Employment & Productivity

Does it fizzle? Does it sizzle

No. It just lays there.

Originally published March 6, 2008

Surely all memory of the 1950s send-up of the original “kerplunk goes the tablet that gives the fizz” ad has long faded, but its apt description of the American job market is recently won.

In recent years our job market has indeed lost much of its fizz. This point is best made by the BLS’s quarterly business employment dynamics (BED) series. It comes out with a long delay—figures for the second quarter of 2007 were only released on February 14. But the BED series is very useful in analyzing longer-term trends.

Net changes in total employment over time are a function of gross job losses and gains. For example, in 2006, there was a net gain of 1.7 million jobs in the private sector, according to the BED program. (This number differs from the establishment survey.) But that net gain came from a gross gain of 30.8 million jobs, and gross losses of 29.1 million jobs. That’s quite a furious pace of turnover under a rather placid surface.

Forget the Participation Rate

Originally published January 25, 2008

That’s what Chairman Jim Saxton (R-NJ) and his Joint Economic Committee advise anyway, and they seem to have a point. In their analysis of the merits of the various employment indicators in predicting recessions, they find that the participation rate with its laughable value of –161% is “actually bizarre” in that it tends to rise at the same rate during both expansions and recessions. That takes care of the booby prize. In terms of ability to predict recessions, balancing value and reliability, the initial UI series (weekly claims for unemployment insurance) ranked first, as did changes in the unemployment rate among the monthly indicators. Sad to say, the payroll and household series “are of no value as recession indicators.”

The Best
Series Value Reliability
Initial UI claims 76% 0.5
Employment/Population Ratio 51% 0.3
Continuing UI Claims 43% 1.8
Unemployment (CPS) 27% 0.8
Unemployment (MA) 15% 1.6
Unemployment (12M) 0% 2.5

The Worst
Series Value Reliability
Labor Force Participation -161% 0.1
Civilian Employment (MA) -80% 1.0
Payroll Employment (real time) -23% 1.3

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– Philippa Dunne & Doug Henwood