Arnold Kling  

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After a report showing a gain of 150,000 jobs last month, Mark Thoma says that the glass is half empty.


it could have been worse, but in past recoveries we've had job growth of hundreds of thousands, far more that this.

But, as I learned by reproducing Ed Leamer's analysis, the economy almost never makes a rapid transition from low employment growth to high employment growth. Before we can get to the point where employment gains are 350,000 a month or more, we have to transition from bad numbers to mediocre numbers. At least with last month's figure, we made it to mediocre. After a couple more months of that, it is more plausible that we will see large gains.

So far, I have been surprised at how long it has taken for job growth to pick up. Still, I think that within a year we will see regular monthly employment increases of 400,000 or more. I have no formal forecasting model or clever insights, but I just don't think that the economy can stay down indefinitely.


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COMMENTS (5 to date)
mlb writes:

To me the real key is jobs vs inflation. Anecdotally, it feels like commodities are rising way earlier in this cycle than in past cycles. In a simplistic view of cycles, the up-cycle ends when inflation becomes a problem. My hunch is inflation will limit this up-cycle to a much shorter duration than others. Not a shocking conclusion when you consider that printing money is our main (only?) tactic for stimulating things.

andy weintraub writes:

Why are people ignoring the 330,000 reduction in employment in October as reported in the household survey? And isn't that usually viewed as a more leading indicator?

Elvin writes:

Isn't a big generator of jobs in a recovery the housing sector? Without a strong home construction market, I find it difficult to believe job creation will jump up to 350,000 a month.

Tom Nally writes:
So far, I have been surprised at how long it has taken for job growth to pick up.

I'm a little bit surprised that Dr. Kling is surprised. Is it our experience that the number of jobs expand and shrink independently of government policy? If that's the case, then why is it necessary for government to even have business and economic policy? And why do we argue about it so vigorously during elections?

Quite some time ago, I argued that it would be impossible for businesses to "go Gault" because every transaction in America leaves an electronic trail. Therefore, an entrepreneur could not withdraw and isolate himself as the fictional John Gault did.

But since that time, I've come to believe that "capital on the sidelines" is the modern-day manifestation of "going Gault". Once capital returns to the game, employment numbers will improve. Once business policy improves -- with the emphasis on tax and regulation components -- capital will return to the game.

At least that's the way I see it. I'm not credentialed in economics like a lot of visitors here. Alas, I'm a lowly structural engineer.

---Tom Nally, New Orleans

Gary Rogers writes:

I would think someone would start looking at what happens when the government runs a 1.3 TRILLION dollar deficit. Mostly, the deficit has been financed by borrowing. Think about it, if they borrow the money from me I would certainly need to forgo some of my own spending. In fact, If they borrow from Bill Gates or Warren Buffet they too would have to forgo an equal amount of spending. Money borrowed from the private sector is as anti-stimulative as money pumped into the economy is stimulative. The net result is stimulating the economy on one hand while destimulating on the other. Now, when you consider how much of the stimulative money pumped into the economy actually produces jobs compared to the unseen cost of borrowing from the job producing engine of the economy; is it any wonder that job growth is anemic?

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