There was lots of good news Friday for President Obama from the US labor market, which is improving much faster on almost every dimension, than most commentators, including yours truly, had expected. An improving labor market is likely to be a major boost to his re-election chances next November, as he will inevitably claim that despite the opposition of his many critics, his policies had successfully put America back to work.
And he would surely have a point: the improvement represents a major problem for the Republicans – who have opposed these policies tooth and nail.
The Bureau of Labor Statistics reported on Friday that the jobs market was improving according to almost every measure that labor economists like me focus on, continuing the trend that first started in the early fall. The BLS reports labor market data from a household survey of individuals aged 16 and over: according to this survey, the number of unemployed fell by 126,000 on the month and 2.1 million below its May 2010 peak. The numbers of employed people was up 180,000 on the month, using these data, and 1.5 million on the year. The unemployment rate fell, unexpectedly, between November and December, from 8.7% to 8.5%, and down from 9.1% in September, while the participation rate was unchanged. The numbers of the long-term unemployed, who had been without work for at least six months, also fell.
In addition to households, the BLS collects job market data from firms, so there are two sources of jobs data. The coverage of the household survey is somewhat broader as it includes the self-employed, unpaid family workers and private household workers. According to the establishment survey, non-farm payrolls were up 200,000 this month, similar to the estimates from the household survey (some months they can be very different). According to this survey, employment is up 1.7 million on the year. There is evidence, from both household and employer surveys, that wage growth remains muted because workers have little power in a recession and are fearful of losing their jobs if they ask for higher compensation, plus an employer's ability to pay is restricted in these tough economic times. Still, the consistent theme is that the labor market is improving, which is very encouraging.
Signs of an improving jobs market in the United States stands in direct contrast to what is happening in Europe. On the same day as the BLS announcement, the European statistical office Eurostat published unemployment rates for the EU27, which showed unemployment increasing on the month in Denmark (7.8%), France (9.8%), Greece (18.8), Italy (8.6%), the Netherlands (4.9%), Portugal (13.2%), Spain (22.9%) and the UK (8.3%), although it did fall in Germany (5.5%). Youth unemployment rates in Europe are especially rising fast and are over 30% in Italy, Portugal and Spain – approximately double US rates.
The evidence from the labor market is also consistent with evidence on consumer confidence, which is worsening in Europe and improving in the US. Eurostat also published its monthly consumer confidence survey, which is falling fast in both the EU27 and in the euro area. In contrast, consumer confidence in the US is rising; for example, the Conference Board's consumer confidence index was up from 40.9 in October, to 55.2 in November to 64.5 in December.
So, why the contrast in labor market conditions – the US improving and Europe worsening?
One simple explanation is that the US entered recession first and was always going to emerge first. Second, unemployment in the US rose more rapidly than it did in the major west European countries because the scale of the monetary and fiscal stimulus was relatively greater outside the US, where federal stimulus had to compensate for declines in spending in states and municipalities which were balancing budgets. But now, despite all the Tea Party-inspired talk against stimulus, the US has largely maintained public spending, while the Europeans imposed bludgeoning austerity too soon. Tight fiscal policy along with the still unnecessarily restrictive monetary policy being run by the European Central Bank has pushed Europe back into recession – as many of us warned would happen.
The UK was always going to be an important laboratory experiment for the US, as it imposed austerity by choice. This strategy has demonstrably failed, as the UK economy looks to have gone back into recession, public borrowing is on the rise, business and consumer confidence and spending have collapsed and unemployment is rising inexorably. Larry Summers' claim last year that the whole idea of an expansionary fiscal contraction is "oxymoronic" looks to have been right.
The various Republican presidential candidates who have moved from Iowa to my home state of New Hampshire for this week's primary have collectively argued for European-style retrenchment – which simply hasn't worked. Drastic cuts in public spending any time soon, as proposed by several of these candidates, look wildly irresponsible given the headwinds the US economy is facing from abroad.
My fellow voters in next week's primary are entitled to know why the Republicans are opposed to a jobs strategy that is so obviously now working. A litmus test for me at this primary is whether a candidate supports a renewal of the payroll tax cuts that were given just a two-month reprieve at the end of the year.
