Tuesday, February 17, 2009

Job Growth Under Bush and Prior Presidents

On February 6th, the Bureau of Labor Statistics (BLS) released its Employment Situation report for January of 2008. Following is the opening paragraph:


Nonfarm payroll employment fell sharply in January (-598,000) and the unemployment rate rose from 7.2 to 7.6 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Payroll employment has declined by 3.6 million since the start of the recession in December 2007; about one-half of this decline occurred in the past 3 months. In January, job losses were large and widespread across nearly all major industry sectors.


The following graph shows the labor force, household survey employment, nonfarm employment, and unemployment rate since 1998:




The actual numbers and sources for this and the following graph can be found at this link. As can be seen, employment has decreased and the unemployment rate has increased sharply since December 2007, especially in the past few months. Also noticeable is the fact that the labor force has dropped off for the past three months. However, much of the drop in the last month was due to adjustments to population estimates for the Household Survey. The BLS Employment Situation report states:


The adjustment decreased the estimated size of the civilian noninstitutional population in December by 483,000, the civilian labor force by 449,000, and employment by 407,000; the new population estimates had a negligible impact on unemployment rates and other percentage estimates.


In any event, the following graph shows the items shown in the prior graph, plus population and private employment, since 1950:




As can be seen, the current unemployment rate of 7.6 percent is the worst since the 1980-82 recession but is still well below the level of 10.4 percent reached in January of 1983. However, it also shows that the growth in employment, especially private employment, has been especially poor over the past eight years. In fact, private employment has increased just 407 thousand over that period. That works out to an average of just 4.24 thousand jobs per month. More on this can be found in an article that I've just updated titled Job Growth Under Bush and Prior Presidents.

Monday, February 2, 2009

Real GDP Growth

Note: There is a updated version of this post at this link.

On January 30th, the Bureau of Economic Analysis issued its initial estimates of the real gross domestic product in the fourth quarter of 2008. Following is the beginning of the accompanying news release:


Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 3.8 percent in the fourth quarter of 2008, (that is, from the third quarter to the fourth quarter), according to advance estimates released by the Bureau of Economic Analysis. In the third quarter, real GDP decreased 0.5 percent.


The Bureau emphasized that the fourth-quarter “advance” estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4). The fourth- quarter “preliminary” estimates, based on more comprehensive data, will be released on February 27, 2009.


The release goes on to describe the components that contributed to the decrease:


The decrease in real GDP in the fourth quarter primarily reflected negative contributions from exports, personal consumption expenditures, equipment and software, and residential fixed investment that were partly offset by positive contributions from private inventory investment and federal government spending. Imports, which are a subtraction in the calculation of GDP, decreased.


Most of the major components contributed to the much larger decrease in real GDP in the fourth quarter than in the third. The largest contributors were a downturn in exports and a much larger decrease in equipment and software. The most notable offset was a much larger decrease in imports.


The BEA also released an updated spreadsheet containing the annual GDP figures since 1929 and quarterly GDP figures since 1947. The following graph shows the change in the annual real GDP figures since 1940:




The actual numbers and sources for this and the following graph can be found at this link. The blue line shows the yearly change in the annual real GDP and the yellow and red lines show the 5-year and 10-year annualized changes, respectively. The following graph shows the change in the quarterly real GDP figures since 1960:




As before, the blue, yellow, and red lines show the 1-year, 5-year, and 10-year annualized changes in the quarterly real GDP. As can be seen, the 1-year change is the most volatile, the 5-year annualized change is less so, and the 10-year annualized change is even less so. In fact, the graph shows that the 10-year annualized change has been relatively stable since 1974, remaining between 2 and 4 percent for that entire period. Much of that apparent stability is due to the fact that 10 years just happen to be close to the length of several of the past business cycles. Recall that the prior three recessions were in 2001, 1990-91, and 1980-82. In fact, it is instructive to look at GDP growth over entire business cycles. The following table shows real GDP growth over all business cycles (taken from trough to trough) since 1949 as determined by the National Bureau of Economic Research:


