Justin Wolfers on August's Dismal Jobs Report

So the jobs numbers from August are out and they’re not pretty. Employers added no net new jobs last month, the first time that’s happened since February 1945. In early trading, the Dow is down some 200 points.

Thankfully, today is a heads day for Justin Wolfers in his Twitter experiment, which he’s been at for a month now (Follow him @JustinWolfers). As soon as the numbers hit the fan this morning, Wolfers posted some brief thoughts to Google+, which we share below:



Justin Wolfers –  9:26 AM –  Public
Latest job market report:
– Non-farm payrolls unchanged (+0 jobs!)
– Unemployment rate unchanged at 9.1%
And we’re all disappointed. Wait for the headlines: “Economic numbers unchanged” and “Economy going to hell”. Both are true. All told, a nice teaching moment about the importance of expectations. 

There are two ways of reading a report like this:
1. How is the economy performing?
Terribly. Over the past three months, average jobs growth of +35k is dismal.
2. What is the news from today’s report?
Forecasters had expected jobs growth of +70k. The failure of these jobs to appear is why markets are falling, and there’s more doom and gloom commentary.
But I think this is a mis-reading. While the establishment survey showed no job growth, the household survey says employment rose +331k. If you put 20% weight on the household survey and 80% weight on the payrolls survey (which is roughly reasonable), this says that true employment growth was roughly consistent with market expectations.

Bottom line: There’s not a lot of news here. The economy is very very weak. Probably not shrinking. And definitely not growing fast enough to reduce unemployment. But we knew that yesterday.

The Fed has been behind the curve on all of this, so it does substantially increase the chances of monetary easing in September.

Heavy D

I'll take a pro-business President who had bad grades in econ over supposed brilliant academics who make cool graphs but inadvertently are creating the most toxic environment for businesses ever. There is no confidence about the future with this current regime.


The problem isn't confidence. It's demand. People keep trying to ascribe psychological reasons for the current market conditions, when it's just simple numbers.


It's not uncertainty, it's demand. Demand is everything.

Eric M. Jones

Sure, it's Obama's fault.

True, the Republicans drove this economy into a ditch and refuse to cooperate to get things going, while espousing the goal of ruining the President....

But hey, keep your eyes shut...it's gonna' be awful.

G Butler

Obama had huge majorities the first 2 years, and passed a bloated stimulus that loaded us up with malinvestment (for example, Solyndra). He also passed a health care bill that burdened businesses with new costs and expenses.

I'm afraid Obama will have to take the blame here. At least he recognizes the situation is dire -- he's scrapping environmental regulations he previously proposed in a desperate attempt to bail out the sinking ship.


Actually the Fed has been throwing curve balls with QE1, QE2, ... and is so maze-dumb that it can't figure out QEn is only going to make things worse. Inflating your way out of massive debt robs everybody of everything. When governments go from helping citizens to hurting them, it's hard to deny that the Anarchists might have a valid point.

Joshua Northey

Inflation doesn't hurt debtors, which is what most Americans are. It does reduce your ability to consume foreign goods, but that is also good and something Americans could stand to do less of.

Compared to the national average my family is very fiscally conservative (I don't even own a credit card), and we still have total debt of around 3 years of earnings.

For most people it is like 10, or more.


What about the fact that company profit margins are increasing without companies having to hire? Scaring people into working harder seems to be working well for business.

Abe Froman

The theory is that QE3 will lead to expansion the monetary base and modest inflation. The connection with employment is that this inflation will fool employers in the short-run into thinking there is growth and lead to hiring?

So this is about the Phillips curve? Why are we having the same debate we had in the 1960's?

I'm deeply skeptical about the ability of monetary policy to solve employment issues. I thought the 1970s resolved that. If you want to fix employment start with better public policy for employers: Less regulatory/tax uncertainty.

Joshua Northey

Regulatory/tax uncertainty reduction is always nice, but that cannot be an excuse for continuing on with the same asinine regulatory/tax policy we have currently.

That would be even more damaging.

I think the main thing is to make sure as much as possible that investment is in economically productive industries, and to focus on labor market liquidity (particularly retraining workers, convincing people to give up trades that are no longer need, encouraging internal migration, and perhaps even conscription of those on the dole for public work projects. If you want unemployment you should need to go dig ditches for it, at least part of the week.


"I think the main thing is to make sure as much as possible that investment is in economically productive industries."

Last I checked oil companies wanted to expand.

Alan T

Dr. Wolfers,

Would you be kind enough to explain why almost all the improvement in the economy since the trough of the recession has gone to corporate profits rather than to jobs? Is it just that job creation hasn't kept with increases in the working-age population, or does the economic tend to benefit shareholders rather than workers for some reason?

Alan T

I think I've figured out the answer to my own question. As long as unemployment remains high, employers won't have to raise wages to attract workers, so increases in GDP will not lead to better wages. Nor will it lead to more jobs as long as demand remains low. The remaining possibility is that increases in GDP will lead to higher profits.

The modest improvements in GDP must be due primarily to higher productivity, since job growth is so weak.


Your correct about the wages. However, much of the profits companies are enjoying is simply coming from their overseas subsidiaries. As the dollar goes down, profits earned in foreign currencies appear larger.

Politicians won't say it directly. But, one of the key goals of Keynesian money printing is to weaken the dollar and as a result reduce the salaries of Americans compared to the rest of the world. This in theory should help create jobs since salary costs are lower.


I am a biologist not an economist but it seems to me the system is out of equilibrium. If there is no demand, why are prices not falling?

G Butler

There is a larger supply of dollars.

Caleb b

"Inflation doesn’t hurt debtors"

True, but it's notoriously hard to contain and lenders quickly adjust current rates to compensate. Wages often lag, so while my mountain of student loan debt gets smaller, my immediate purchasing power is severly hurt.

Two things will happen in the next ten years, 1) we get caught in a Japan-like liquidity trap or 2) inflation will go to double digits for five years. There is zero chance we can smoothly exit this mess. No matter who is in the white house.


@Justin Wolfers: Perfect comment :)

All the reasons are obvious, the post do not talk about any analysis or logical deduction of economy.

I am following the predictions and tips of http://www.forecastfortomorrow.com/. Its amazingly accurate.