The jobs report: what should we do?

(cross posted at freeforall)

My first post of 2012 said the top public policy priority for 2012 was to:

…enact policies that encourage economic growth now, while moving toward a sustainable budget over the long run. This main policy need is unchanged from 2011, and we didn’t manage to do either very well.

This is still true.

The jobs report today has triggered the panic button for many (here is Jared Bernstein’s first take on the report), showing that the slow economic recovery is further slowing. I think the biggest mistake we have made the past few years is to lose government jobs; we lost 13,000 more this past month, and the unemployment rate would be about 1% point lower than it is if we hadn’t shed government jobs (mostly state and local cuts). For the short run, and with the real interest rate paid by the federal government at or below zero, we should be boosting state and local jobs with federal money, not losing such jobs. It is not too late to do so.

For the longer run, we need a path toward a sustainable federal budget, and that is the focus of my book. These two ideas–we need to do more in the short run to boost employment and growth, while adopting a longer range plan to reduce budget deficits–are not incompatible. In fact, I believe some movement toward the latter could actually help enable us to do more of the former. However, politically both seem impossible, which really means that our political system is incapable of enacting the type of compromise that will enable us to address our biggest short run problem (slow economic growth), and our biggest long run problem (large deficits due to normal spending given our current tax code and demographic changes). Maybe it will take some sort of economic catastrophe for our political system to act, and that is demoralizing.

In the long run, it will take a tax increase and a health reform plan that can slow the rate of health care cost inflation, to ever achieve anything near a balanced budget in the future. There are other policy changes needed, but without those two we will never have a sustainable federal budget. We need a forceful response on both the short run and long term problems facing our country. I am not sure we will get away with waiting until after the 2012 election to begin doing the obvious.

Comments

  1. Byomtov says

    These two ideas–we need to do more in the short run to boost employment and growth, while adopting a longer range plan to reduce budget deficits–are not incompatible. In fact, I believe some movement toward the latter could actually help enable us to do more of the former. However, politically both seem impossible, which really means that our political system is incapable of enacting the type of compromise that will enable us to address our biggest short run problem (slow economic growth), and our biggest long run problem (large deficits due to normal spending given our current tax code and demographic changes). Maybe it will take some sort of economic catastrophe for our political system to act, and that is demoralizing.

    Demoralizing indeed.

    • Ken Rhodes says

      “These two ideas–we need to do more in the short run to boost employment and growth, while adopting a longer range plan to reduce budget deficits–are not incompatible.”

      Well Bernie, wasn’t there some fellow named Clinton who effected something like that?

      • Byomtov says

        Yes, there was. But the lineup has changed more than a little since then.

        The political incapacity Don complains of is not mostly a question of structural defects, but rather of the attitudes of the players, and the problems faced.

  2. Brett Bellmore says

    Well, you could start by noticing that the administration is routinely defrauding the public about jobs numbers. When you release a number, and it is ALWAYS revised down a few days later, you’re not looking at a routine error, you’re looking at fraud. Mistakes happen in both directions, not the same direction every time.

    • J. Michael Neal says

      Brett, you’re not only lying but you’re being exceedingly incompetent about it.

      From the April report:

      “The change in total nonfarm payroll employment for February was revised from +240,000 to +259,000, and the change for March was revised from +120,000 to +154,000.”

      From the March report:

      “The change in total nonfarm payroll employment for January was revised from +284,000 to +275,000, and the change for February was revised from +227,000 to +240,000.”

      From the February report:

      “The change in total nonfarm payroll employment for December was revised from +203,000 to +223,000, and the change for January was revised from +243,000 to +284,000.”

      From the January report:

      “The change in total nonfarm payroll employment for November was revised from +100,000 to +157,000, and the change for December was revised from +200,000 to +203,000.”

      From the December report:

      “The change in total nonfarm payroll employment for October was revised from +100,000 to +112,000, and the change for November was revised from +120,000 to +100,000.”

      From the November report:

      “The change in total nonfarm payroll employment for September was revised from +158,000 to +210,000, and the change for October was revised from +80,000 to +100,000.”

      From the October report:

      “The change in total nonfarm payroll employment for August was revised from +57,000 to +104,000, and the change for September was revised from +103,000 to +158,000.”

      From the September report:

      “The change in total nonfarm payroll employment for July was revised from +85,000 to +127,000, and the change for August was revised from 0 to +57,000.”

      From the August report:

      “The change in total nonfarm payroll employment for June was revised from +46,000 to +20,000, and the change for July was revised from +117,000 to +85,000.”

      From the July report:

      “The change in total nonfarm payroll employment for May was revised from +25,000 to +53,000, and the change for June was revised from +18,000 to +46,000.”

      From the June report:

      “The change in total nonfarm payroll employment for April was revised from +232,000 to +217,000, and the change for May was revised from +54,000 to +25,000.”

      So, over the last year there have been 24 revisions of the numbers from earlier months. Of those 24, 8 have been downwards revisions and 16 have been upwards. The net revision has been +397,000 jobs over that period.

