Real Job Gains in February

March 4, 2011

The jobs report for February (link provided above) was the best since the beginning of the Great Recession.  Non-farm payrolls grew by 192,000 and private payrolls grew by 222,000.  (The difference, of course, is due to a decline of 30,000 in government payrolls.)  And this time the numbers are real.  The “employment level” – the total number of Americans employed – grew by 250,000.  And the reliance upon the “mysteriously vanishing labor force” to drive a bogus drop in unemployment seems to have (at least temporarily) been suspended this month, with an actual rise of 60,000 in the “civilian labor force.”  (Still, that’s probably a bogus number since population growth adds, on average, 125-150,000 workers per month.)  So it seems that the one tenth of a percent drop in the unemployment rate to 8.9% is probably real, though the number itself is well below the actual U3 unemployment rate of 11.5%

Here’s my calculation:

Unemployment Calculation

And here’s a chart of the unemployment rate:

Unemployment Chart

One thing I should point out is that the calculation actually uses a slightly reduced figure for U.S. population beginning with this month.  That’s because the Census Bureau stopped publishing its monthly estimate of population with its December 1st estimate.  I’m guessing that it’s in the process of digesting new figures from the 2010 census.  So in the meantime, I’m using the Census Bureau’s U.S. population clock, which seems to be running a little behind where it would be if the growth in the monthly population estimate had been maintained.  What this probably means is that the 2010 census came in a little below the running estimate based on the previous 2000 census.  In other words, population growth has slowed a bit.  That’s good news!

Here’s the charts of unemployment that I’ve been maintaining.  Still a bad picture, but one that showed a little improvement in February.

Unemployed Americans

Labor Force & Employment Level

Per Capita Employment

The job gains, based on the Labor Department’s establishment survey, break down as follows:

  • Manufacturing:  + 33,000
  • Construction:  + 33,000
  • Professional & business services:  + 47,000
  • Health care:  + 34,000
  • Transportation & warehousing:  + 22,000

The good news is that the economy is finally adding jobs for real.  The bad news is that it’s driven by tsunami of debt and a Federal Reserve program of mopping up that debt to hold down interest rates.  Neither is sustainable.  The other day, Bill Gross, co-chief investment manager of Pimco, the world’s largest bond fund manager – a man who knows a little something about bonds and government debt – predicted an economy-killing rise in interest rates if the Fed ends its “QE2” bond purchase program in June as planned.  

But the Fed is under pressure to do exactly that, from those rightfully concerned about a huge bubble in treasuries.  And lawmakers are under pressure to rein in the debt.  They kicked that can down the road by two weeks, but the threat of a government shut-down still looms.  The time bought by the deficit spending to repair the economy is growing short and has largely been squandered.  Two years into the program, and only now is manufacturing showing signs of rebounding when the time could have been used to fix trade policy, restore a balance of trade, and bring manufacturing jobs home by the millions, instead of by a few tens of thousands.

Examples of “Kooks” We Should Pay Heed

September 22, 2008

 No sooner did I finish my previous post, suggesting that our next president needs to begin listening to economists who, until now, have been dismissed as “kooks” and “weirdos” by the now-discredited high rollers like Paulson, Greenspan and Bernanke, when along comes this Fortune article with a perfect example – economist John Williams of, who coined the term “Pollyanna Creep” to describe the phenomenom of revising economic data to make things appear rosier than they are. Williams contends that today’s economic melt-down has roots that go back much further than the mortgage crisis, that we’ve been deluding ourselves for many years that the economy is in much better shape than it really is.

No shortage of villains stand accused of igniting the brushfire raging across Wall Street: greedy lenders, gullible home buyers, negligent regulators, numbskull credit ratings agencies, and vicious short-sellers, for starters. Maybe they share the blame. But what if the underlying problem goes deeper? What if the reality is that the US economy has been a lot worse than was thought for a long time, and now the chickens are finally coming home to roost?

That’s the dark thinking beyond what is known as “Pollyanna creep,” a phrase coined by an economist named John Williams and supported by a cadre of other macroeconomic dissidents.

Williams, who lives in California, runs a Web site called that trades in the idea that key government statistics have become so optimistically misleading as to become essentially useless. Yes, this sounds a bit like the thinking of the black helicopter crowd, or the plotline of a Matrix movie. But given what’s gone on in the financial sector of late, it doesn’t sound quite so fringe.

