio-political porn addicts.
As long as it's private activities between consenting adults, it's fine. All I ask is that they keep their addiction to Limbaugh and Hennity and the others like them out of our schools and away from our precious children.
The Dark Wraith guards the gates of public decency.
[BOY! does it feel good to be on the side of moral rectitude.]
Hi, Linda.
Suppose I present a hypothesis and see if you can make any sense of it:
Building on what Dark Wraith said regarding mind control and getting people's hopes up as a means of propaganda, consider this next assumption I'm going to make as a stepping stone to understanding this matter.
Progress (according to think tanks) is not measured in what actually gets accomplished but in what might get accomplished. (Everything is futuristic... there's some esoteric stuff in there if oddjob is interested.)
Having said that, most businesses labor under the assumption there is a future, at least the way most companies are set up these days. Most do not count on losing profit or going under. Breaking even is almost anathema and is usually not considered a viable option.
What Pugman and others do not understand is productivity is not truly measured by how many people are on the clock and/or how much you can squeeze out of each individual. Productivity is measured by what actually gets done (as I see it). Not all people are physically capable of working 60 hours a week. That doesn't mean they should eat any less. They should eat until they are no longer hungry.
The problem we have is people working three jobs and still not having enough to eat, while others work one lucrative job and have plenty. So, therefore, the person working the three jobs is putting more energy into his work and needs more nourishment to compensate for the calories he burns. If he doesn't, eventually his body will break down. The opposite is true as well. If a person does not do any real work and is fed more than he gives output, he will be a glutton and likely suffer any number of health problems due to obesity.
When you observe all the "progress" we've made, ask yourself what we have accomplished when it actually pays more to do nothing.
When more and more jobs lose their effectiveness, all that's left is a title, no responsibilities, and a paycheck.
Kind of insulting, isn't it? How could someone live with himself if he's paid to not work? Sounds like a fishy scheme to me...