09/01/2017

First Jobs Report of the Semester

This morning the BLS released its monthly Employment Situation Summary, the first jobs report of this academic year.  These reports are released on the first Friday of each month and they report U.S. labor market data for the previous month.  During this year, we will follow monitor at least three data series from these reports.  The first is the national unemployment rate, shown in the graph below.  The graph goes back to 2006 which is prior to the Great Recession.  Unemployment peaked in October 2009 at 10% but is now down to just 4.4 percent.

Unemployment9-17

We will also watch to see how many new net jobs are created each month.  For this, we watch the series called Total Nonfarm Employment.  In August of this year, Nonfarm employment grew by 156,000 jobs.  That is a lot of jobs, but not necessarily in comparison to more than 153 million total nonfarm jobs in the U.S. economy.  In fact, this increase is below the average over the past five years (see graph below) of more than 200,000 per month. 

Employ0817

Finally, we will often report the labor force participation rate (LFPR).  This is the portion of the working age (non-institutionalized civilian) population that is either working or actively looking for work.  It has become important recently, as more workers are retiring and opting to stay out of the labor force for other reasons.  The graph below shows LFPR data since 2006.

 LFPR9-17

You can see that the LFPR has been hovering below 63% for almost four years.  This is very low by historical standards and you can see that it was 66.4% back in January of 2007.  This difference represents millions of workers that are now out of the labor force. 

04/28/2017

The U.S. Economy is Muddling Along

This morning, the BEA released its advance estimate of GDP data for the first quarter of 2017.  Real GDP growth is estimated at just 0.7 percent.   Remember that this first estimate is rough and has lately been subject to upward revisions.  Still, this estimate implies that the U.S. economy is really just sputtering along. 

GPD2017.I

None of the four main components of GDP increased much.  The table below shows how each contributed to the overall growth rate. 

GDPTable2017.I

The meager increase in consumption spending is particularly worrisome in historical context: this is the smallest increase since the fourth quarter of 2009.  This is a bit surprising due to the recently high estimates of consumer confidence.   And remember that consumption makes up about 70% of total GDP spending. 

 

 

04/07/2017

Unemployment Rate Drops to Lowest Level since 2007

The March jobs report was released by the BLS this morning.  The real news is that the economic recovery continues.  In terms of data, the unemployment rate dropped to 4.5 percent, the lowest level since May 2007 (nearly ten years!).  That is the good news.

Unemp0317

But while the unemployment rate dropped, the number of jobs added was less than recent trends.  In March, 98,000 new jobs were added, but this is significantly below the average of 202,000 for the past five years.

Employ0317

Two words of caution are in order.  First, we don't want to draw significant conclusions from a single jobs report.  On a month-to-month basis, there is a lot of noise in the data.  It is best to consider long-run trends.  In this case, the long-run trend on employment is certainly positive. 

Second, it is still to early to credit or blame our new government leaders for any economic economic conditions that may show up in the data.

 

 

02/03/2017

January Jobs Report Brings Good News and a Data Lesson

Earlier today, the BLS released the jobs report for January 2017 and the news is not bad.  While the unemployment rate ticked up slightly to (a still low) 4.8 percent, other indicators came in very strong.  Nonfarm employment increased by 227,000 jobs in the month.

Unemp0117

Labor force participation edged up to 62.9 percent and this offers us another teachable moment.  Students may be confused as to how 227,000 new jobs were created and yet the unemployment rate increased.  One reason is that the labor force increased by 76,000 workers.  Therefore, many new workers entered the labor force and many of these found jobs - all of this is positive.  But the unemployment rate still climbed because some of these new labor force participants did not find work (yet). These workers are probably frictionally unemployed: they may find work eventually but it takes some time to match workers with available jobs.  

Lfpr0117

01/27/2017

2016 GDP Report: Weak and also Misleading

The advance GDP estimate for 2016 is sobering but also an opportunity to learn a little about the details of how we measure GDP. Let's look at the headline data first and then circle back for a quick lesson in GDP accounting. 

Overall, GDP in the fourth quarter grew at just 1.9 percent, according to this first estimate.  This estimate will be revised over the next three months, but it is not encouraging.  The figure below shows real GDP growth by quarter back to 2006.  The last quarter of 2016 caps off an anemic year of 1.8% growth overall.  2016 pales in historical context, since average real GDP growth over the past 50 years was about 3 percent. 

