September 14, 2013

Supposed Mystery at AP: Economy Isn’t Strongly Growing Despite Increased Employment (Can You Say ‘Part-Timers and Temps?’)

It’s almost amusing to watch writers like Christopher Rugaber at the Associated Press, aka the Administration’s Press, pretend not to understand why the economy isn’t growing as much as one would “expect” based on the number of jobs being added each month and falling weekly unemployment claims.

In a Thursday story which was mostly worthless because the incompletely collected government data on weekly unemployment claims made it so, Rugaber and the “expert” he quoted pretended not to understand — well, I hope they were pretending because otherwise I’d have to conclude that they’re dumber than a box of rocks — how all of this can be (bolds are mine):

“It’s hard to believe that claims can keep declining indefinitely without a commensurate pickup in job growth,” said Dan Greenhaus, chief global strategist at BTIG. “Then again, that’s exactly what they have done.”

… Historically, falling applications have pointed to a pickup in hiring and stronger economic growth.

JPMorgan economists point to the October-December quarter in 2004, just three years after the 2001 recession ended. Unemployment applications were down to 329,000, in line with the current level reported over the past four weeks. Yet the unemployment rate was 5.4 percent and the economy grew at 3.4 percent annual rate.

Applications were also at 329,000 in the fourth quarter of 1994, three years after the 1991 recession ended. The unemployment rate was 5.6 percent then, and the economy grew at a 4.6 percent annual rate.

“The ongoing drop in … claims has not shown its normal relationship to job growth,” Greenhaus said.

Still, hiring has been steady this year. Employers added 169,000 jobs in August, although job growth in June and July were weaker than first estimated. The economy has added an average of 180,000 jobs a month this year.

Those weekly claims figures from 1994 and 2004 argue for the idea that the economy should be growing even faster now than it was then, because 329,000 weekly claims represents a smaller percentage of the “covered workforce” (data obtainable here), which was 106.1 million in the fourth quarter of 1994, 126.25 million in the fourth quarter of 2004, and is currently 129.82 million. Those 329,000 readings cited from 1994 and 2004 were the equivalent in today’s economy of about 402,000 and 338,000, respectively.

The answer to the contrived conundrum is obvious. Today’s economy is adding part-time workers at a record rate — almost 60 percent of all hires during the first eight months of this years, (seasonally adjusted):


This isn’t tough, Chris and Dan.

Part-timers don’t make as much money or get much in the way of employer-provided benefits. They don’t spend as much money as full-time workers. That means that the growth in persconal consumption expenditures component of reported gross domestic product currently isn’t as great as one might ordinarily expect.

Additionally, the number of jobs at temporary help services is at an all-time high. A not insignificant number of these temporary positions are truly temporary, lasting anyhwere from a few days to a few weeks. Even if such temporary assignments involve eight hours per day, they end up as the functional equivalents of part-time employment any time there’s a break in service between assignments. Temps certainly can’t plan their finances as if their eight-hour days won’t be interrupted, and therefore must be very tight-fisted with their spending.

Would it be too rude to say, “Duh“? No, not considering the fact that AP reports have occasionally mentioned part-time work, that the largely Obamacare-driven move to part-time work has been a topic of frequent discussion for months, and that Rugaber himself did a report on the growth in temp employment in early July.

This isn’t a mystery at all. I maintain that AP and most business press reporters are, despite its obvious relevance, deliberately avoiding the part-time vs. full-time topic to avoid inevitably having to cast aspersions on Obamacare’s impact in the process.

Cross-posted at


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