Many times what you see depends greatly upon how you look. The answers you get depend on what questions you ask. Take the employment outlook, for example. If you only look at the last quarter’s numbers, as the mainstream media has been doing, you will come away with the impression that the sky is falling.
Well, it may be actually falling, and certainly is falling if yours is one of the half-million jobs lost during the last month. But if we step back from the immediate carnage and look instead at how the employment picture has evolved over the past decade, a rather different picture emerges.
The media seems to be ever-focused on jobs lost, reporting even the minutest fluctuations in unemployment percentages. The stock market, too, seems to respond to these variations, and seems only able to manage a simple binary response: down-good, up-bad. But if it’s a picture of whether or not the economy is growing we are interested in, then a bit more discernment is called for.
At a minimum we need to recognize that often when one part of the economy is downsizing, other industries are starting up. When one company lays off a 100 workers, several others may be hiring 50 or 60 each. Or not. But surely what is important, from the macroeconomic viewpoint, is net jobs gained. In the same way that we wouldn’t determine the financial health of a company from examining only trends in its expenses and would look also at revenues and, of course, the bottom line. Net jobs gained is the bottom line as far as employment is concerned.
This being the case, I went to the Bureau of Labor Statistics to see what light their numbers might shed on U.S. employment. Since their datasets didn’t record net jobs gained or lost, I had to calculate it from their jobs gained and jobs lost datasets. I then plotted the difference. The resulting plot is shown in Figure 1, below.