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The Not-Bad, Not-Good Employment News Continues!

GR2009060501264.gifWe're still in the period of the recession where good trend news is still bad actual news. Economists, for instance, are glad to hear that the economy only lost 345,000 jobs in May. That's quite a bit less than the 600,000 we'd been losing month-after-month earlier this year. But 345,000 lost jobs is still a really bad number. It's like celebrating a hangover because it at least means you're no longer drunk.

Meanwhile, Felix Salmon makes a troubling observation:

Remember the stress tests? The baseline scenario had unemployment in 2009 at 8.4%, rising to 8.9% under the more adverse scenario. Well, we’re only up to May, and already it’s at 9.4%.

Well that's not very good news. On the other hand, you could make an argument that this is all going according to the Treasury Department's plan: The stress tests were insufficient in order to make the banks look stronger. That worked. The banks raised oodles of private capital that they wouldn't otherwise have been able to access. Now they're better positioned to weather the next year or two.

Or, you know, maybe not.

(Graph credit: Washington Post)

By Ezra Klein  |  June 5, 2009; 1:00 PM ET
Categories:  Economy  
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Comments

The good new is that most economist were wrong in trying to predict the number of jobs lost on May. The bad news is that Rush Limbaugh is pontificating over the airwaves that the 9.4% unemployment rate is a result of the failure of the Obama stimulus bill. Am I the only one that remembers when this bill was first being debated and voted upon, that it was Mr. Limbaugh himself that told his audience that the money in the stimulus bill was not going to effect the economy until sometime in 2010 and 2011. I just don't understand why people in the media are afraid of calling out Mr. Limbaugh on his obvious double standard and forgetful memory.

Posted by: johnstrack1 | June 5, 2009 2:01 PM | Report abuse

Don't be taken by the unemployment numbers: it contains 220,000 jobs added by the new-business birth-death adjustment (which isn't measured, but only modeled). Does anyone believe that 220K new jobs were created in the last month? Maybe 22,000, or even 22, or most probably they missed the negative sign on data entry and 220K jobs were 'lost' do to businesses folding, making the real total -655,000.

How can unemployment grow to 9.4% from 8.9% at the same time that the number of jobs lost decreases by several hundred thousand? It can't, you say, and you'd be correct.

Posted by: JimPortlandOR | June 5, 2009 2:37 PM | Report abuse

Hey, just wanted to answer Jim's question. The number of jobs lost in May was 345,000 --- that's the number of people who had a job on 30 April but didn't have one on 31 May. This gets added to the number of people who already didn't have a job on 30 April, meaning the total number of people out of work on 31 May is higher than it was on 30 April --- unemployment rose. That's the increase Jim describes, going from 8.9% to 9.4%.

The fact that the number of people who actively lost their jobs from 1-31 May was less than the number of people who actively lost their jobs from 1-30 April, which the diagram very nicely shows, is the oddly optimistic part. We can look at that chart and visually perceive two things: one, dangit, all the bars are still below zero --- people are still actively losing jobs. But, hey, we can see out to the right how, soon, those bars will start going positive again. This leads to Ezra's pithy and true statement that "good trend news is still bad actual news".

This only goes to answer the question at the end of the previous post --- the point about the figures being adjusted by birth/death modeling is an interesting one.

Posted by: cosmos_dc | June 5, 2009 3:23 PM | Report abuse

Salmon isn't quite fair. The 8.4% unemployment rate in the adverse scenario is the average across the entire year. So it's not comparable to say "we're already at 9.4%" since the average includes prior results.

Calculated Risk's post at 9:30 this morning paints a more accurate picture. The "more adverse" scenario assumed an average of 8.8% unemployment for all of Q2; the actual Q2 average over the first two months is 9.15%. The more adverse scenario assumes average unemployment of 9.3% in Q3 and 9.7% in Q4. Also note that the unemployment rate jumped much more than the job loss rate would suggest as more people were looking for jobs in the past month (that actually might be good news).

So while the more adverse scenario is a bit optimistic, it's not *that* optimistic. If the job loss rate continues to moderate, the gap between its projection and the actual unemployment rate may not be that large.

Posted by: robbins2 | June 5, 2009 3:42 PM | Report abuse

"It's like celebrating a hangover because it at least means you're no longer drunk."

No, we're still getting more drunk. It's like celebrating slowing down drinking, switching from liquor to beer.

Until the dollar collapses, making American wages globally competitive, we are going to have trouble getting a industrial recovery going.

Posted by: staticvars | June 5, 2009 5:04 PM | Report abuse

Almost 10 percent unemployment nationally, but strangely, the Post continues its relentless argument for open borders, amnesty for illegal immigrants and increased legal immigration.

Posted by: MaryJessel | June 5, 2009 5:13 PM | Report abuse

Its a good question, how many Americans would actually have jobs and be employed if those jobs weren't taken by illegal aliens?

It was so nice to say that illegals just take jobs Americans won't do...but will Americans really not hang drywall, poor driveways, build retaining walls, lay sod, etc. to feed their children?

Having said that I am soo happy Obama pointed out in Egypt how great Islam has been - thus ending all hostilities with the Islamics.

It will be great to hear his speech today on how WWII could have been prevented by being nicer to Hitler and the Nazis, and how the Revolution War wouldn't have had to happen if General Washington had just complemented English cooking, and how Lincoln could have avoided the Civil War by pointing out favorable things about Southern slave culture.

Posted by: Singer4321 | June 6, 2009 7:30 AM | Report abuse

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