Russ Roberts notices the really big news about employment.
Here’s the last paragraph:
The good news was that job gains for both July and August turned out to bigger than previously estimated, taking some of the bite out of September’s figures. The report also showed that job growth during the 12 months ending in March may have been 45 percent higher than previously reported. The Labor Department said payrolls for the 12 months that ended in March 2006 will be revised upwards by a whopping 810,000 jobs, the biggest revision since 1991.
I like that word “whopping.” The Post reporter, Daniela Deane, realizes that an average monthly error over 12 months of 67,000 jobs is an incredible error.
I think that it is vestigial Keynesianism to applaud the discovery that it took 810,000 more people than previously estimated to produce our nation’s output. Unless the statisticians revise GDP upward, this is going to lower our productivity numbers by quite a bit. And productivity is the single most important indicator of our economy.
READER COMMENTS
Lancelot Finn
Oct 6 2006 at 7:48pm
The point about productivity is well-taken, but it’s not “Keynesian” to be happy about low unemployment. It’s a personal tragedy when a person is out of work. It’s bad for self-esteem, it can cause social problems and even lure people to political extremism, it results in long-term deterioration of skills, etc. If you asked me, given that GDP will grow by a certain rate, would I rather that growth be driven by rising employment or increasing productivity, it would be a tough call to make. Anyway, “more jobs” is certainly good news in itself, and while “low productivity growth” is bad news, conceptually the two are separate even if they might both be implied by the same new statistic.
bob
Oct 7 2006 at 12:06am
Oh, no! Employment is up, so productivity is down! How awful!
WTF?
Igor Uszczapowski
Oct 7 2006 at 4:08pm
I think Arnold is not only right, he also cares about people. To understand this contention, consider the following:
Economic growth is defined as the change in output per capita. To measure output, we take the total value of the goods and services produced by an economy in a year, called Gross Domestic Product (GDP). Then we divide by population to get the average standard of living. Alternatively, we can divide output by the size of the working population in order to measure labor productivity. We use either of these measures of output per capita to compare economic performance across time or across countries.
If we have more growth, then the poor will enjoy a higher standard of living, social security will be solvent, and our ability to maintain clean air and water will be greater.
The last two paragraphs are a plagiarism, I took them from Arnold’s “Learning Economics” (p. 75 and p. 81). Well worth reading.
Learning economics holds the message for me (among other things) that if you care about people, you should not be concerned with employment as such (which Socialism focussed upon) but with productive employment.
Art Woolf
Oct 9 2006 at 7:36am
An alternative is that rather than productivity being reduced, the higher employment numbers will lead to an upward revision in GDP when the BEA does its next comprehensive revision.
Tom West
Oct 9 2006 at 8:28am
Oops. I must have posted my response in the wrong article…
[I’ve now removed the extraneous one now that you’ve reposted it in the intented article–Econlib Ed.]
RogerM
Oct 9 2006 at 8:42am
I think that it is vestigial Keynesianism to applaud the discovery that it took 810,000 more people than previously estimated to produce our nation’s output.
I don’t understand how this is Keynesian. Can anyone help me?
careers
Oct 9 2006 at 3:57pm
Whopping – sensationalist reporting even on jobs.
Igor Uszczapowski
Oct 9 2006 at 4:21pm
Dear RogerM,
Your question does not betray how much you know of or what understanding of Keynesianism you have. So my answer might not be of much use to you.
Keynes thought that government should intervene in the economy to create employment.
Though considered a great economist, like most economists, Keynes had a very crude notion of an economy because – as is very popular with economists – he did not much care about economic reality. (He considered the economy a pretty crude equilibrium system rather than a complex pattern of intricate processes, did not discern between the manifold different types of unemployment, unduly generalised (in his “General Theory”) conditions specific to a certain time in history and, and, and…)
As a result, his general stance in the matter of employment is not far from the socialist position which considers employment a good thing without paying attention to the conditions and advantages of productive employment (in a free society) vis-à-vis employment for employment’s sake. Hence, in a communist country everyone is in employment at the price of being forced into ridiculously unproductive work and therefore being miserably poor.
However, Keynes was good with the pen, and ironically his best book (reads like a novel, marvelous stuff) “The Economic Consequences of Peace” (his personal account of how the Versaille treaty was negotiated, he belonged to the group of British emissaries), is one of the most graphic accounts of how government intervention in 1919 was bound to create economic desaster after the First World War (including mass unemployment) and led to one of the most terrible catastrophes in modern history, the Second World War.
Igor Uszczapowski
Oct 9 2006 at 5:11pm
By the by: Here is a truly remarkable excerpt from J.M. Keynes’ “Preface to the German Edition” of his acclaimed “The General Theory of Employment, Interest and Money”: Signed 7 September 1936, that is with the Nazi regime in full swing, Keynes, trying to sell his great findings, assiduously writes to his German readers: “Nevertheless the theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of production and distribution of a given output produced under conditions of free competition and a large measure of laissez-faire.”
Shocking enough for a German reader (I am German), even 70 years after the event. What conclusions contemporary Americans might draw from this, I don’t know.
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