March 29, 2023

Economix Blog: What to Look For in Friday’s Jobs Report



Dollars to doughnuts.

The monthly jobs report usually gets a lot of attention, but the September numbers due on Friday are likely to absorb an outsize amount of oxygen because of the election just over a month away.

Here are some crucial details economists and analysts are likely to be looking for in the report.

One note of caution: The jobs report numbers are volatile and subject to major revisions months or even years afterward, so it’s a good idea not to read too much into any one report, Friday’s included. Last week, in fact, the Labor Department released preliminary revisions to the jobs numbers for the 12 months ended in March 2012 suggesting that the economy added 386,000 more jobs than originally believed.

1. The number of jobs that employers added to their payrolls.

Economists are predicting job growth of 113,000, far below the economy’s long-term trend and too slow to absorb just those coming of age into the labor force.

The pace of job growth the last few months has been somewhat lackluster, with the economy adding an average of 87,000 jobs a month since April, after averaging 226,000 jobs in the first three months of this year.

It’s not clear what accounts for the slowdown; some analysts have attributed it partly to the unusually warm weather last winter, which may have caused employers to hire earlier than usual and so kept them from needing to add workers in the spring.

In any case, if we continue to have the same pace of job growth that we’ve seen so far this year (an average of 139,000 jobs monthly over the course of 2012), it will take nearly three years before the economy regains the number of jobs it had before the recession began in December 2007. We have 3.4 percent fewer jobs today than we did then, even though the number of working-age people has increased.

If we want to close the jobs gap fully — that is, add enough jobs to absorb new entrants to the labor force as well as the already unemployed — it will take more than a decade at this pace.

2. The unemployment rate.

This number refers to the unemployed as a share of Americans who want jobs and are actively looking for work. It excludes people who are out of the work force altogether and who are not applying for jobs.

It always gets a lot of attention, although economists play it down because it is based on a somewhat volatile survey. Economists are forecasting that the unemployment rate will again be 8.1 percent, reflecting the slow job growth.

3. The number of people joining or leaving the labor force.

This is based on the same noisy survey that the unemployment number comes from, and you can expect talk about it on Friday, particularly if the size of the labor force falls.

Usually in a recovery, many who were sitting on the sidelines decide to re-enter the labor force and start looking for work. In August, however, the share of Americans in the labor force fell, which is why the unemployment rate ticked down. (And that’s a bad reason for the unemployment rate to fall; we want it to fall because people who wanted jobs found them, not because people who wanted jobs stopped looking for work.)

We don’t know why the number of people in the labor force declined. It’s possible that more people than usual decided to enroll in school in August. A surprisingly large share of people who dropped out of the labor force in August did so after being employed, as opposed to unemployed.

4. The broader unemployment rate.

This number includes the people who are out of work and looking for a job (the traditional unemployed), as well as two other groups of “shadow unemployed”: people who want to be working full time but can only find part-time work, and people who want to work but are no longer looking because they’ve been discouraged by their prospects. This group is sometimes referred to collectively as the “underemployed.”

This number has bounced around a bit this year, ranging from 14.5 percent to 15.1 percent. It was 14.7 percent in August. If the number goes up, you can expect to hear a lot of commentary about how the economy is worse than everybody thinks.

5. Government payrolls.

While the private sector has been adding jobs for 30 consecutive months, the public sector has been hemorrhaging workers almost every month for roughly the same period. There are fewer government workers today than there were when President Obama took office, because of job losses at the state and local levels. In August, governments at all levels shed 7,000 jobs.

Government job losses are weighing on the economy, since laid off government workers have less money to spend at private sector businesses, causing those businesses to retrench as well.

If the so-called “fiscal cliff,” which includes cutting $109 billion across the board from the federal budget, materializes at the end of this year, we can expect more government layoffs to follow. The Congressional Research Service recently synthesized a group of studies that estimated that the “sequestration” of federal funds would lead to the elimination of direct, indirect and “induced” jobs of 907,000 because of military spending cuts; 34,000 from cuts to the National Institutes of Health budget; 80,500 from cuts to education spending; and 500,000 from cuts to Medicare.

