Reading the Employment Report: Focus on Hours, Not Heads

The latest employment numbers are out, and they are dreadful. Those commentators who saw “green shoots” out there had been focusing on the fact that in May, the economy “only” shed 322,000 jobs, which is good news when compared with the fact that the economy had been losing over 600,000 jobs per month in January, February, and March. Squint hard enough at the black line in my chart, and you can see why many were hopeful that job losses were slowing down.

But counting the number of people who lost their jobs misses an important part of the story. Focus instead on the purple line, which is the index of aggregate weekly hours worked and also counts those who’ve lost only part of their jobs. The decline in aggregate hours worked has been frighteningly consistent over recent months. Any evidence of “green shoots” appearing in recent months disappears in this broader measure. The recession continues apace. If current trends continue, we are in for a frightening time.

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It’s time to start talking about a second fiscal stimulus.


David

A second stimulus? I didn't even know money from the first had been released.

Colin

It's time to start talking about a second fiscal stimulus.

Sounds good. Since the big government approach isn't working, how about the second stimulus be based on free market approaches like deregulation and tax cuts?

Jonathan S

"It's time to start talking about a second fiscal stimulus."

The first trillion dollars didn't do much, why should we bankrupt our grandkids even more?

iratecat

Why doesn't it count farm workers?

SpecialK

The first pork-laden $3,270,000,000,000.00 (as calculated by CBO over first 10 years) stimulus was so wildly successful we have to start talking about a second one? So soon?

The Obama administration has already admitted it was dead wrong about the effects of the first stimulus by at least 2% more unemployment by the end of this year. Where are all those multipliers we were promised? But the second stimulus will work for sure, right?

Andy Feldman

It's time to start realizing that consumption-stimulus doesn't help the economy. That's the evidence most people would draw from that graph. Savings, not consumption, is what drives real, permanent growth. We've become addicted to borrowing, and more stimulus is like taking another hit to stave off your withdrawal symptoms. Does that really sound like a good idea to anyone?

We're in this mess because of the persistent low (or even negative) savings rates over the past decade or more. Consumption was above normal as we borrowed and spent, and now it'll be below for a while as we pay it back. There's really nothing surprising about this, and there's no magic fix.

frankenduf

i totally agree that a second stimulus is needed (read as critique- first one wasn't aggressive enough)- as to the "green shoots", that's regression back to wall-street-speak- wall street profits are back to record '07 levels- that finance profiteering will continue as before is the (money) green shoot that the finance industry wants to confuse as a good sign for all

Caliphilosopher

"how about the second stimulus be based on free market approaches like deregulation and tax cuts?"

I'm pretty sure that deregulation got us into this mess. And cut taxes for who? All those people who have lost their jobs?

Another David

@iratecat:

All payrolls are seasonally adjusted, but farm payrolls are left out because their payrolls are seasonal to adjust. Hope that helps!

WholeMealOfFood

Moving from a discussion of bad job numbers to calling for a second stimulus is a non sequitur.

PsiCop

I'm not sure a second stimulus would work. One thing that this recession has revealed, is that the amount of sheer, unadulterated incompetence in both the financial and political worlds is staggering. The housing bubble and sub-prime mortgage crises were both forseeable, yet they happened nonetheless, because those who were able to stop it, didn't see the danger, and the only ones raising alarm bells, were not numerous enough to be listened to.

Are we to assume that the same businesspeople, pundits, and politicians who have already proven themselves incompetent both by failing to prevent the disaster and by cooking up a stimulus that didn't work, are suddenly going to summon the will and the ability to create one that will?

Sorry but I don't for one moment believe that's possible.

At this point I conclude that it will be much better to incur no additional costs — either in terms of direct government spending that the ideological Left wants, or in deferred or indirect expenditures such as tax cuts that the ideological Right clamors for. Whatever is spent in either fashion, will just go down the vast sinkhole of rampant incompetence which has already consumed previous stimulus packages.

The only way I'd support any more "stimulus" is if new people were in charge of both the government and the corporate world ... people with demonstrated competence and willingness to actually do something effective. Since neither will change hands any time soon ... forget it.

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Hunter

Um, how about, no?

The reason that state workers are taking unpaid furloughs, overtime is non-existent and part-time workers are getting cut back is that businesses, governments and employees want the freedom and flexibility to adjust to MARKET conditions rapidly.

