Someone with the byline Invictus has done some interesting work on the labor market. In a piece appearing on the website businessinsider.com, the writer says that “from the trough, the labor market is generating jobs at a faster pace than the previous two recessions.” The numbers are correct by my accounting. However, there’s a lot more to the story. First, Invictus has chosen July 2009 as the trough month of the recession. There is much debate over which month the National Bureau of Economic Research committee will choose as the final month of the recession, and the results change depending on the trough month.
Many economists believe the recession ended in June 2009, based on the some of the monthly indicators the NBER committee follows in deciding such matters. For example, both industrial production and real business sales hit bottom in June. Others indicators, including real personal income less government transfers and nonfarm payrolls, bottomed out in October and December, respectively. If Invictus had chosen June as the recession’s nadir, the results would have been less impressive. I have replicated his analysis in the chart below, except I used June as the trough month.
In Invictus’ analysis, which implies a 13 month recovery to date, August private payrolls are 0.1 percent (92,000) above his July 2009 trough. At the same point after the 1990-91 and 2001 recessions they were 0.4 percent and 0.9 percent below those respective troughs.
As my chart shows, using June 2009 as the trough month and a 14-month recovery so far, August payrolls remain 0.2 percent below June 2009, which is essentially where they were 14 months into the recovery after the 90-91 recession, but not as bad as after the 2001 recession, when they were still down 0.9 percent.
The point here is that you get different results depending on when the recession actually ended, which we still don't know yet. As you move the trough date further toward the end of 2009, the performance of private payrolls increasingly improves relative to the 1990-91 and 2001 recessions, because payroll losses lessened as the year wore on.
Perhaps the more important point is that these are really small numbers that are not worth getting excited about, even if they do edge out the two previous recoveries. A 0.1 percent increase in payrolls, or 92,000 jobs, since July 2009, is about 7,000 jobs per month, which is statistically insignificant from zero. Since payrolls hit bottom in December, they have increased 95,000 per month, yet economists have shown that employment has to rise about 125,000 per month just to prevent the unemployment rate from rising further.
Consider that 13 months after the severe recessions in 1973-75 and 1981-82, payrolls were up 3.9 percent (2.4 million) and 4.7 percent (3.4 million), respectively. Those are the mountains; Invictus is showing us the molehill. Things aren’t always what they seem.
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