GPD2016.IV

Now, let's dig a little deeper into the fourth quarter figures to see the contribution to growth from the four major categories of GDP expenditures: consumption, investment, government and net exports.  The table below shows how each of these components contributed to the overall growth rate of 1.9 percent.

GDPTable2016.IV

Growth in private spending on consumption and investment goods and services was strong.  But net exports (exports minus imports) pulls down the final number by 1.7 percent.  This is largely due to an increase in imports of $65.7 billion during the fourth quarter.  Now we get to the (boring) details of national income accounting.  Imports don't make us worse off - more imports mean we get more stuff from around the world.  But when we tally up gross domestic product (GDP), we subtract imports because they weren't produced here. 

Bottom line: the fourth quarter wasn't great, but the large increase in imports skews measured GDP downward some. 

 

12/02/2016

Unemployment Drops to 4.6%

The U.S. unemployment rate dropped in November to 4.6%, the lowest level since August 2007. 

Unemp1216

This is certainly good news, but perhaps not as positive as it first appears.  Part of the reason why the unemployment rate dropped last month is due to 178,000 new jobs added in the economy - not a trivial number.  In fact, as Justin Wolfers notes, this is 178 times the number of Carrier jobs that were recently "rescued." 

But a second reason the unemployment rate dropped is due to a decline in labor force participation.  In November, the U.S. labor force dropped by 226,000 workers, bringing the labor force participation rate (LFPR) down to 62.7 percent.  This is the third straight drop in the LFPR after showing signs of improvement this year with a 63% in March.

Lfpr1216

 

 

11/18/2016

Gas Prices Push Up CPI Slightly

Rising gas prices pushed up the Consumer Price Index (CPI) in October.  However, year-over year, gas prices were essentially constant.  In addition, overall inflation over the past year was still just 1.6%.

  Inflation1016
The table below shows changes in selected goods and services over the past year.  Notice that egg prices continue to drop drastically, but they make up a very small portion (0.1 %) of a typical consumer's budget.  Shelter (housing) prices rose 3.5% in the past year and these account for about a third (33.4%) of a typical consumers spending.   This continues the trend that began in 2010, following the decline in housing prices in the wake of the Great Recession.

CPI Table 1016

 

 

11/04/2016

Last Jobs Report Before the Election

The jobs report was released this morning and it is not bad news for Hillary Clinton.  The unemployment rate ticked down to 4.9% in October.  Historically, low unemployment rates have helped political parties retain power.

Unemp1016

This report could be stronger but it adds to the record string of consecutive months of positive job gains, bringing this record streak to 73 months now.  In October, nonfarm employment grew by 161,000 jobs. While many are touting this record string of job gains, we should point out that these have not been the strongest job gains we've seen historically.  For example, in the eight years from 1993 to 2000, the U.S. economy added an average of 242,000 jobs per month, versus the average over the past six years of 200,000.  That is a big difference over the course of several years.

Employ1016

 

10/28/2016

Goods Exports Push Real GDP Higher in Third Quarter

Real GDP growth is finally ticking up toward the long run average again.  The BEA released it's first (Advance) GDP estimate for the third quarter.  The estimate of real GDP growth came in at 2.9%, which is the highest level in two full years but still below a long run (50-year) average of 3 percent. 


GDPTable2016.IIIA

Much of this increase was driven by exports and especially exports of goods.  While total exports make up just 12% of total GDP, exports increased by $66.4 billion in the third quarter.  This increase contributed more than one third of the total real GDP growth in the third quarter.  The contribution of the four major pieces of GDP to third quarter growth is broken down in the table below.

GDPTable2016.IIIA
Total net exports contributed 0.83 % but exports of goods alone contributed 1.08 percent.

 

 

 

10/11/2016

September Unemployment Rate at 5 Percent

Last Friday, the BLS released their latest jobs report which includes estimates of the unemployment rate and labor force participation rate (LFPR) for September.  The unemployment rate ticked up slightly to 5.0 percent which is essentially where it has been for the past year.  Nonfarm payroll employment, the most closely watched aggregate jobs figure, rose by 156,000 in September. 

Unemp916
The potential good news from the past few reports is that the LFPR may have finally bottomed out.  In September, the LFPR ticked up to 62.9%, which is up from just 62.4% one year ago.

Lfpr0916

 

 

 

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