It really is all about jobs, jobs and more jobs this week and in November. The obstructionist Republicans have no credible alternative on offer to get America back to work – and that is a major gift to Obama.
Comments
8 January 2012 6:53PM
So, the unemployment rate having had the stimulus is worse than what Obama predicted it would be without the stimulus but "his policies had successfully put America back to work."
Okaaay.
8 January 2012 6:58PM
Playing with the meaning of words and sentences is the only hope for Republicans.
8 January 2012 7:09PM
To "stimulate an economy" is for the most part to stimulate consumerism, but consumerism necessarily entails pollution, exploitation of resources, CO2, and more. In a rational world it would be done away with.
8 January 2012 7:09PM
Interpretation of statistics depends on the interpreter……
8 January 2012 7:14PM
Unemployment is not falling in the US. Phone survey data are irrelevant and just political posturing.
From the US bureau of labor:
http://www.bls.gov/news.release/empsit.t01.htm
Number employed November 2011 is 141,070,000
Number employed December 2011 is 140,681,000
which is a decline of 389,000 jobs, so how can there have been a reduction in unemployment ?
8 January 2012 7:15PM
It isn't this that make the Republicans look stupid.
They do that by themselves naturally.
8 January 2012 7:20PM
Do you really not know how unemployment rates are figured - as opposed to the number of people employed and not employed? And have been for decades? And why they're figured that way?
If so, ask me and I'll dig up some references for you.
8 January 2012 7:26PM
A good article which in so many words says the jobs and more jobs create growth.
Pity that Osborne will never admit that his Plan A has done the exact oppositie or that the man who annoys Cameron so much is the one that is proving to be right.
8 January 2012 7:26PM
Blanchflower predicted that austerity would lead to UK unemployment of five (5) million
http://www.guardian.co.uk/business/2009/oct/26/youth-unemployment-to-rise-blanchflower
His latest couple of articles boasting how great he is at predictions compared to others are an embarrassment to academia.
8 January 2012 7:28PM
And what exactly are these sudden new jobs?
"Head of Job Success Program"
"Assistant in department of socialists money distribution centre"
"Department of spending other's money"
"Supervisor of Department of spending other's money"
"Supervisor of Supervisor of Department of spending other's money"
"Behavioural engineer position to study why it is good to spend other's money"
"Research position on studying how printing money can create more research positions studying the same"
"(WeAreNotReallyPaidByTheGovt.) Think Tank Jobs that assure people why printing money does not take away their future" And if it did it is OK.
Brilliant innit!
8 January 2012 7:32PM
Yes David austerity is a busted flush, as anyone with an ounce of economic sense could have told you beforehand. Yes again, that we in the UK are gonna suffer Gideon and Cameron pro-recession policies for some time to come.
As others have pointed out, however, the US employment figures are very dodgy to say the least and i wouldn't put much faith in them.
8 January 2012 7:32PM
You're looking at the figures without seasonal adjustment - and if you look in the same column on that page you referenced, you'll see that without seasonal adjustment, the unemployment rate has indeed gone up. However, the figures without seasonal adjustment are misleading and very rarely used. Perhaps a better way of putting this is - the unemployment rate has gone up, but not nearly as much as we would expect given the time of the year, so that by adjusting for seasonal variation, we can reliably say that unemployment has gone down over this period.
http://www.bls.gov/cps/seasfaq.htm
8 January 2012 7:33PM
Good article. The economic gloom may be bad out of the US, however stadiums are full, restaurants full and Disney was apparently packed to bursting over the holidays, construction on multi millionaire dollar homes continues. There must be money somewhere.
That said, the US isn't labouring under an inept and corrupt coalition government with the likes of Gove who will all but destroy English education, the likes of Osborne and our PR sales man Dave. None have expertise in their area, none are qualified to do the job, all have had 20 months on the job and have failed to stimulate an iota of growth but more fall into poverty each day. England is failing under our own version of tea party republicans, not surprising considering their ties with ALEC, their conservative spin and public PR man. I think the Us will be fine, however, I wouldn't hit the bookies on the UK just yet.
http://www.telegraph.co.uk/finance/comment/liamhalligan/9000114/Printed-money-and-regulatory-diktat-are-keeping-UK-gilt-yields-low.html
8 January 2012 7:34PM
Unless you invest in your own country as a government you have failed the first principle of what it is to serve the people and not your vested interests.
