Where the jobs went, and what good they're doing

For several months I've been posting what looks like very good news about jobs from the Bureau of Labor Statistics—and July's numbers are no exception.  In the past 12 months, some jobs have disappeared, but far more jobs have been created.  Not only that, but more higher-paying jobs have been created than the jobs that went away. 

Seems as if that should be good news, doesn't it?  Especially to those who've been isolating their attention to the jobs that disappeared—the ones we're supposedly "exporting"—while ignoring the new jobs.  [Not an inclusive way to analyze the job situation, but it evokes strong emotions and is therefore politically potent.] 

Anyway, each time I've posted the jobs results, a small percentage of the comments and emails still find some bad news in the numbers.  For example, if jobs aren't being created at the same rate the population is increasing, isn't that bad news? 

What good the jobs are doing
To address that question, I've added a chart showing what good the jobs are doing, because what matters more than the percentage of people working is real output, real incomes, and real spending-and-saving power (all per capita). 

To illustrate: If the population is increasing due primarily to more children and more retirees, that would decrease the percentage of working-age people.  Is that bad news?  Not necessarily; not if GDP per person and disposable income per person were still growing.  And that is just what has happened.  That's why, before showing the jobs charts for this month, I'm leading off with this new chart:

The population is growing, but we're still growing real GDP (output) per person and real disposable income (after taxes and transfers) per person.  More good news, in other words. 

One of my favorite statistics is the last one above, real disposable personal income per capita.  That's the real purchasing power left over after taxes and after transfer payments.  (My wish list, by the way, includes a breakout of that number that would show after-tax, after-transfer, real disposable income by quintile, in addition to the aggregate reported by the BEA; that would enable a before/after redistribution comparison, to help in the income inequality debate.) 

Private sector jobs versus year-ago
I added the average wages for each job category (from BLS Table B-3) to the chart showing jobs added and subtracted.  Click to enlarge:

Government jobs versus year-ago
The BLS reports the government jobs (federal versus state & local), but not the average wage rates, so I couldn't include those.  In the past 12 months, the federal government shrank by 35,000 jobs; state & local government expanded by 260,000.  Here's the chart:

In the three charts above, I can't find much to be unhappy about.  Let me know if you spot anything.  [I guess it would be less upsetting if creative destruction could grow everyone's real income without anyone ever losing a job, including the obsolete jobs, but that is not the way creative destruction works—by definition.] 

Comments

[JJ]

Much ado about GDP?

Steve,

I notice that the crux of many of the arguments here is the 'growth' of our economy. Debt growing? Our GDP is growing faster! Jobs being exported? More high wages jobs are being created as the BEA divides GDP by the workforce. So, *big* question: Can we 'trust' the GDP? The GDP, after all, is the pulse of nearly everything, our markets react, our borrowing and lending policies and much more are based on it (among other things), so it seems the possibility of politicizing it would be tantalizing. This isn't a conspiracy theory (really!), but I think a good hard discussion of the GDP in general, and hedonics in particular is in order here...

[Counter Revolutionary]

Steve, seemed to have forgotten a verb in the first sentence of the Political Jobs discussion. Thanks for the meat for future discussion.

[Steve]

I'll add the per-capita chart to the GDP article each month.

JJ:
GDP is imperfect, but better and more ubiquitous than any other measure of national output. Politicizing it (or any other economic statistic), in my experience, means calling it out when it makes one's political point, and ignoring it when it doesn't.

[mark]

Steve,
I grew up in a middle class family in the 60-70s. We had no problem making ends meet on one income (father).We went on two or three very nice vacations every year and my parents paid off there mortgage in under 15 years. If income per capita is so much higher today and inflation has been truly measured, why do most middle class families require two incomes to make ends meet?

[Jason]

Mark, I've been wondering the same thing - as my wife and I are just starting out and trying to figure out how to make our finances work. I wonder if it has to do with more "toys" to which we have become accustomed. We have computers, laptops, internet, IPhones, cellular plans (including internet, text, and assorted add-ons) - things that our parents didn't have and on which they weren't dependant. Not only that, but it seems that people have less time to make food, and so spend more money eating out. It's incredible how fast those expenses add up. We started making dinner every night (far more than we needed, then used the extra for lunch the next day). We've cut hundreds of dollars from our "eating out" spending, and have been able to put more of that into our car payment - cutting our loan time to less than half.

So, I'm no economist, but my guess would be a higher standard of living due to luxuries becoming the new necessities. Just my uneducated, meandering, and anecdotal guess!

[lowtax]

Mark,

There's really far too little information in your example to extrapolate it to the general population. My wife and I consider ourselves young 'middle classers' (engineer and speech pathologist both about 30 yrs old) and we are doing much more than fine, as are all of my educated friends (mostly engineers).

As Jason mentioned, it may be a problem of measuring, or it may be that some families have been left behind by technological and economic change (people who don't adapt well), or, worst case, we have become a nation of whiners, upset when every little thing doesn't go our way. But any way we look at it, we need far more information to draw any conclusions.

[Bob]

I'd like to see more additions in the Information segment assuming that means software engineers and technicians.

