The Skeptical Optimist

Where the jobs went: Dec 2007 snapshot

The private sector's job-creation rate is trending downward, and the unemployment rate ticked upward.  That's the "bad" news.  The good news: the private sector nonetheless created 1.5 million new jobs in the last 12 months, which more than offset the half million jobs that went away, for a net increase of one million new jobs.  More good news: one million (of the 1.5 million) new jobs pay more than the half million jobs that went away. 

I'm guessing that should please Lou Dobbs (...if only he would drop by this blog and take a look at the chart).  Apparently he doesn't, though; he always has either a frown or a sneer on his face whenever I check, which is at least twice a month. 

Here's the job quality chart.  Click to enlarge.

And here's the breakdown by job category.  Click to enlarge.

This month, I added a bonus chart.  This one is specifically for the commenters here who have apparently fallen in love with a statistic called the "Employment to Population Ratio" (EPR).  I chose to chart the Labor Force Participation Rate (LFPR) instead of the EPR, for reasons explained below.  Here's the bonus chart, showing the private sector's downward-trending job creation rate (red line), and the steady-as-she-goes Labor Force Participation Rate.  Click to enlarge.

Why did I choose the LFPR instead of the EPR?  If you're really serious about understanding the details, I suggest reading chapters 4-7 of Gene Epstein's 2006 book, Econospinning; here's an excerpt from chapter 7:

This short chapter is the fourth to reinforce the argument: The relatively low unemployment rate of the past few years has been approximately right, notwithstanding the fantasies of Krugman and others about long-term unemployment, labor force "dropouts," and labor force participation rates already covered in previous chapters.  This chapter deals with the often-mentioned EPR, which turns out to be old wine in new bottles.  The EPR is essentially a mixture of two other Household Survey indicators that have already told their stories: the labor force participation rate and the unemployment rate itself ... The EPR can tell no coherent story until we've distinguished one effect from the other.

Again, here's the link to Epstein's book, which helped me a lot.  (Warning: Not recommended for anyone who has already made an ideological commitment to the Employment-to-Population Ratio.) 

FQ.08.01: Favorite Quote for This Week

Prediction requires knowing about technologies that will be discovered in the future.  But that very knowledge would almost automatically allow us to start developing those technologies right away.  Ergo, we do not know what we will know.
N. N. Taleb, The Black Swan

Why so much fuss over the national debt? (A generic letter to the editor)

[Note: Please don't miss the end note to this article.]

False alarms about the national debt still flood the editorial pages, blogs, and candidates' press releases.  For hundreds of examples just in the past week, follow this link to Google news. 

Yesterday, while wishing I had more time to submit responses, I thought, Why not recruit some help from this blog's readers?  So, if you agree with the underlying message at this blog (i.e., that a managed level of debt can be harmless, even desirable, in a growing economy), and you'd like to help inject some sanity into the debate this year, here's the deal: Copy the two generic letters to the editor (below) to a convenient place on your computer; then, whenever you spot someone whining about the debt while ignoring our growing ability to service the debt, submit a response by using either the short or the long version below, whichever you think is more appropriate. 

Letter to the editor, short version:

I read [name of whiner goes here]'s sob story about the size of our national debt, and wondered why there was, as usual, no mention of our nation's growing ability to service the debt.  Yes, our debt is $9 trillion and growing . . . but our economy is $14 trillion, and has been growing faster than the debt.  Result: Just as the burden of my car payment decreases whenever I get a raise, the burden of our national debt decreases whenever the economy grows faster than the debt.  Why don't we ever hear that side of the story from the fear mongers? 

How about less whining about the debt, and more ideas about how to enhance economic growth, which improves our ability to service the debt? 

Letter to the editor, longer version:

[Name of whiner goes here]'s sob story about our $9 trillion national debt leaves out some very important information: Our national economy is $14 trillion, and it has been growing faster than the debt.  Guess what: That means our ability to service the debt has been improving. 

Think the interest on the debt is a problem?  Well, in the mid-1990s, it took around 15% of federal tax receipts to pay the net interest on the debt; but now, it only takes 9%.  That's a 40% reduction in the debt "burden" in a dozen years.  Again, our ability to service the debt has been improving. 

Think it would be a problem for future generations if, instead of paying down the debt, we allowed it to keep growing at a rate of, say, 2% every year, year in and year out?  Well, if our economy and our federal tax receipts grew at a rate of, say, 3% every year, our debt "burden" would decrease, year in and year out.  Future generations would be better off than we are, in spite of the debt growth. 

So instead of stirring up fear about the negative side (the debt), why don't we start giving at least equal time to the positive side: a growing economy?  That's the best antidote to a growing debt level. 

I, for one, have heard enough whining about the debt and the interest payments.  Does anyone have any ideas about how to enhance economic growth?  If so, let's hear them.  Steve Forbes said it succinctly:

You can't cut your way to prosperity; you've got to grow the economy.

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Important end note: 

A happy, healthy, and prosperous new year to all of you.  Thanks for spending a little time here.