8 January 2012 7:37PM
You're sure this article is just a boast? I thought it was a good follow-up to his earlier predictions, which have now started to come true. Is he supposed to apologize for being right, or have the good grace to not report results which show him to have been right? Am I missing something?
8 January 2012 7:39PM
Well I for one am not going to hold my breath waiting for the Republican candidates' mea culpas.
8 January 2012 7:46PM
Yes, the main difficulty of this article is that it approaches the GOP as if it is a political party that requires a comprehensive and carefully thought out strategy. I'm not expecting the Republicans to change their campaigns in the face of economic reality.
8 January 2012 7:47PM
Steady on, it isn't over yet. It is much too early to announce the success of the Obama strategy. Good news for US employment is good news, but a collapsing european economy could create major difficulties for everybody including the US.
8 January 2012 7:47PM
Great article, although I would have expected the CiF editor to use spellcheck to replace 'labor' with 'labour'. You just can't get the staff nowadays.
8 January 2012 7:48PM
Blanchflower was advocating lower interest rates here and that was before the credit fuelled boom went bust! He is consistently completely wrong on pretty much everything and does the profession of economics a disservice by getting his name in the press.
8 January 2012 7:53PM
zapthecrap at 7:34PM
And you'll fail the people again unless you know that investment is not the same as splashing cash for the next day's headline.
8 January 2012 7:56PM
Technically this is the American part of the site. So although this is a British newspaper they use American English not British English in this section. I suppose it also depends on the writer.
But yes, good article
8 January 2012 7:57PM
The answer of course is VERY SILLY
Not that you'd know it from looking at our media or supposed opposition party. Keeping their heads down, not saying a word about the utter failure of austerity.
8 January 2012 7:58PM
When the facts don't support your ideology, have a good rant about something you've just made up.
8 January 2012 7:59PM
If you mean the Republicans, I'd say they're looking pretty smart because the "stimulus" did not, and IS not working at accomplishing anything but driving the US into bankruptcy and undermining the value of the US Dollar. (The FED is working overtime at these efforts!)
I believe that here is an appropriate place to reiterate that in the US, 150,000 to 175,000 new workers enter the workforce EVERY MONTH!!! So an "increase" of 100,000 jobs is a LOSS of available employment for 50 - 75k workers... EVERY MONTH - so this is an annualized LOSS of employment opportunity for 600,000 to 900,000 workers a year!!!
BUT - those new workers will not show up in the "unemployment" numbers because, since they've not held jobs, they aren't counted. NOR are the 300,000 plus workers who have run out of unemployment benefits and are no longer receiving a check from the government. Nor are the vast numbers of workers who have tried to get jobs for over 3 years and, being unable to get hired, have stopped looking and have essentially dropped out of the labor market - but who would jump at a job if they could find one.
You have to watch the current administration in DC. Having extensive practice, they have lying with statistics down to a fine art.
8 January 2012 8:00PM
He didn't just advocate it, he voted for lower rates consistently at the height of the boom as a member of the MPC.
That this person, one of the guilty men, gets space in a newspaper for articles pointing out how brilliant he is for having predicted that a looser fiscal policy will lead to higher growth in the short term (wow!) is appalling.
8 January 2012 8:00PM
@Ragnorak:
It takes considerable childish chutzpah to write this after the Republican's million dollar historian, their 250 million dollar job destroyer, their Texas crony capitalist governor, and the long history of taking millions to keep the Baghdad airport safe during the time said airport was closed to civilian traffic. And let's not forget the guy who sold troops stale food; he made 35 million.
It all depends on your definition of "other people's money", right?
8 January 2012 8:04PM
It only on the website, and surely we want a variety of opinions to stimulate debate.
So I guess you're broadly in disagreement with the article?
