Sunday, April 04, 2004

The Dark Side of Productivity
Blogosphere Meta-Review

Yesterday I posted  a bit on the recent employment figures.  Today I did another Bloglines search and found a few more bloggers with input on the issue.  This is a summary of the highlights.  I conclude with a perspective on the topic, from the trenches of the battle against mental illness, since I try not to put up material without adding something that nobody else seems to be saying.

Notes from the left hemisphere:

Mark Madsen, at Extended Phenotype, actually went to the Bureau of Labor Statistics "Employment Situation Summary," and did some analysis  of his own.

If we were to measure unemployment by including the folks who have exhausted their benefits, or have stopped looking for work because they haven't found a job in over a year, or have accepted part time work instead of full time work, the rate would 9.9 percent, not 5.7 percent. This is down 0.1 percent from last year at this time, and essentially unchanged throughout the last 12 months (except for a brief improvement last month due to government hiring).

In sum, the numbers are showing only microscopic improvement, and mostly through the expedient of not looking at "under employment" too closely. The "jobless recovery" continues in March. Bush can (and will!) spin these numbers to portray himself as leading a strong economic recovery, but the picture hasn't changed. The broader economy is still fairly flat, and it's merely the stock market that's hot right now, in a little "mini-bubble." But that's another story entirely...

I would like to hear what he has to say about the stock market "mini-bubble."

Brad DeLong's post on the employment figures has 27 comments as of this writing. 

Mark D. Hamill et. al. at the group blog The Potomac Tavern  have a good discussion about this.  This thread, in particular, is interesting.  That is because there is a discussion about how to interpret the complex statistics used by the government to derive the unemployment figures.  Their bottom line:

I think the statistics are disingenuous. Anyone who truly wants to work whether they are looking for work or not should be considered unemployed. But I'm afraid that would show a true unemployment rate between 8 and 9 percent, and that is politically unacceptable.

There is a little discussion  at Happy Furry Puppy Story Time with Norbizness, although the (anonymous) blogger him/her self did not say much other than to ask some rhetorical questions -- which serve to highlight the fact that the summary numbers need to be taken with a grain of salt. 

Bryan, at the group blog Spare Change, avoids the temptation to work the numbers into an anti-Bush thing:

The fact that President Bush and his team has righted the ship is good news. The fact that we're finally able to bilge the water we've taken on from President Clinton's mismanagement is good news. The logical optimism that we'll soon be able to steam forward toward the destination of manufacturing prosperity is good news.

Don't let the media or John Kerry tell you otherwise. And remember to take the Ketchup Kid's boastful confidence in his own job-creating ability with a grain of salt. Remember, this is they guy who claims to have the world's leaders supporting his candidacy, that he could have created a global alliance for the fight for democracy, that he could have prevented 9/11 by an act of his considerable will, and that he is only weakened in the presence of Kryponite which unfortunately comes wrapped in increased taxation legislation.

Well, maybe he wasn't tempted after all. 

Luis, at The Blog From Another Dimension, takes the opposite stance:

March brings good news: 308,000 jobs were added to the workforce. Good news for you and your neighbors, but expect an overly-exuberant Bush White House to make this sound like every single thing Bush has done since January 2001 is now fully vindicated, end of story, go home and vote for Bush. Of course, there is bad news, news which they won't tell you about. For example, at the very minimum, 150,000 jobs must be gained every month just to tread water, because that number is needed to match population growth. Now look at the first three months of the year: January, 97,000; February, 21,000; and March, 308,000. That's a total of 426,000 new jobs since the start of the year. In order to break even, we needed a minimum of 450,000.

A anonymous blogger at Radically Inept  posted skepticism  without a lot of evident political bias:

I expect the numbers to be revised down, as they have been consistently over the past half year. I suspect a whole lot of political and business interests round up all of the supporting numbers to get these, and then when most people aren't looking, the numbers drop significantly. Though, the January numbers were revised up from about 97,000 jobs to 157,000. So, who knows? Certainly no one I've read or heard has any kind of accuracy rate over the long term to have earned any credibility with me.

At another site, Texas Conservative, Steven Headley posted the following:

Jobless claims fall again ...

The AP is reporting that fewer people filed new applications to receive unemployment benefits last week.
The Labor Department reported Thursday that for the week ending March 27, new jobless claims filings declined by a seasonally adjusted 3,000 to 342,000, the lowest level in two weeks.

Last year, claims hit a high of 444,000 in the middle of April and have slowly drifted downward since then.

Thursday's claims figures come as the department released annual revisions to the data to better reflect seasonal adjustment factors.

The more stable four-week moving average of new claims, which smoothes out weekly fluctuations, held steady last week at 340,250. That was the same figure as the week before, which had marked the lowest level since the week after President Bush's inauguration in 2001.
Economists believe the nation's payrolls grew by around 123,000 in March, which would mark a big improvement from February, when employment grew by just 21,000 _ all of which came from the government. Private payrolls were flat in February.

The government releases the employment report for March on Friday.

Analysts also are expecting the unemployment rate for March to hold steady at 5.6 percent.
Tax cuts work ...

It is not obvious how he draws the conclusion about tax cuts, but I understand that there are a lot of people who agree with him.  The scientist in me cautions that it is hard to draw a conclusion from a single data point.  Of course, if that single point fits in to your paradigm, it is easy to accept is as confirmation of that paradigm.  He may want to look at the EPI  webpage  that discusses the effect of the tax cuts on the employment situation.