      You are either the most clueless idiot on the planet or fundamentally dishonest. My money is on the latter.

      • marcel says

        Curse you J. Michael Neal for getting your post in, with more corroboratory detail, while I was busy typing mine!

        • j_h_r says

          “Well, you could start by noticing that the administration is routinely defrauding the public about jobs numbers.”

          No you weren’t.

          • Brett Bellmore says

            Jobless claims aren’t “job numbers”? Ok, I suppose they’re technically “jobless” numbers, but surely you’ll concede they’re “joby”, right? They’ve got at least *something* to do with jobs, I’d think.

          • Byomtov says

            They are jobs numbers, but they are definitely not all jobs numbers, which is what you claimed are always being revised. And further, since you complained about downward revisions, I suspect you weren’t talking about jobless claims at all. Or maybe the fax came in upside down.

          • J. Michael Neal says

            And, yeah, the jobless claims figures seem to be consistently revised up, but only one of those 56 upwards revisions has been by more than one-half of one percent. These aren’t revisions; they’re rounding errors.

            It’s also important to note just what this figure is. It is not the result of a survey of a randomly selected sample. Rather, the 50 states each send in a report of the actual number of people that filed for unemployment and the actual total is modified by a seasonal adjustment that must sum to zero over the course of a year. So, if the revisions are consistently upwards, it isn’t because anyone at the Department of Labor is massaging the numbers. It’s because the states don’t have an accurate count of how many people are making claims. There are actually several good reasons for this, one of which is that there is a problem with the reporting for someone who worked in one state but files in another. That’s probably the biggest one, and it will almost always lead to an undercount in the advance numbers.

            If there is a problem here, it isn’t at the Department of Labor, which is doing exactly what it is supposed to do. It’s with reporters who are so innumerate that they don’t understand the process that they are reporting on. It wouldn’t be that hard for them to describe the numbers accurately. They just choose not to. That’s not the DoL’s fault. They explain all of this to anyone who cares to find out.

        • J. Michael Neal says

          Right. You responded to a post about the monthly jobs report with a claim that the jobs numbers are always revised up. No further explanation. And we are expected to believe that you were talking about some completely different set of numbers that no one had mentioned.

          As I said, you’re busy watering the bullshit fields.

        • Clark says

          Brett Bellmore: Well, you could start by noticing that the administration is routinely defrauding the public about jobs numbers. When you release a number, and it is ALWAYS revised down a few days later, you’re not looking at a routine error, you’re looking at fraud.

          You were complaining about jobless numbers being revised downwards as an indication that the administration is defrauding the public to put itself in a better light?

          I eagerly await your response. Please let me know if I should hold my breath while waiting for it.

    • marcel says

      I haven’t heard anyone who is familiar with the either BLS or the Census Bureau suggest either that its work is fraudulent, nor that the long arm of any administration reaches so far down as to effect its data collection and reporting. My recollection is that early in the (calendar) year, revisions to the monthly numbers of new jobs were positive. More recently (last 3 months I think) the revisions have been negative.

      See this, for example (found with the following google search:

      revision to January unemployment rate

      where I limited the dates to 2012/01/30 – 2012/02/03

      The story I’ve heard is that because of the warm winter, the seasonal adjustments that the BLS uses for the initial estimates were less accurate than normal, leading to a bunch of upward adjustments. I don’t know what the explanation for the current set of downward revisions is, but I think I’ve heard explanations based on the unusually high employment figures for the winter, when taken into account, have now thrown off the seasonal adjustments for recent months in the opposite direction.

      It would be nice if, before leveling charges of fraud, partisans displayed either some expertise or some evidence, rather than “talking” out their posterior openings.

  3. NCG says

    What evidence is there for this idea that if there were a long-term budget solution, all of a sudden people would start buying things they apparently don’t want/need now? Or that businesses would all of a sudden feel confident enough to invest? The demand-side argument just seems to make sooooo much more sense.

    • Don Taylor says

      @NCG
      Boosting demand would do more short term and have a more predictable result, meaning supporting state/local jobs with federal $ would work. Removing policy uncertainty (like how we navigate taxmageddon, what the path to increasing taxes will be, practical way ahead of health reform) I think would have a benefit becasue moving toward a longer range plan on taxes and spending side would imply the political system can actually do something to fix problems. I think this would in turn lead to increased ability to do more short run demand work. Also, we need to do something more on the mortgage issue to clear bad loans one way or another more quickly, but I am not sure what it is/how to do it.

  4. Bruce Wilder says

    Whose this “we”, who “should” be doing this and that, and has been making “mistakes” instead?

    Is our political system really incapable of “compromise”? Incapable of “acting”?

    Because it seems to me that the political system has been compromising and acting right along. It is how we got to this pass, and, after the election, I fully expect the political system will act again, reaching some Grand Bargain to screw the 99% out of Social Security and extend tax breaks for the Rich, and similar horrors. And, “we” will be solemnly told “we” cannot afford this and that.

    The government is being run for and by the rich and powerful and predatory. There are no mistakes being made. There’s no paralysis.

    What there isn’t, however, is a real fight.