REAL GDP GROWTH BY BUSINESS CYCLE

GDP GDP Last Quarter Entire Cycle
(billion (billion ---------------- --------------------------
current chained Percent Annual- # of Percent Annual- Prior
Year Qtr dollars) 2000 $) Change ized Quarters Change ized Trough Trough
---- --- -------- -------- ------- ------- ------- ------- ------- ------ -------
1949 4 265.2 1629.9 -1.0 -4.0
1954 2 376.0 2044.3 0.1 0.4 18 25.4 5.16 1949q4 1954q2
1958 2 458.1 2243.4 0.6 2.4 16 9.7 2.35 1954q2 1958q2
1961 1 527.9 2491.2 0.6 2.4 11 11.0 3.88 1958q2 1961q1
1970 4 1052.9 3759.8 -1.1 -4.2 39 50.9 4.31 1961q1 1970q4
1975 1 1570.0 4237.6 -1.2 -4.7 17 12.7 2.85 1970q4 1975q1
1980 3 2786.6 5107.4 -0.2 -0.7 22 20.5 3.45 1975q1 1980q3
1982 4 3314.4 5189.8 0.1 0.4 9 1.6 0.71 1980q3 1982q4
1991 1 5888.0 7040.8 -0.5 -2.0 33 35.7 3.77 1982q4 1991q1
2001 4 10226.3 9910.0 0.4 1.6 43 40.8 3.23 1991q1 2001q4
2008 4 14264.6 11599.4 -1.0 -3.8 28 17.0 2.27 2001q4 2008q4*

* 2008, quarter 4 has not been identified as a trough. It is just the most recent quarter.

Some of the business cycles are arguably too short to provide meaningful data. The following table combines the shorter business cycles to remedy this:

REAL GDP GROWTH BY BUSINESS CYCLE (shorter cycles combined)

GDP GDP Last Quarter Entire Cycle
(billion (billion ---------------- --------------------------
current chained Percent Annual- # of Percent Annual- Prior
Year Qtr dollars) 2000 $) Change ized Quarters Change ized Trough Trough
---- --- -------- -------- ------- ------- ------- ------- ------- ------ -------
1949 4 265.2 1629.9 -1.0 -4.0
1961 1 527.9 2491.2 0.6 2.4 45 52.8 3.84 1949q4 1961q1
1970 4 1052.9 3759.8 -1.1 -4.2 39 50.9 4.31 1961q1 1970q4
1980 3 2786.6 5107.4 -0.2 -0.7 39 35.8 3.19 1970q4 1980q3
1991 1 5888.0 7040.8 -0.5 -2.0 42 37.9 3.10 1980q3 1991q1
2001 4 10226.3 9910.0 0.4 1.6 43 40.8 3.23 1991q1 2001q4
2008 4 14264.6 11599.4 -1.0 -3.8 28 17.0 2.27 2001q4 2008q4

As can be seen, the table now contains 5 groups from 1949 to 2001, each containing one or more full business cycles and being about 10 or 11 years in length. The last span from 2001 to 2008 is technically not a full cycle since an ending trough has not yet been determined by NBER. Still, the annualized growth in real GDP for these groups agree pretty much with the 10-year change seen in the graphs above. Real GDP growth from 1949 to 1970 was around 4 percent and was generally slightly above 3 percent from 1970 to 2001.


Since 2001, however, real GDP growth has been almost a full percentage point less than it was from 1970 to 2001. As mentioned, this period does not yet represent a full business cycle. However, the annualized rate of growth is unlikely to get any better between now an what turns out to be the final trough. Of course, there are all sorts of possible reasons for this slower GDP growth. Still, the data appears to provide no evidence that the Bush tax cuts served to increase real GDP growth.

Note: There is a updated version of this post at this link.

About Me

I became interested in U.S. budget and economic matters back in 1992, the first time that I remember the debt becoming a major issue in a presidential election. Along with this blog, I have a website on the subject at http://www.econdataus.com/budget.html. I have blogged further about my motivations for creating this blog and website at this link. Recently, I've been working on replicating studies such as the analysis at this link.

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