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September 30, 2003

The Churn Economy

This report is important.

It may explain some of the bizarre things going on in the economy, such as the wide divergence between the payroll survey and the household survey in how many jobs have been lost under Bush (1.14 million jobs lost since Nov. 2001 under the payroll survey; 1.41 million jobs gained according to the household survey in the same period).

What's going on in the economy is an insane amout of "churn"-- jobs being created and destroyed. The new Labor Department report, instead of just looking at net gains and losses, actually tracks all jobs and finds an amazing fact:

7.746 million jobs were gained in the final three months of last year, while 7.816 million were lost -- for a net loss of 70,000 jobs.

In other words, 7.2 percent of all jobs in December 2002 did not exist three months earlier, while 7.3 percent of jobs in September 2002 had disappeared by the end of the year -- a significant churn that cannot be seen by looking at the Labor Department's monthly payrolls report.

According to some analysts looking at this report and others, one answer to the bizarre numbers reports is they reflect a lot of unstable work relationships:

Some suggest that companies, facing tough competition from overseas and unable to raise prices of their products, are trying to hold down costs by turning more and more to contract employees. These employees would not show up on the business payroll survey but would be picked up by the survey of households, which would list them as self-employed.

Living on the edge as contract workers, seeing jobs appear and disappear, is no joy for those involved-- especially with many lacking health care or other benefits.

But just to avoid lowering expectations too much for Bush, progressives should be a bit more careful with the "more jobs lost under Bush than any other President" line. It may be true or it may be a statistical mistake.

The economy does suck out there-- unstable contract jobs are no substitute for a real job and many of the self-reported "self-employed" may just be too proud to report honestly that they are "unemployed" (hell, I often describe my bout of unemployment last year as my time as a "consultant"), but don't ever take numbers too seriously.

Live by the stat attack, die by the stat attack.

What is remarkable is the instability so many people are living with. Add the real unemployment rate (including discouraged workers) to this rate of "churn jobs" and you have 15-20% of the population without a job or unsure if they'll have one tomorrow.

That's a scary number.

Posted by Nathan at September 30, 2003 10:53 PM

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