The jobs report was released this morning. The headline is good: 146,000 jobs were created and unemployment dropped to 7.7%. But you really can’t trust the headline. I start most mornings by reading Paul Krugman, but this morning, I went directly to Dean Baker. In a sense, Baker is the most important economic writer we have. He is a total buzz kill. So on the one hand, if there’s bad news hidden in the jobs report, he will know it. On the other hand, if he’s optimistic, it’s time to sell those government bonds and buy some real estate! (Or something. Don’t take investment advice from me or you’ll end with my portfolio: .)
Unfortunately, there is no word yet from Baker. So I went elsewhere. I knew WonkBlog would not let me down, and indeed, Dylan Matthews provides the usual competent overview of the numbers (Brad Plumer also has a good overview):
- 146,000 jobs created in November;
- Unemployment dropped to 7.7%;
- September-October jobs created revised down by 49,000 total;
- Labor force participation is generally stable at 63.6%;
- Job creation is all in the private sector, public sector losses.
This last bit of data is important. Check out this graph below from the BLS report. The red bars show net private sector jobs added or lost during a month. The blue bars show the same thing for public sector (i.e. government) jobs.
Notice that other than during the census in 2010, the government has been shedding jobs. And yet, to listen to Republican politicians or Fox News reporters, you would get the impression that the government has been on a hiring spree. This is why it is important to look at the data. But it raises an important question: how can the country have an honest debate about policy if one of the major parties is consistently dishonest?
To this data, Brad DeLong provides more details from the report. He notes that there are three ways to look at full employment. Compared to the employment peak of 1999, we are 6 percentage points below full employment. (Those were great days!) Compared to the computed economic potential in the mid-2000, we are 3.5 percentage points below full employment. Or now, due to the movement of the Beveridge curve, we are 2.5 percentage points below full employment. As DeLong notes, it doesn’t matter how you look at, we are well below where we should be.
But let us not be too gloomy. At least Obama was re-elected. With the unemployment rate improvement and the previous job numbers revised down, you can imagine what Republicans would be saying now if Romney had won, “Employers are feeling more comfortable about the future now that they know Romney will be president; that’s why they’re hiring!” This may seem like a silly thing to suggest, but in Romney’s 47% talk, he said exactly this. He claimed that the markets would rally based on nothing but the idea of his awesomeness:
So let’s be grateful that at least we won’t have to hear this kind of rubbish for the next 4 years.
 Leave it to Brad DeLong to offer up a concept like the Beveridge curve without providing even the smallest amount of condescension for the non-economists who read him. (This is a big part of why I no longer read him every day.) The Beveridge curve is a graph that plots unemployment versus the job vacancy rate. For example, right now there is high unemployment and a small vacancy rate. What is important is that the unemployment predicted by a given vacancy rate can be changed by a number of factors: long-term unemployment, labor force participation, skills mismatch (generally a conservative canard, but not always).