The article singles out GDP (Gross Domestic Product) and CPI (the Consumer Price Index) as a couple of macroeconomic statistics that are especially worthy of scorn – overly optimistic to the point that they have been rendered useless, the very point I made in the first chapter of Five Short Blasts. If you’ve followed this blog for any length of time, you know that another favorite of mine is unemployment. To suggest that our unemployment rate is only 6.1% (the current “official” rate) is ludicrous when the annualized rate of weekly jobless claims is closer to 16%. In the past, while still chairman of the Federal Reserve, Alan Greenspan claimed that unemployment rates of 5% or less represented “full employment” and worried about the inflationary potential, all while weekly jobless claims still hovered above 300,000 and while thousands of people in manufacturing were losing their jobs ever week.

Another fringe economist cited in the article is Kevin Phillips, former Nixon advisor and author of Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism.

In his recently-published and rather depressing book “Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism,” onetime Nixon White House adviser Kevin Phillips discusses Pollyanna creep as part of an era of “Bullnomics: the pied-piping of America toward a misleading financial ideology (the efficiency and reliability of markets), buttressed by a spectrum of dubious thinkers, doctrines and enablers.”
Phillips contends that some of the biggest changes to CPI calculation took place between 1997 and 1999, “while the public and the politicians were preoccupied by bull market euphoria and the actions in Congress to impeach Bill Clinton.”
In their effort to reduce Social Security outlays – and buttressed by a belief that CPI overstated inflation – government economists with backing by Federal Reserve Chairman Alan Greenspan implemented controversial modifications to CPI that, among other things, tried to measure increased satisfaction from goods.


This Fortune article may be a good sign that, already, the Paulsons and Bernankes of the world are being pushed aside while we begin to look to the “fringe” economists, the “macroeconomic dissidents,” for real answers.

The Pollyanna creep crowd ….  may have some currency. Amid the talk of hundreds of billions in financial market clean-ups, a debate over the accuracy of economic bellwethers may be a can of worms worth opening.

Advice for Obama: Choose Your Advice (and Advisors) Carefully

July 3, 2008

Bill Gross, chief investment officer of PIMCO, is likely correct that Obama will be our next president, given that the economy is literally crumbling around us. But his advice to Obama on how to deal with the economy is miles off the mark.

Gross’s July investment outlook letter was addressed to Obama, as if he had been elected.

“Dear President Obama,” the letter began. “You have inherited a mess. Your predecessor, fixated on emulating a former Republican icon from a far different economic era, chose to emphasize tax cuts for the rich and excessive consumption for all Americans,” Gross wrote. “He promoted deregulation and free markets when, in fact, the markets and their institutions needed tough love.”

No arguments here so far. But this is where Gross’s advice goes astray.

The next president has little choice but to step up fiscal stimulus to revive the economy, Gross said.

“You’ve inherited an asset-based economy whose well has been pumped nearly dry with lower and lower interest rates and lender of last resort liquidity provisions,” he wrote. “Your administration will produce this nation’s first trillion dollar deficit.” …. “what you need now is fiscal spending and lots of it,” Gross wrote.

… “This economy will need an additional jolt of $500 billion or so of government spending real quick,” he wrote.

We can only hope that Obama sees this kind of advice and similar advice from other corporate leaders for what it is – a lot of self-serving crap from people who care nothing about the U.S. economy and are only interested in their corporations’ profits and their own outlandish compensation packages. What else would one expect from someone in the business of trading bonds? Of course he wants more deficit spending, requiring the government to crank out hundreds of billions and even trillions of dollars more in bonds! Who cares if it bankrupts the nation, as long as PIMCO gets to execute more bond fund trades?

My advice to Senator Obama? It’s just as I laid out in Five Short Blasts. First and foremost, as quickly as possible, institute trade policy reforms – specifically a population density-indexed tariff structure – that will gradually eliminate our trade deficit in manufactured goods. This will inject $500 billion into the economy not once, but year in and year out, without bankrupting the nation as Bill Gross’s plan would do. The economy will rejuvenate like a starved dog in a meat-packing plant!

Second, begin cutting legal immigration – that’s right, legal immigration – to bring the supply of labor in balance with demand, allowing for real wage growth. Third, begin a national conversation on population and challenge our nation’s government and corporate leaders to explain how any of our most critical goals – eliminating our trade deficit in oil, reducing greenhouse gas emissions, etc. – can ever be achieved if we continue pursuing policies of rampant population growth.

Choose your advisors carefully, Senator, and consider their motivations. Are they motivated by a desire to see you and the nation succeed or are they motivated by more selfish interests?