NYTimes' Krugman Talking Down the Economy Again
Fresh from his performance on ABC’s This Week this past Sunday, the New York Times economic writer, Paul Krugman, has a new op-ed today filled with more delicious economic distortions:
But although many people say "four million jobs in the last two years" reverently, as if it were an amazing achievement, it's actually a rise of about 3 percent, not much faster than the growth of the working-age population over the same period.
Nice factoid, but not altogether relevant. After all, not everybody that is of working age is actually looking for a job, correct? Some of these folks may have retired early, or are housewives/househusbands or students. As such, the more appropriate measure of employment is how many jobs are being created compared to the growth in the labor force.
So, if we look at this number, we see that as the economy has added four million non-farm payroll jobs in the past 24 months, the labor force has only grown by three million. This is why the unemployment rate has dropped during the same period from 6.2% to 5.0%.
And recent job growth would have been considered subpar in the past: employment grew more slowly during the best two years of the Bush administration than in any two years during the Clinton administration.
Well, that’s not really a fair comparison, is it? After all, due to a variety of demographic changes occurring in our population, the labor force isn’t growing as quickly this decade as it did in the previous one. In fact, the velocity in the growth in the size of our labor force actually peaked in the 70’s, and has been declining ever since.
For example, in the period from Clinton’s first inauguration to July of the first year of his second term, the labor force in our nation grew by 6.2%. During this same period since Bush’s first inauguration, the labor force has only grown by 4.4%. Obviously, it’s easier to add to payrolls when the labor force is growing more quickly.
As such, a more appropriate way to compare the last two years’ job growth to any under Clinton would be to determine a ratio between the increase in jobs versus the increase in the size of the labor force. For example, from July 1995 through July 1997, there was a 5.658 million increase in the number of non-farm workers as the size of the labor force increased by 4.234 million. This means that workers grew at 133% of the rate of the labor force.
Well, in the last two years, the number of workers has grown at exactly 133% the rate of growth in the labor force. This means that the last two years job growth is actually precisely what our nation experienced under the same two corresponding years when Clinton was president.
But other measures of the job situation, like the average of weekly hours worked (which remains low), and the average duration of unemployment (which remains high), suggest that the demand for labor is still weak compared with the supply.
The first part of this statement is thoroughly devoid of historical reference. After all, the average workweek has been declining in our nation for 40 years.
For instance, in 1964, the average non-supervisory worker in America logged 38.7 hours per week. By the end of 1970, that had dropped to 36.8. By 1980, this was down to 35.3. By 1990, 34.2, which is also what it was when Clinton took office. However, in December 2000 when he left office, it was 34.0.
That means that this statistic declined during Clinton’s tenure. Of course, economists on the left side of the aisle weren’t complaining about it, or using it as an indication that job growth under Clinton was actually weaker than the numbers suggested.
Moreover, this number now stands at 33.7, which means that this statistic has just continued to decline under Bush as it has for four decades, and is in no way suggesting that demand in the labor force is weak today as compared to the supply.
Of course, one might ask the question: Why has the average workweek been declining for so long? Well, for two reasons. First, more and more people -- housewives/househusbands, senior citizens, students, etc. -- want part-time jobs instead of full-time ones. In addition, more and more companies want to hire part-time workers instead of full-timers so that they can avoid paying them benefits. Yet, both of these conditions have existed for decades, and are by no means a recent occurrence.
In the end, the majority of the complaints about the economy expressed in this piece are actually the source of faulty statistical calculations, or demographic shifts in our nation that have been occurring for many decades, and can in no way be blamed on the fiscal or monetary policies of our government.
*****As a post facto addendum, the Labor Department announced some results yesterday (reported by Associated Press/Business Week Online) that bring into question many of Mr. Krugman’s assertions in the above-referenced op-ed:
The number of people receiving unemployment benefits reached a four-year low last week, fresh evidence of a strengthening economy.
The number of laid-off workers receiving jobless benefits averaged 2.58 million over the four weeks ending last week, the lowest four-week average since March 2001, the Labor Department reported Thursday.
For just last week, the number of newly laid off workers applying for benefits fell by a better-than-expected 4,000 from the previous week to 315,000, the lowest level for new claims since the first week in August.
Analysts said both the drop in total benefits being paid and the decline in new benefit applications pointed to an economy that was continuing to create jobs.
"The general message from the claims numbers as well as just about every other indicator we have seen over the past couple of months is that the economy is still growing at a very nice clip," said Nariman Behravesh, chief economist at Global Insight, an economic forecasting firm in Lexington, Mass.
So far this year, a strong economy has generated an average of 191,000 new jobs per month, better than last year's average of 183,000. Employers created 207,000 jobs in July, which helped to keep the unemployment rate at a low level of 5 percent.
The overall economy, which grew at an annual rate of 3.4 percent in the spring, is powering ahead at an even faster pace above 4 percent in the current July-September quarter, many economists believe, and they expect this strength will add to job growth.
Behravesh predicted strong economic growth will keep monthly job creation between 150,000 and 200,000 and help to send the unemployment rate down to 4.7 percent over the next year.
Also of interest, Mr. Krugman’s own newspaper ran most of this AP story in today’s edition.