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I.M.F. Provides New Short-Term Credit

The changes come as the I.M.F. gears up to take a yet bigger role in helping ease the European sovereign debt crisis. Risk-averse investors are paring back exposure to Europe, hiking borrowing costs across the Continent. Numerous countries, including Italy, Spain and Hungary, are struggling to finance their debt.

The fund said it approved revisions to help countries with “relatively strong policies and fundamentals” affected by the debt crisis in the euro zone — in its words, “crisis-bystanders.” It said it will be able to offer assistance in a “broader range of circumstances” than previously allowed.

The goal, the fund said, is to “break the chains of contagion.”

“The fund has been asked to enhance its lending toolkit to help the membership cope with crises,” said Christine Lagarde, I.M.F. managing director, said in a statement. “The reform enhances the fund’s ability to provide financing for crisis prevention and resolution. This is another step toward creating an effective global financial safety net to deal with increased global interconnectedness.”

The fund is replacing an instrument called the “precautionary credit line” with a more flexible instrument it called the “precautionary and liquidity line.” It will now offer credit to countries in relatively good fiscal shape facing liquidity problems. Previously, the fund offered such credit lines only as a precaution against financing problems for countries that may encounter trouble. It will also provide credit lines with durations as short as six months.

The fund additionally announced that it will consolidate its natural-disaster aid and post-conflict aid programs under a new “rapid financing instrument.”

The changes come as the I.M.F. takes a more prominent role in stemming the European debt crisis and attempting to prevent global contagion.

European leaders have fumbled in enacting their plan to ease countries’ spiraling borrowing costs. For instance, they have not yet fully funded the European Financial Stability Facility, a trillion-euro rescue fund. The half-measures have failed to ease the concerns of global investors, and borrowing costs have kept rising.

A bolstered I.M.F. could provide the liquidity that Europe needs and its involvement could reassure investors, experts said. But the fund would require significantly more resources to be able to help big euro zone countries, like Italy.

Cash-rich emerging-market countries including China and Brazil have indicated a willingness to help ease the euro zone crisis by contributing funding to the I.M.F. At a press conference last week, David Hawley, a spokesperson for the fund, said that “emerging market countries have expressed readiness to augment the resources of the fund.” Some European officials have also floated the idea of the European Central Bank lending to the I.M.F., which would then lend to and help enact fiscal reform in euro zone countries. The fund has declined to comment on the idea.

For now, the I.M.F. is playing a supporting role. But that role is getting bigger.

Later this month, it is sending a team to assess the Italian economy, though Italy has not requested I.M.F. aid.

The changes announced today will help countries seeing borrowing costs rise even if they are in decent fiscal shape. The new resource is relatively modest and would do little to aid large European countries facing heavy debt burdens. For instance, Italy would be able to borrow about $123 billion from the I.M.F., 10 times its current quota. It needs to refinance more than $350 billion of its debt in the next six months alone.

But the new facility might aid smaller countries hurt by exposure to the euro zone crisis. On Monday, Hungary, which does not use the euro currency, announced it had asked the I.M.F. and the European Commission for a line of credit should it need short-term funds. The country does not have as heavy a debt load as many other European countries, about 80 percent of its annual economic activity, compared to 120 percent for Italy. But Hungary is nevertheless facing financing troubles related to problems in the euro zone.

Weak demand in Europe has reduced Hungarians exports and slowed its economic growth. Its currency, the forint, has slumped. It also has problems with its housing market, since a high proportion of Hungarian mortgages are denominated in foreign currencies.

Hungary said it had sought “insurance” from the I.M.F. and the European Commission. A feisty statement by its ministry for national economy promised that the new arrangement would “not increase government debt” and would be taken out only as an “insurance contract” to encourage investment in Hungary and to bolster growth.

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