Allan Meltzer argues that employment is growing, albeit not in a strong or robust fashion. His explanation: many former employees are being rehired as contractors, and our employment statistics do not measure this trend accurately.
Here is the relevant statistical issue, according to Meltzer:
There are two sources of labor market statistics, the Establishment Survey and the Household Survey–both conducted by the Labor Department. The first asks manufacturing and service sector companies how many employees they have. The second asks a sample of people whether they have jobs. The two give different answers and, important right now, the difference changes systematically over time. The reason is that the number of companies does not remain fixed. In our dynamic economy, old firms die and new ones are born. The Labor Department learns about the deaths quickly, but it takes longer to learn about the births.
Nor is the longer-term record of the Bush administration on employment as dismal as is commonly believed:
For the year ending in August, the Establishment Survey shows a loss of 463,000 jobs. The Household Survey shows that the economy added 313,000 new jobs in the same period. The Establishment Survey also shows the much discussed job loss since the Bush administration took office–2.7 million jobs. The Household Survey reduces the loss to 220,000, not good but far more typical of a period with recession and slow recovery. As the speed of recovery picks up, the latter loss will disappear by early next year.
Revisit this post in a few days for an addendum, I will let you know if there is any reaction to this argument (Brad DeLong once wrote a critique of Meltzer) in the blogosphere.
Thanks to John Charles for the pointer to the original article.
Addendum: Brad DeLong offers critical commentary on Meltzer’s argument.