Jack Dunn - Reclaiming Common Sense

Worker Growth - The Cause and Effect of Economic Growth


We need workers to work full-time jobs in order to buy homes. We need people who are buying homes to buy refrigerators, stoves, microwaves, televisions, paint, carpeting, and landscaping items. We need retail stores to hire salespeople, not just cashiers. We need people with existing homes to want to buy new homes and place their existing homes on the market to alleviate an existing home shortage. We need new homes to be built so construction workers will return to the sites. We need jobs to generate revenue so that we can see tax rates drop and disposable income rise.  The level of growth that we have seen during the past eight years has not been enough to stimulate the economy. What rate of expansion is needed?


Jobs, Workers, Participation. The foundation of this column's employment situation forecast is the rate of job growth, or contraction, that occurs on a regular basis. Certain months "shed jobs always, January and August, while others tend to add jobs every year, February, March, April, May, June. Workers are participants. So are unemployed workers. Part-time Workers count the same as part-time workers. The best periods of economic growth during the recent past was between the Summer of 1983 and the Fall of 1989 (The Reagan Years.) There was a second spurt between the Summer of 1993 and the Fall of 2000 (The Clinton Years.)  We saw participation increase under Presidents Reagan and Clinton. Jobs grew at an annual rate under President Reagan at annual rates of 4%, 5%, and as high as 6.29%. The fastest rate of worker growth was 3.54% under President Clinton.


How Soon will we hit 2.00% again? We have had annual Current Employment Statistics (CES) Worker growth during the month of March over 1.67% since March 2011. If we hit 2% this march then we will add over 1.150 million workers to the economy. This would be comparable to what we added during March of 2014. You do not remember a million worker month because the government seasonally adjusted everything.


What difference does the seasonal adjustment make? What would happen if we grew at the same Seasonally Adjusted rate of growth for the same years where we saw roughly 2.00% non-seasonally adjusted Growth? The 1.57% annual growth rate is relevant because that is the annual rate of growth that we had during January. The 1.63% March growth rate is comparable to our February 2017 growth rate. The seasonal rates are almost identical to the non-seasonally adjusted growth rate. Note that the 2016 growth rates are not even close to one another. If the growth rate for the NSA CES data is 1.70% then we should add 240,000 seasonally adjusted workers. If we grow at an annual rate of 1.75% that number exceeds 300,000.


We May Not Be at 2.00% Annual Growth, yet.  The news is good with manufacturing keeping jobs in the United States or bringing them back home. We are hearing that there is consumer optimism, builder optimism, and all sorts of other optimism. Optimism normally brings spending and growth. If we were to hit the 2014 level of expansion then the authors of the report would "have" to post a "Jobs number" of nearly 700,000 workers added.

What Should We Expect from the March Jobs Report? This column published an article projecting strong jobs growth, stronger worker growth, a drop in the number of unemployed workers, a drop in the unemployment rate, and a rise in the participation rate. "Mad March Jobs Forecast" projected a monthly worker growth between 0.66% and 0.70%. This would be comparable to the growth seen during 2005, 2007, and 2013.  We could see a private sector number reported around 300,000 workers reported, depending upon the seasonal factor used to convert the recorded NSA data to the reported SA data.

Growth is King. If there is anything to remember from this column it is that everything is relative. The seasonally adjusted data masks reality - the good and the bad. Adding 200,000 jobs a month when we had 100 million workers was one thing - when we have 150 million workers it is not as good. We need 300,000 seasonally adjusted jobs to be added each month in order to offset eight years of full-time job growth malaise. We recovered jobs - we have not consistently added full-time jobs to the peak 2007 level.  We had an annual CES NSA Private Sector Growth Rate of 1.57% during January. We jumped up to 1.68% during February.  If we grow at a rate comparable to March 2005, 1.70%, then we should see at least 240,000 SA Private Sector Workers added during March of 2017. If we see worker growth comparable to March 2013, 2014, or 2016 we could see remarkable private sector worker growth recorded, NSA, and reported, SA. 

It's the economy.