The employment situation release seems like old news, and Jim has already teased out some of the most important aspects in his post. However, I thought a little more context would be useful, given that some observers still think a recession can be avoided. From the White House economy fact sheet (accessed 9/7/08):

On September 5, 2008, the Bureau of Labor Statistics released new jobs figures for August. Nonfarm payroll employment decreased by 84,000 jobs in August, and the unemployment rate rose to 6.1 percent. While these numbers are disappointing, what is most important is the overall direction the economy is headed. Last week, the economy posted a strong gain of 3.3 percent at an annual rate in the second quarter, led by growth in consumer spending, exports, and a well-timed and appropriately sized stimulus package. This level of growth demonstrates the resilience of the economy in the face of high energy prices, a weak housing market, and difficulties in the financial markets. Orders for durable goods have been rising in recent months. In addition, productivity growth over the past four quarters has been strong at 3.4 percent — above the averages for each of the past three decades over the course of the Administration.

See as well [1].

Consider first a plot of the payroll employment series of various vintages.

Figure 1: Nonfarm payroll employment figures from February (blue), May (red), July (green) and August (black) releases, seasonally adjusted. Source: BLS.

What’s obvious is that each successive release has revised downward the employment figures; in other words, the last downward revisions to the previous two months’ worth of numbers was not an isolated event. (It’s no use plotting the earlier vintages — those are pre-benchmark and hence show a much higher level of employment — roughly 100,000 higher.)

Aggregate weekly hours also continued to decline. They are calculated to have declined about 0.9 percent in log terms relative to the December 2007 peak (nonfarm payroll employment has only declined about 0.4 percent).

Figure 2: Log nonfarm payroll employment figures (blue) and log aggregate weekly hours index (red), seasonally adjusted, normalized to 0 in 2007M12. Source: BLS, August employment situation release.

Finally, note that there is no solace to be had in looking at the household survey data. The civilian employment series has declined about 0.5 percent (log terms) relative to 2007.12, and is obviously declining. (The civilian employment series adjusted to conform conceptually to the payroll employment series is up 0.3 percent relative to December 12, but down 0.5% relative to its most recent peak in April 2008.)

Figure 3: Nonfarm payroll employment figures (blue, left axis), civilian employment (red, right axis), and 3 month moving average of civilian employment (maroon, right axis), seasonally adjusted, normalized to 0 in 2007M12. Source: BLS, August employment situation release.

So while GDP is up in Q2, July and August employment — in Q3 — suggests a lot slower growth.

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Last 5 posts by Menzie Chinn

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