Yesterday’s NYT noted “U.S. Growth and Employment Data Tell Different Stories”:
Measured by traditional yardsticks for growth, like gross domestic product, the American economy definitely looks weak. View it through the prism of hiring and employment, however, and the economy seems surprisingly strong.
“It is a real mystery how you can have nearly 300,000 new jobs created in December with the economy growing by 1 percent or less,” said Torsten Slok, chief international economist for Deutsche Bank Securities in New York. “We can’t have this discrepancy for a long period of time.”
In our 2014 J.Macro paper, Laurent Ferrara, Valérie Mignon and I asked why employment growth was so sluggish given GDP growth (post here). The current situation seems to have reversed that puzzle. Of course, we examined levels (using a nonlinear error correction model), while the current discussion is centered around growth rates. Nonetheless, this is an interesting question.
Figure 1 depicts the employment and growth trends since 2007.
Figure 1: Log real GDP (blue), and nonfarm payroll employment (red), both normalized to 2009Q2=0. 2015Q4 observation is the January 15 Macroeconomic Advisers nowcast. NBER defined recession dates shaded gray. Source: BEA, BLS via FRED, Macroeconomic Advisers, author’s calculations.
It’s hard to see how the two series’ growth rates covary over time, so I show cumulative growth for annual increments since 2009Q2, the last NBER-defined trough.
Figure 2: Log real GDP (blue) and nonfarm payroll employment (red), both normalized to 2009Q2=0, 2009Q2-2010Q2. Source: BEA and BLS, and author’s calculations.
Figure 3: Log real GDP (blue) and nonfarm payroll employment (red), both normalized to 2010Q2=0, 2010Q2-2011Q2. Source: BEA and BLS, and author’s calculations.
Figure 4: Log real GDP (blue) and nonfarm payroll employment (red), both normalized to 2011Q2=0, 2011Q2-2012Q2. Source: BEA and BLS, and author’s calculations.
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