8 January 2012 8:06PM
Of course the unemployment rate is a sham since it calculates only those still looking for work, not those who have dropped out or are underemployed in PT jobs when they want full time. Funny that the % of the labor force that is working is 36%...tied for its' lowest point since the great depression. THIS from the same BLS gnomes that give us the distorted unemployment rate. Things may be improving a little bit...but the reality, as opposed to the statistics, is still awful and the public feels it. The U6 unemployment rate which is more comprehensive is 15.2% than the U3 which only counts those out of work who have looked for work in the last 4 weeks.
8 January 2012 8:08PM
@ David Blanchflower
You may want to add a rtider on the european unemployement figures.
Yes, germany has done better thatn the rest; but that may well be because, despite generally adopting "austerity", it has adopted pro-employment policies. In particular, the deal whereby workers took a 10% cut in hours (and thus pay) but the government made up 4 of the 10 in take-home pay, and the employers another 3 of the 10. Soi the workers where the deal applied got a promise of no redundancies in return for a cut of only 3% in take home pay, for a reductiuon of 10% in working hours.
Germany has the (Marshall plan imposed) partnership between unions and management that t he rest of europe lacks. So it will always dfo better on combatting unemployment.
8 January 2012 8:10PM
You claim that the stimulus has worked?? Correct me if I'm wrong but in the time that Obama has been in office, his administration has accumulated more public debt than from the founding of the United States till Bill Clinton's second term in office...While it's debatable that stimulus has caused the growth in jobs, surely the cost it has taken to create each job, surely in the hundreds of thousands of dollars range, isn't really a good thing to be celebrating...
8 January 2012 8:11PM
Where did I say the republicans are any different from the democrats? Criticising democrats doesn't mean the republicans are right. By my definition both are effectively socialists. Republicans do the same in a different name. That is why the party needs some serious cleansing, which I think is happening but perhaps not in time for the 2012 election..
8 January 2012 8:17PM
Do we really have to repeat these stale points every thread? You know perfectly well how much of the public debt comes from the previous administration, and how much comes from falling tax revenues and increased social security costs. Unfortunately, somebody has to pay for those the "job creators" get breaks to cut loose, and that somebody is Uncle Sam.
If you don't know about this, educate yourself before you come on again. This thread is from the planet Earth, not the planet Zorak.
8 January 2012 8:18PM
Were you really part of a committee at the BoE that was entrusted with making major decisions that impacted the economy?
Public borrowing is not rising, it is falling and is forecast to continue to fall. It is not falling as quickly as originally planned but this does not mean it is rising.
8 January 2012 8:18PM
Good, get rid of all government, I'm sure you'll like paying off your local warlord to keep your business running. Or, as the Godfather says, "someday I may call on you to do me a service".
8 January 2012 8:20PM
I have to admire David Blanchflower's pluckiness, but I can't see any real reason to cheer and even less justification for partisan sneering.
Politicians of both stripes, on both sides of the Atlantic have created deep structural problems in their economies largely as a result of the sort of lax fiscal policies Blanchflower is advocating. US and European economies have become dependent on an unstainable cycle of ever greater fiscal stimulus which is threatening to implode both.
I cannot see any easy solution and even less willingness on the part of politicians to find one, but one thing is clear; The stimulus merry-go-round cannot continue.
8 January 2012 8:25PM
Talk of a cold war with China and trade sanctions should help as well. An actual cold war and sanctions China would help most western economies, well until India is up speed anyway.
8 January 2012 8:27PM
'dult,
Check out Ragnorak's* avatar. A Randian: imagine that. Not GOP - he thinks they're socialists too.
* Not to be confused with Ragnarok, which is Old Norse for Gotterdammerung.
8 January 2012 8:31PM
Yep - but that still leaves c. 13 million people out of work. 200,000 jobs is actually only a 2% decrease in unemployment. So whatever stimulus has taken place is minimal. Moreover, it's taken place in the private sector, as oppopsed to more public sector workers being sacked; and it's a monthly survey: my guess would be that those jobs were seasonal, and were borne of the Christmas period when a lot of businesses take on additional staff; with the exception of mining and health care, the gains where made in areas which receive a boost from Christmas merchandising. But how sustainable are those jobs? Are they likely to last beyond January?
On the whole, there is minimal change, however:
(BLS)
I agree that the Republicans are a joke; but it's nonsense to claim this as a victory for Obama. The long-term trend is what matters; and there still seems to be little concrete by way of job creation.
