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Chart of the day: Employment in the US

The jobs report came out today and it was spectacular: We gained 517,000 jobs in January, which comes to 427,000 jobs after accounting for population growth. The unemployment rate went down to 3.4%, the lowest it's been in my lifetime. Here's the basic chart:

Here's a different one:

I've noted before that the employment level—a slightly different measure of employment—showed virtually no growth in 2022. This made me wonder how many jobs we've really added.

Well, in December the employment level increased by 700,000 jobs and in January it increased by another 900,000 jobs. It's still well below the headline number, but it sure made up a lot of ground.

If you believe the headline number, we've added 4 million jobs in the past 12 months. If you believe the employment level, we've added 2.5 million. That's a big difference to reconcile.

However, both surveys showed a big jump in January and the unemployment rate kept falling even though it was already at historic lows. This is great for workers, but unfortunately it will probably convince the Fed that the labor market remains hot and the economy requires further tightening.

This jobs number will also drive economists nuts. In theory, if the labor market is getting ever tighter, inflation should be going up. But instead it's going down. What happened to the Phillips curve?!?

One possible answer is: Just wait, pretty soon inflation is going to surge.

A second possible answer is: Over the past three years the economy has been entirely artificial, driven mostly by the effects of the pandemic and government responses to it. The Phillips curve just doesn't work in circumstances like this.

I'm on Team Artificial, and we'll find out if that's right sometime later this year.

12 thoughts on “Chart of the day: Employment in the US

  1. tzimiskes

    Employment to population remains low. Seems like there are a lot of people who might decide to rejoin the labor market if jobs become more desirable. I would think this would do a lot to dampen inflation, though employers might be under more pressure to improve working conditions.

    1. KenSchulz

      "Seems like there are a lot of people who might decide to rejoin the labor market if jobs become more desirable."
      On some alternate Earth, economics is an empirical social science, and economists do things like interviewing actual non-working people about their intentions concerning employment, and their reasons*. Here, we'll just get highly aggregates measures and lots of speculation based on theories we actually know are wrong.
      *Yes, I know people are not always fully forthcoming in interviews. We social scientists have ways of dealing with that problem.

  2. marcel proust

    RE: "The unemployment rate went down to 3.4%, the lowest it's been in my lifetime."

    I am guessing that the unemployment rate is seasonally adjusted; otherwise it would not make much sense to compare the rate for different months in the same year.

    However the seasonal adjustment formula gets -- um -- adjusted from time to time, as seasonal behavior changes. Not sure it makes sense to compare seasonally adjusted rates across such long periods of time as Kevin's life. In addition, even without worrying about revisions to the seasonal adjustment algorithm, this estimate will be revised several times before being considered final.

    So is it the lowest rate in his lifetime? As Chou En Lai responded when asked about the consequences of the French Revolution -- er -- Days of 68: "Too early to say."

  3. jdubs

    It's an amazing situation we find ourselves in. This historically great economic news will undoubtedly be portrayed as a negative for the economy, a negative for the President and a negative for America. These negatives will 'force' the Fed to save the economy and the country from the increasingly dire situation.

    Month after month after month of impressive wage, productivity and job growth.....it's obviously all bad news that needs to be acted on and corrected. For reasons. It's obvious.

    1. kenalovell

      Labor shortages ... supply chain problems ... Jimmy Carter's second term stumbles from one crisis to another. Luckily the media is there to explain it all to the public.

  4. different_name

    Wage suppression via desperate workers doesn't seem to be going well at all.

    Powell just doesn't have that Greenspan magic mumble.

  5. skeptonomist

    The Phillips curve blew up in the 70's. That economists still consider unemployment the key, whether in the form of the Phillips curve or the NAIRU (which was disproven by the very low unemployment in the 90's and 10's) is an indication of how their beliefs are not determined by evidence.

    Or maybe this is an indication of anti-labor bias - which is present among many American economists who call themselves liberal.

  6. Joseph Harbin

    "We gained 517,000 jobs in January, which comes to 427,000 jobs after accounting for population growth."

    I'll have to check the math, but I'm pretty sure 517,000 net new jobs is more than the 85,000 jobs lost due to tech layoffs this year -- the subject of endless headlines and news stories.

    It's a bloodbath out there.

  7. NeilWilson

    I heard on Bloomberg this morning that we really only need about 30,000 new jobs to keep up with population growth.
    Maybe you should check your 90,000 number?

  8. kenalovell

    Predictably, right-wingers have dismissed the news as a pack of lies, made up by Biden the same way Obama used to fabricate his numbers.

  9. D_Ohrk_E1

    Do you still feel confident that the US will sink into a 12-month long recession sometime this year?

    For perspective, NBER has noted just 3 (peak to trough) out of 12 post-WWII contraction periods lasting longer than 11 months.

    What critical black swan tail risk are we overlooking, that would trigger a prolonged recession?

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