Lowering/Raising the Payrolls Bar

Thankfully, there is now less than a month to go before the November election and, while that does mean that we’ll be hearing a lot more about Friday’s labor report in the weeks ahead, it also means that, eventually, it will all be over. Given that there are only a few days between the October jobs report to be released on Friday November 2nd and when voters cast their ballots on the following Tuesday, that labor report is not likely to garner near the attention that the one on Friday did.

Then  again, if the jobless rate drops from 7.8 percent to 7.5 percent a month from now, all bets are off.

In perusing the news this morning, Paul Krugman’s take on the labor report in the New York Times caught my eye as it noted that, not only was the 7.8 percent jobless rate a great improvement, but that the establishment survey’s recent rise in nonfarm payrolls was too, since, job growth in excess of 90,000 per month is all that is needed to keep pace with the population growth:

On the employer side, the current numbers say that over the past year the economy added 150,000 jobs a month, and revisions will probably push that number up significantly. That’s well above the 90,000 or so added jobs per month that we need to keep up with population. (This number used to be higher, but underlying work force growth has dropped off sharply now that many baby boomers are reaching retirement age.)

Now, I’ve always thought that the number was somewhere between 125,000 and 150,000, in which case, the average monthly increase in nonfarm payrolls of 86,000, 153,000, and 146,000 over the last  three years was about what was needed to keep pace with the population, but not much more.

So, where does the 90,000 figure come from?

Well, one possibility is We Need 90,000 Jobs Per Month to Keep Pace With the Growth of the Population by Dean Baker at CEPR and what’s both interesting and highly misleading about this is that it refers to growth in the “labor force” which, of course, doesn’t include people who, though they still want to work, have given up looking - the millions of “discouraged” or otherwise “marginally attached” workers.

This item at the Economic Populist last month cites an Atlanta Fed survey indicating the number is just over 104,000, however, that’s to maintain the 8.1 percent jobless rate at the time and even fellow Democrat Robert Reich puts the number at “at least 125,000″ in this commentary last Friday on the jobs debate.

To be sure, Republicans have their own set of numbers too when it comes to what level of job creation is needed to keep pace with population growth and, it should come as no surprise that, over the last four years, they’ve opted for the 150,00 to 200,00 range, numbers that are closer to the growth in the civilian population rather than that portion of the civilian population that is or would like to be working.

According to this Wikipedia page, the U.S. population grew at a pace of 228,000 per month between 2000 and 2010 and, after excluding the 23.7 percent of the population under age 18 and the 13.3 percent of the population over 65 per this Census Bureau summary page, you get a monthly increase of 143,000 for the “working age” population which happens to be in the middle of the 125,000 to 150,000 range noted above.

Draw your own conclusions about whether 90,000 is too low or if 200,000 is too high…

5 Responses to Lowering/Raising the Payrolls Bar

  1. Dave Cohen October 8, 2012 at 12:24 PM #

    Thanks for this post, Tim.

    You did your homework. I will be citing this post sometime in the near future.

    Paul Krugman? (sigh)

    - Dave

  2. Ted S. October 8, 2012 at 12:35 PM #

    I looked at the CBO report referenced in the Baker link. If you use the CBO projections on page 3 you get break even numbers of 117K for 2012 and 133K for 2013 and, as you note in this post, that only includes expected increases in the labor force.

    Add in the “not in the labor force but wanting to work” factors you cite above and it’s clearly 125K to 150K……

  3. AD October 8, 2012 at 12:57 PM #

    Does the 90,000 a month figure mean that the federal government concedes there are 2 categories of working-age adults?

    One is the labor force and the other is a permanent outcast/welfare group (i.e., the 47%-ers, etc.).

    • Tim October 8, 2012 at 1:32 PM #

      FWIW - Those not in the labor force but wanting a job number about 7 million.

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