8 January 2012 8:34PM
I would agree if the cash were not being splashed propping up the private sector at the expense of public services.
8 January 2012 8:35PM
Ragnorak:
Not even close. The public sector decreased by 12,000 jobs; the private sector increased by 212,000 jobs. To quote the BLS "Job gains occurred in transportation and warehousing, retail trade, manufacturing, health care, and mining". So you don't have a case.
8 January 2012 8:35PM
Oh, Natasha, I'm just behind on the latest iconography. Not hip at all.
I can recommend Ragnorak move to Vancouver, where much of the justice system has been dismantled. Gang members shoot each other in coffee bars here, while you watch. Ragnorak can celebrate this achievement.
8 January 2012 9:09PM
Seasonal adjustment of the employment numbers, however that is calculated I don't know, but is it just cooking the books to make the mumbers look better.
It results in a fictitious number of jobs created of 176,000 which is a drop in the bucket.
Here are the US government figures concerning employment:
http://www.bls.gov/news.release/empsit.t01.htm
Out of a total population of 311 million, just 141 million have jobs, many of them part time.
The real unemployment rate is around 23%
http://www.census.gov/
33 million people are over 65
19.4 million are under 5
75 million are at school and college (grads & undergrads)
Working age population 183 million
Number employed...........141 million
Unemployed.......................42 million
Percentage unemployed 23%
Millions of people are working part time and many people over the age of 65 are still working, which means it is tougher for school leavers and graduates to find jobs.
8 January 2012 9:11PM
adult
8 January 2012 08:17PM
Half of US Treasury debt is inter governmental. What do you make of that ?
8 January 2012 9:18PM
Do you think there is no one in the working age demographic that doesn't have a job because they don't want a job?
Full time mothers (or fathers)?
Early retirees?
8 January 2012 9:26PM
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was 8.1 million in December 2011
People are not counted as unemployed if they had not searched for work in the 4 weeks preceding the survey. Looking for a job can be very frustrating these days.
Job ad - If you are currently unemployed please do not bother to apply for this position.
8 January 2012 9:30PM
You can always create jobs if you borrow money and throw it at the economy
US National debt $15,200,000,000,000 and counting
8 January 2012 9:33PM
Spike,
It ain't just that. When you have several populations that have to be counted in different ways, you should report them separately, at least initially, to avoid apples and oranges in the results. People drawing unemployment and/or registered with state employment services make up one group, which can be counted this way, at that interval. People who are more or less hiding silently within the population at large have to be counted (or estimated) differently, at different intervals. Then there are the little fudges we've learned to make - seasonal adjustments - which can never be perfect but which can be shown to smooth out misleading peaks and valleys.
It's no big trick to add these different kinds of numbers together and declare that total unemployment is (A + B), and there may even be good reasons for doing it. But it isn't evidence of fraud or conspiracy, except to those to whom fraud and conspiracy are self-evident.
8 January 2012 9:40PM
This is just embarrassingly wrong.
UK data has actually been surprisingly good over the last months after a poor October.The latest leading indicators have all surprised on the upside.
The manufacturing purchasing managers’ index rose from 47.7 to 49.6, construction from 52.3 to 53.2 and the service sector from 52.1 to 54.
And public borrowing isn't rising. The forecast reduction in public spending has slowed a little. The OBR's deficit forecast for this year is still on target.
Osborne's central economic strategy has been to keep interest rates as low as possible, so as to provide a strong monetary stimulus. Seeing as bond yields are at forty year lows, the AAA rating still sound and the UK regarded as a safe haven in Europe then it is just partisan nonsense to claim Osborne's strategy has "demonstrably failed".
8 January 2012 9:43PM
According to the 2000 census report, 48 percent of kids younger than 2 — and 25 percent of those between the ages of 3 and 6 — are cared for solely by a parent.
(What the figures are in 2011 I do not know)
Thus there are roughly 6 million stay at home Mom or Dads
Deducting this from the working age population of 183 million, we are left with a potential workforce of 177 million. This then gives an unemployment figure of 36 million or 20%. Still far higher than the fictitious official number.
Yes, quite a lot of people are involuntarily retired under the age of 65, but I count these as unemployed.