Mats Lind of the group blog Bonobo Land (and a solo blog Different Opinion) posted a link, along with her(?) own comments, to an article on The Big Picture

Hold The Bubbly

Dow Jones Newswire's Dr. John McAuley admonishes investors that "March Jobs Gain Welcome, But Hold The Bubbly"

In a snarky column, the Economics Prof warns that "Despite the euphoria in some quarters in the wake of the much stronger than expected March nonfarm payrolls report, it's probably best to hold the champagne. While the 308,000 gain in payroll jobs in March was a welcome sign that the labor market has finally joined in the recovery, the headline increase was nearly the only upbeat statistic in the entire jobs report."

The Big Picture cites stats from McAuley's article.  The article is from a subscriber-only newsfeed, so I won't push the fair-use envelope and quote them here.  I will say that some of the stats are ones that often are used as leading indicators for the manufacturing sector, and those indicators were negative. 

Max Sawicky at MaxSpeak, You Listen!  speaks  thus:

The magic number for March is a gain of 308,000, in and of itself very good news. That's how many jobs were gained according to the "Establishment Survey." By contrast, the counterpart for the less-accurate Household Survey is a loss of 3,000.

Let's remember the big picture here. Last January, George Bush sold his tax cuts on the promise they would create an additional 1.4 million jobs by the end of this year. This job growth was on top of prior projections, linked to prior tax cuts. We got the tax cuts, but not the jobs. This recession has been a record-breaker in lackluster job growth.

Melanie at Just a Bump in the Beltway  has a bunch of pertinent quotes from other sources.  I'm getting too hungry to track them all down, so go read it -- and the comments, if you've already eaten dinner.

Notes from the Right Hemisphere:  For those of you who do not know, I am a psychiatrist.  This gives me a gloomy point of view on the unemployment problem, since financial problems make my job a lot harder.  When I finished training (1990) it was fairly unusual for me to see a patient with what I considered to be intractable workplace stress.  Now it happens all the time.  This could be because I see progressively more challenging cases as I get older, or there could be some other reason.  I cannot say that it is a general trend.  However, since I work in Ann Arbor, Michigan, which tends to have a low unemployment rate, I suspect that the view from other areas is even gloomier. 

One of the factors that often has been cited for the jobless nature of the economic  recovery is the "astonishing" growth in productivity of the American worker.  Economist have referred to the the "dark side of American productivity:"

NEW YORK, Jan 9 (Reuters) - The latest report on the U.S. jobs market has once again highlighted the dark side of American productivity: firms have become so efficient that they require fewer workers to get the job done.

That may be great news for the stock market, as companies slash labor costs and enhance corporate profits. But try telling that to the more than 8 million unemployed U.S. workers.

For them, the reality of productivity is stark: Hundreds of thousands are throwing in the towel after months of frustration with never-ending search for work.

The psychological perspective reveals another dark side:  getting more production per hour per worker is neither free, nor sustainable.  "Workaholism" is a popular term for some people's tendency to work too much.  The negative health impact  is well known.  Workaloholics, however, work too much by choice.  The recent increase in productivity is not  something the workers have chosen for themselves.  It is forced upon them by a tight jobs market.  I have not seen any data on this, so feel free to argue with me on this; but I really believe that the negative health impact of excessive work is much greater when it is not the outcome of a worker's free choice.  People wonder why health care costs are going up, why more antidepressants are being prescribed, why people are giving up looking for work.  In some cases they give up, not because there are no jobs available, but because the workers are burned out. 

I suppose one could dismiss this giving up as a moral failure.  I reject that as a global explanation, because it overlooks a fundamental aspect of biology.  Any organism has limits to what it can do, and has mechanisms for throttling down when those limits are reached.  Sure, a person can push those limits for a while through sheer force of will, and I'm sure that are some people who don't push the limit very hard.  But some limits can't be surpassed, no matter the level of effort. 

Imagine taking a car out on the expressway.  Say the car goes 100 MPH when you floor it.  Now take a family sedan and drive at top speed for days on end, stopping only for more fuel.  Eventually,  the engine will blow up in your face.  The explosion is not a moral failure; it is an inevitable outcome of pushing a machine beyond its limits for too long. 

Conclusion: What this means is that there is a limit to how much economic growth can be gained by increasing productivity of workers.  To use an economic analogy, pushing workers too hard is like putting your monthly expenses on a credit card.  Or a federal government running a deficit.  It is OK to do for a short while, but it is neither free, nor sustainable.  The March 2004 employment figures show that the average workweek shrank by 0.1 hours to 33.7 hours, while the manufacturing workweek fell by 0.1 hours to 40.9 hours. (As I mentioned yesterday, this was noted on World on Fire.)  Presumably, employers are still trying to get as much work as possible from each worker.  The shrinking workweek is not due to a sudden outbreak of humanitarianism.  It suggests that workers have reached their limit.

The March 2004 employment numbers may be an indication that productivity is now at the point of unsustainability.  I know this is a shaky hypothesis, but the potential impact, if true, bears some consideration.  If it is true, and the productivity figures start to come down, the mighty economic engine that is the American economy is going to blow up in our faces.