Anytime government hires more people I'm suspicious. I mean, what kind of revenue does government provide?

Re: Productivity (Steve is very fond of it). So, have economists figured out how to measure the output in leisure and hospitality?
Number of beds changed?

How about education? Number of students passed per teacher?

Okay, I'm being a smarta--. But the questions can't be dismissed out of hand if we are moving to a service economy.

[JorgXMcKie]

I teach public budgeting, so I'm suspicious when state and local governments add jobs, too, but even here in Michigan, while many local governments are downsizing (as it the state), many are also adding personnel.

In most cases the added public workers are in response both to demand for services *and* increased local tax revenues. Local tax revenues in Michigan increase mostly due to homes being bought by new people (either new built or existing homes) because our property taxes are capped by Prop A and the Headly Amendment.

Do they overdo it? Sure, some communities do. However, in any growing city or suburb, the odds are than the added workers are added conservatively. These communities have seen what has happened to old-line manufacturing cities and taken heed, mostly.

There are currently around 40 local governments on the state budget watch list. (I.e. they have unbalanced budgets or certain structural budget defects.) They uniformly share some characteristics: their tax base has been heavily weighted towards a manufacturing component; and they have unionized public personnel who got lucrative contracts in the late 70s and early 80s.

Anyway, in a good economy busy people tend to turn local government for more services in the face of increased revenues without large tax increases. Many of the growing cities here are adding community centers and recreational facilities and so on.

Thus, added personnel.

[JJ]

JJ:
GDP is imperfect, but better and more ubiquitous than any other measure of national output. Politicizing it (or any other economic statistic), in my experience, means calling it out when it makes one's political point, and ignoring it when it doesn't.

Steve,
You don't think there's wiggle room to 'politicize' by gov't bureaucrats (who tend to handle all these statistical measures) by the voodoo of hedonics? (See my first comment). I *really* don't think I've seen hedonic techniques discussed openly as I think they should be, anywhere...

[JBL]

As usual, the actual data doesn't support the alarmist rhetoric that jobs are going away or that wages are going down. At least not yet. But in looking at the mix, there are two points that are potentially of concern.

1. As Bob points out, there is a definite transition from a manufacturing to a service economy. The question is, where is the underlying basic productivity? Leisure, business, and professional services all add value to existing production, but they assume that there is someone out there making the money to spend. Which brings us to point 2:

2. The largest area of job growth is in education and health care, which do qualify as basic production. But thanks to politics, they are also probably the most inefficient sectors of our economy. As technology makes agriculture and manufacturing more efficient, it is entirely possible for services to become a fundamental driver of GDP growth. But only if the services are relatively efficient and have market dynamics working to increase value. Without those dynamics, growth becomes difficult or impossible.

[mark]

lowtax,
You say you and your wife are doing fine on two incomes. What if you add three kids and take away one income. Still doing fine?
Jason,
We not only have more "toys", but a much better health care system, safer cars, etc. But from what Steve has been posting, productivity gains should be increasing incomes above inflation (allowing for an increase in the living standard). The question is, should one income have kept pace to buy the above mentioned items or is the increase in living standard coming at the expense of time devoted to a second income?

[lowtax]

Mark,

Funny you should mention that because it's exactly what we're planning on doing next year (although it will be two kids, not three). And yes, we will still be doing fine because we have been good about saving and investing. Mind you, we won't be as able to buy all those 'luxury' items but those things are being 'traded-in' for kids (you can't have everything).

It also matters a bit where you live. If you live in San Francisco or NYC, real-estate is going to hit you really hard. Real-estate is not getting any cheaper in real-terms (more population) so that has to be factored in. Energy is the same - it does not necessarily get cheaper in real terms over time.

And with regards to your question to Jason, I think one income should NOT necessarily keep up with all that stuff because there may be a divergence between population growth, productivity growth and technological creativity (coming up with new things we 'must' have). If we are inventing consumer goods faster than goods that increase productivity then one income may not be sufficient to buy you all of that stuff.

[Jason]

Exactly my point, lowtax. Again, I'm no economist, so all I can base my assumptions on is my own experience. My dad is currently supporting my mom and five (of seven) kids on his own income - and they're doing far better than when I was little (admittedly not that long ago). They now each have cell phones, ipods, a total of four cars, five portable DVD players for road trips, a gamecube and nintendo wii - and he just loaned my brother $800 for a guitar. The only debt they're carrying is the original mortgage on their house.

Me, I don't have all those things. I do, however, have more things (and nicer things) than my parents did when they started out. *If* my parents ever help us, it's in the form of loans that we have paid back (which is far kinder than my grandpa was to my Dad - he didn't get any help at all). We really don't have a problem making ends meet - as long as we don't go buying every gadget that everyone has to have.

That's why I have a hard time believing the doom and gloom talk about the economy - and why I would guess that more toys and poor money-management are the most prevalent financial challenges people face - emergencies and unfortunate circumstances aside.

[rDan]

Aren't buying these toys what drives the economy currently? Consumer spending cut by 30% does what to this particular phase of economic growth?