Important: We Need 90-100K Jobs/Month to Keep Pace With Population (Not 125-150K)
Last edited Sun Oct 7, 2012, 09:56 PM - Edit history (3)
This may be this most important, informative story you will read all week. I know it is for me.
For a very long time the rule of thumb on jobs reports has been that the replacement rate—the number of new jobs we need each month just to stay in the same place—is 125,000-150,000.
But the CBO says that is obsolete. Due to the aging of the baby boomers the replacement number these days is about 90,000. If the CBO is right, that explains why the unemployment rate has been in a persistent down-trend despite a lot of jobs reports showing 110,000-130,000 new jobs created.
I am big on changing what I think in light of new evidence. I have always used the 125K-150K rule of thumb, and have thus viewed a lot of employment reports over the last few years as net losses that may well have been modest gains.
When I first learned about the economy the US labor force grew at 2.1% a year. (19602, 1970s, 1980s). In the 1990s it grew at only 1.2%. And the CBO says that the labor force has increased by about 0.8 percent per year, on average, over the past decade.
Over the past year, including upward revisions, we’ve added about 1.8 million jobs. At a replacement level of 150K that's dead flat... treading water. If, however, the replacement rate is 90,000 that works out to 800,000 new jobs (67,000/month) above the replacement level.
Since public sentiment has improved a lot in the year, and since the unemployment rate has gone down over that year, the current CBO figure seems to have more explanatory power than the ancient rule-of-thumb.
Put another way, if a commentator has been assuming a 150K replacement level and was told every month the jobs report came in 67K over replacement he would be assuming a jobs report showing 217,000 new jobs, and he would say it was a strong report.
Saturday, 09 July 2011 05:54
In an article on the June employment report the NYT told readers that the economy needs 150,000 jobs per month to keep pace with the growth in the population. Actually, the Congressional Budget Office projects that the underlying rate of labor force growth is now just 0.7 percent annually. This comes to roughly 1,050,000 a year or just under 90,000 a month.
This is fortunate since the economy has created less than 1.8 million jobs in the 16 months since it first began adding jobs again in February of 2010. If we needed to create 150,000 jobs a month then we would have needed 2.4 million jobs to keep even with the growth of the labor force, so we would be considerable further behind where we were in February 2010. As it stands, we are roughly treading water with job growth that has been pretty much even with the growth of the population over this period.
http://www.cepr.net/index.php/blogs/beat-the-press/we-need-90000-jobs-per-month-to-keep-pace-with-the-growth-of-the-population
http://www.cbo.gov/publication/22011
http://krugman.blogs.nytimes.com/2012/10/07/the-payroll-data/
= new reply since forum marked as read
loss of home equity etc., i believe.
We will leave the exploring up to you, but it is remarkable to note that the 65 and over was the only segment to experience a rising Labor Force Participation Rate. Seniors are rejoining (or never leaving) the working ranks. This might be due to the economic hardship, the desire to continue working, pension shortfalls, etc. We will be addressing the pension issue very soon. There are many more observations, but we’ll leave it at that.
http://econnewsletter.com/123901.html