When furloughs stop and hours are added, then we know the economy is recovering. Then employers will gain the confidence they need to take the necessary risks that come with expanding the workplace. Any "stimlulus" to "get people back to work" might cause employers to add hours, but I doubt it's going to inspire much confidence.

Joe Smith

You start from an implied and false premise: that the January 2008 numbers are where the economy should be.

The January 2008 numbers are artificial - they were inflated by a decade of criminally reckless mismanagement on Wall Street, in the White House and in Congress. Madoff is just a useful scapegoat. Several thousand others should be joining him.

The debate should be about how to build a well functioning economy for the long term.

Alex

Some government agencies are still waiting for their stimulus money to even arrive (thanks, Congress!!). Time to take care of that, THEN think about next steps.

Space Pirate

Maybe we're just getting way more efficient with how we use our 'work' hours?

Eric M. Jones

@13. Right on. There's that Faith and Trust violation problem. The more crooked executives put behind bars, the faster the economy will recover.

I used to have a tax man who told me, "We try to be honest but when push-comes-to-shove I just ask myself--'What would Richard Nixon do?'. That usually clears it up for me."

So the economy "only" shed 322,000 jobs. What happens in Zimbabwe when everyone who could possible get aids has already gotten it?--the monthly increase in new aids cases goes down. Perhaps we will soon get to the point where nobody else can realistically get fired and the unemployment numbers will fall sharply.

Now won't that be special....

Carrie

A second stimulus? I hope you're joking. If you want to live off the government, move to China. We'll see how large you live over there.

D

How about actually spending a reasonable fraction of the first stimulus before deciding whether or not we need a second one, hmm?

Although no matter what happens, I suspect it won't change people's minds. If the economy gets a little bit better, stimulus advocates will say "The stimulus worked, let's do more," while stimulus opponents will say "The economy is improving so there's no need to spend even more." Conversely, if the economy gets worse, advocates (evidently including Prof. Wolfers) will say "We need a second stimulus to help the economy," whereas opponents will say "The stimulus obviously didn't work, so let's not throw more money into a giant hole."

It will be a lot harder for the Democrats to push a second stimulus bill through Congress, though, since I doubt as many people will fall for the "MUST PASS BILL NOW OR WORLD WILL END, NO TIME TO READ OR DISCUSS IT" nonsense the second time around. (At least I hope that's the case, although Waxman-Markey doesn't fill me with confidence on that front.)

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Nick

Some day I will understand what possesses people to think "oh, the government can solve that problem!"
At this point all I can come up with is it's some form of mass hallucination. "Lets give the folks who have demonstrated utter incompetence More Money and Power!"
What am I missing?
Nick

Open-Eyed Economist

Scroll back up a little and re-read PsiCop's comments. I fully agree. We are living in historic and fast-changing times and the sooner we are rid of the Baby Boomers and their aging parents who got us all in this situation - the better.

The corruption, theft, and outright lying that has gone on at the local, state, and federal levels as well as at the corporate, banking and insurance sectors of the financial industry is just STAGGERING. It is simply the crime of the century when all is said and done.

These past two generations have spent more money than the Earth can produce - and have passed on a HUGE amount of debt obligations to several generations while stealing the resources that were not theirs to begin.

Now, we see some Boomers holding on to the jobs that are left with younger workers laid off in the millions now in an attempt to squeeze even more money out of the system before it collapses.

We see this in most states - especially California - where the claims of "experience" and "rank" mean that those Boomers with 30 or more years on the job are able to retain positions at higher wages and health premiums, while those workers in their 40s, 30s and 20s are left to fend for themselves and their young families.

By next year - the clamor will be so loud - with official national unemployment rates in the mid-teens - that it will be VERY hard not to approve a second and a THIRD stimulus package.

Most states are broke. Cities and counties depending on property tax revenues cannot because the real estate market has collapsed.

This is why taxes are being raised across the board - mainly "sin" taxes. However, many communities will not survive the Crash of 2008.

Every sector this Boomer generation has touched is sinking in red ink -

Health care
Education
Banking & Financials
Insurance
Construction
Real Estate
Manufacturing
Automotive

And, the reason why Health Care tops the list of multiple problems to solve is because the Baby Boomers are about to bankrupt THAT system as well. We all know what is coming down the road, and it's not that far away now...

However, I agree with PsiCop in that the same people who got us into this mess CANNOT be the ones to get us out. It simply will not happen.

When the history is written about the Baby Boomers as the ruling Establishment (1993-2010) they will be indicted as the most corrupt and incompetent generation EVER to walk the face of the Earth. Period.

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