Paul Krugman: Growth and Jobs (GDP report)

[Kurt_and_Hunter]

Before jumping ugly at Krugman as a gloom-and-doomer please recognize that what he is saying here is just economics, not commentary. It takes a surprising amount of GDP growth to shave points off unemployment. Always has.

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Growth and jobs

Just a quick note on the GDP report. Obviously, 3.5 percent growth is a lot better than shrinkage. But it’s not enough — not remotely enough — to make any real headway against the unemployment problem. Here’s the scatterplot of annual growth versus annual changes in the unemployment rate over the past 60 years:




Basically, we’d be lucky if growth at this rate brought unemployment down by half a percentage point per year. At this rate, we wouldn’t reach anything that feels like full employment until well into the second Palin administration.

http://krugman.blogs.nytimes.com/2009/10/29/growth-and-jobs/

[AllentownJake]

1. Time till Krugman is the enemy of the people again

3....2....1

[vaberella]

2. From my perspective he's an economist.

Most of them normally have varying interpretation of different things. I think he's a progressive overall, but still an economist who makes up one opinion based on information he's getting.

[joeybee12]

3. Even the administration is worried about unemployment...

...they know it won't come down any time soon.

[Nicholas D Wolfwood]

16. and they've never said otherwise.

Currently, it seems like we're coinciding with their projections rather well.

[Cant trust em]

4. I think that putting things into perspective is really important

We have a tendency to think that every bit of evidence is a silver bullet. My interpretation on this is that I'd rather have growth that shrinkage. Is this the ray of sunshine that we've all been waiting for? No. But it's a nice positive sign.

[uponit7771]

5. Rec'ing, I love Obama but one fair criticism of his admin is they keep talking about the economy in

...terms of indexes that don't matter to the people who voted them in office.

We can have constant GDP growth and falling jobs and wages Krugman makes this point clear

[HughMoran]

6. What indexes should he use? Should he be more pessimistic?

Doesn't pessimism feed on itself? I'm not sure what you're expecting him to do - he's already stated the unemployment rate will keep rising - up to 10% by year end and that it will take years before it comes down to reasonable levels. Does he have to keep stating this over and over again to satiate you?

[uponit7771]

17. Unemployment rate, the one that matters to the middle class...

[Dawgs]

11. BS. Every time Obama talks about the economy he says that jobs are the only thing that matters.

He's said it consistently for months. Did you really believe that job growth would start by now?

[uponit7771]

18. No, not with a supply side approach I didn't with a consumer side approach? yes

asdfsdf

[rockymountaindem]

7. I'm a little confused, maybe, by that graph

It seems that most of the data points between two and six percent growth, i.e. between modest and quite high GDP growth, correlate with very small decreases in unemployment. Since six percent growth is a rarity even in good times, and two percent growth is considered sluggish by normal standards, it seems strange that they would have basically the same impact on unemployment.

Is it possible that this outcome is because such levels of economic growth tend to occur when the economy is already at or near full employment? For instance, if the economy grows at 4% when unemployment is already down to 5%, I would expect that even with the good econ. growth the impact on unemployment would be minor because it is already down just about as low as it can go. On the other hand, the same level of growth when unemployment is very high, like now, might produce a more salutary effect. I don't think this graph tells the whole story, but I'm no expert.

[Kurt_and_Hunter]

8. I was noting the same thing

Your instinct that employment rate moves more freely in extremes but runs up against a lower boundary where change becomes more difficult feels right but I'm not sure how often we have had unemployment so low that the factor would come into play.

It may have something to do with comparing a growth rate to an employment percenatge. The economy has growth built in but does not have lower unemployment built in. Job creation, yes, but not change in the unemployment rate.

If the economy's idle speed is 3% (to pick a round number) then steady 3% would show no change in unemployment rate and that's pretty much what we see... no major employment rates shifts until GDP deviates strongly from the zero level. (which is a positive number, not zero)

Another possibility may be that some of our best periods of relative GDP are on the recovery side of down-turns in a long series of jobless recoveries.

Since jobs have been weak since Reagan a chart dividing the 60 years of results in 1949-1979 and 1979-2009 might show two different pictures.

[BootinUp]

9. I think its a little oversimplified

and I rarely disagree with Krugman. But seems to me it would depend on what unemployment level you are currently at or what factors are causing it. Companies cut to the bone this year, but if they see business returning I think they will start hiring to replace a significant portion of those cuts, otherwise they won't be able to keep up with business.

[AllentownJake]

10. A lot of companies used this recession

as an excuse to move operations overseas.

[Kurt_and_Hunter]

12. I don't think he's suggesting a rigid formula

In extremes of very high/low GDP and/or very high/low employment the moves are probably more fluid/dramatic.

Even on the little chart it appears more curved than linear.

But since we just had a good quarter of 3.5% yet everyone expects unemployment next quarter to not be much improved it seems like everyone accepts the general phenomenon he's describing, that it takes a lot of GDP to move employment rate much.

[mkultra]

13. hes right and this follows predictions thus far

jobs are a lagging indicator

[Jennicut]

14. Krugman is right, it is growth but really, really small growth.

We shall see if it starts to actually get big enough to make a difference. And Obama has never said, yes, we will have tons of jobs by 2010. He never ever said that. We are in step 1.1 of recovering from the economic disaster and many jobs in certain fields may never come back.

[mkultra]

15. unfortunatley, his graph doesnt include post recession markers

Which generally show faster growth of employment than standard economic growth times. Employers are usually waiting to the last before they ramp up to take advantage of the dip.