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July's Happy Job Numbers

GR2009080701339.gifJuly saw a real slowing of job losses. In June, non-farm payrolls -- jobs, in other words -- dropped by 467,000. July saw a drop of 247,000. That's not only less than June, but less than June by more than economists had expected. It's weird to celebrate the loss of 247,000 jobs, but it's really a good sign, as you can see on the graph at right. Moreover, this is the sort of news that can help convince businesses that the economy is rebounding and thus they should begin increasing their spending, which in turn actually helps the economy rebound. It's not just good news, in other words, but news with the possibility to do good.

On a related note, I recently heard David Leonhardt make an interesting point on the likely path of the unemployment rate. The unemployment rate, remember, only captures people who are actively looking for jobs. But in a long recession, many people give up, at least for a period of time. It's not so much that they don't want to work as that they simply can't find work and so stop searching. As the jobs picture brightens, however, these people rush back into the labor market, which can temporarily increase the unemployment rate even as it's a sign of real progress.

By Ezra Klein  |  August 7, 2009; 12:09 PM ET
Categories:  Economy , Solutions  
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Dead Cat Bounce.

Probably always best to wait for the "revised" numbers.


Posted by: toshiaki | August 7, 2009 1:11 PM | Report abuse

That's the usual explanation for a falling unemployment rate despite ongoing payroll losses. But as Paul Krugman pointed out earlier, something fishy's going on. The BLS's U-4 underutilization measure actually includes discouraged workers, and this reading also fell in July, from 10.0% to 9.8%. What's even more odd to see than unemployment and payrolls moving in the same direction is labor force participation and the number of discouraged workers moving in the same direction.

It's probably just a bit of noise that doesn't substantially undermine the main fact that this is a good reading. All I can think of is that there may have been more retirees than usual in the survey, though its sample size is quite large. There will be more upticks in unemployment, but at a much slower rate than we saw from November to April.

Posted by: TheodoreLittleton | August 7, 2009 1:12 PM | Report abuse

"Happy numbers" indeed - unless you're one of the nearly 250,000 people who were dumped from productive employment in July.

Or one of the millions dumped from productive employment in the last year.

The number of jobs we need to add in order to fully recover remains staggering.

Posted by: anne3 | August 7, 2009 1:38 PM | Report abuse

That is the traditional understanding, however I'm not sure to hold that this time around. If my recollection is correct, the stimulus package included extension of unemployment benefits up to I think 79 weeks in some cases. Extended unemployment benefits generally have the perverse result of increasing the unemployment rate by both keeping what would otherwise be discouraged workers on the rolls and preventing those workers from taking jobs that pay lower than their unemployment. I'm not saying this is bad policy, however it does have the effect of probably keeping the unemployment rate higher than it otherwise would be without the extended benefits.

Posted by: sgaliger | August 7, 2009 1:56 PM | Report abuse

NB: June’s job losses were revised down to 443,000 from 467,000.

Posted by: infirm | August 7, 2009 2:07 PM | Report abuse

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