Karl Smith on the Recovery: If We Had Ham, We Would Have Ham and Eggs, If We Had Eggs…
~ Brad Delong
Lets start by assuming ham and eggs. Here are private non-construction jobs gained or lost each month for the last 10 years
What you see is a private non-construction recovery stronger than anything we saw during the 2000s. The absolute level of gains looks better than almost any month, the gains are increasing and they are solid month to month.
Lets take a closer look at something that a few of old cranks also find interesting and that’s mining, utilities and manufacturing: the traditional industrial heart of the economy.
We don’t see huge gains but given that massive losses are the norm, the numbers are strong. Clearly they are better than anything that has happened in the last decade.
Indeed we have to go back to the mid-to-late 90s to find anything this strong. Notice also that the total post dot-com carve out in industrial employment was just as bad as the Great Recession. Yes, the mildest of the post war recessions hit industrial workers as badly as the Great Recession.
Now lets turn to retail and hospitality. These are the sponge industries. When our marginal worker Jane Doe “needs a job” she is probably looking in retail or hospitality. These are jobs like cashier, wait staff, line cook, etc.
Not blowout performance but not horrible either.
Lets briefly turn to the golden children: education, health, professional services, business, finance, insurance and real estate. These are the aspirational jobs. People in these industries use the term “career.”
This is quite solid performance. Not as go-go as the mid 2000s and that is primarily due to the strength of finance and real estate during that period and its weakness right now.
So what are we missing, Ham and Eggs naturally. Government and Construction.
Here is the disaster that has been construction
You can see that we are just now rising out of the depths even though we have been depressed more or less since early 2006.
The government chart is all mucked up by the census but you can still see that it has been a major drag since 2009.
Now why is any of this important?
Partly because most folks live within a given employment class and so it helps to see how the rest of the world lives. It also helps economists and wonks who are used to looking at the top line see the human shades of the recession.
Additionally, however, it changes the way I look at the top line number. The things that are holding us back are specific dysfunctions that we have reason to suspect will go away.
Construction: obviously finance is causing the headache here. However, the news in multi-family construction is that equity is stepping in to make up for the difficulty in getting loans. That is, people are putting down more and more cash to build apartment buildings. This should give us near term hope.
Over the longer term the pressure builds for more housing construction generally and we should see a turn around as living arrangements revert back to normal.
Government: The drag from government should end soon. Much of this is state and local consolidation driven by low sales tax revenue and balanced budget constraints. Most state and local governments have rainy day funds of on sort or another. However, those funds were not big enough to whether this storm. In particular the collapse in sales tax revenue was unprecedented.
I literally can find no records of a drop off like we experienced. During the Great Depression, property tax was a much stronger part of state and local revenues.
Yet, that is turning around and state and local should stop bleeding by the end of this year.
So given the real potential for a construction turn around and the likely healing of state and local government the jobs trajectory looks fairly good.