Just how strong is the economy?

-- The economy is so strong that the number of people on Social Security disability is "plunging, a startling reversal of a decades-old trend that threatened the program’s solvency." 2yrs ago system was going to be insolvent by 2023. Now 2032.

-- Food stamp use that had been steadily increasing under the Obama administration has fallen to an eight-year low.

-- Over 95% of manufacturers bullish on future, ‘record optimism’

-- Millenials are finally leaving their parents' home

Broad range of company stocks soar after Trump election win

Remember the claims by Justin Wolfers and Eric Zitzewitz that a Trump win would crash the stock markets? Well, the opposite has occurred.

You get an idea of the types of industries that have been most harmed by President Obama and which ones will be helped the most by Trump see the stocks that have gone up the most.

From USA Today:

Small stocks are logging big gains largely because tiny companies generate most of their sales and profits domestically, where Donald Trump's economic agenda is seen benefiting the most.

Trump’s call for lower taxes, fewer regulations on businesses and government-financed infrastructure projects are viewed as a boon for smaller companies. . . .

From the Wall Street Journal:

Shares of banks, industrials and health-care companies propelled the Dow Jones Industrial Average to 19000 on Tuesday. The bets on those sectors largely reflect investors’ expectations of looser regulation, and higher growth and interest rates under a Trump administration. . . . 

Goldman Sachs Group Inc. (contributed 240.99 points to the Dow industrials since Nov. 4) and J.P. Morgan Chase & Co. (73.76 points) 

The two banks have been big factors in the blue-chip index’s rally this month, largely because of the improved outlook for bank earnings and the rebound in long-term bond yields, which can make lending activity more profitable.That has particularly helped J.P. Morgan, the largest bank in the nation by both assets and market value. Since the presidential election, bond yields have risen and the gap between long- and short-dated debt has widened. That should help banks’ income because it increases the difference between what lenders charge on loans and pay out on deposits. . . . 

UnitedHealth Group Inc. (99.64 points) 

The largest U.S. health insurer has struggled to eke out profitability from its Affordable Care Act plans. UnitedHealth Group has said it intends to withdraw from nearly all of the health-law marketplaces next year amid anticipated annual losses of about $850 million on ACA plans. Other insurers have also pulled back from their coverage areas under the law, leaving many counties with only one participating insurer and increased premiums. President-elect Donald Trump has pledged to “repeal and replace” the Affordable Care Act. Still, the law has also resulted in a Medicaid expansion, bringing new customers to the insurer. In its latest quarter, the company added 9% more Medicaid members.  . . . 

Caterpillar Inc. (77.45 points) . . .

Median Household Income still much lower today than it was when the recession ended!

Click figure to enlarge.  The original figure is available here.

It is one thing to say that the economy is worse than before the recession hit.  It is another to say that we are lower now than when the "recovery" started.

Estimated Second Quarter GDP growth implies that Weather wasn't the reason for the drop in 1st quarter GDP

GDP fell at an annual rate of 2.96 percent in the 1st quarter.  To make that up, just to get back to where we were at during the end of December, would require a 3.1 percent increase in the 2nd quarter.  But that would leave us with zero growth over the first half year.  But if the shrinking GDP in the first quarter was just a temporary aberration from weather, we should easily make that up and be back up to at least the meager annual growth rate of 1.8 percent we have experienced during the Obama "recovery."  From The Hill:

Business economists have lowered their estimates for economic growth in the second quarter following news of a significant contraction during the first three months of the year. 

The April to June forecast fell to 3 percent from a 3.5 annual rate in June, according to a special survey released Friday by the National Association for Business Economics (NABE). 

The forecast change is due mostly to a late June report showing that the economy shrank at a 2.9 percent pace in the first quarter. . . .

Newest Fox News piece: "Mr. Obama, you can’t blame our economic troubles on weather"

With the Obama administration continuing to blame the poor economic growth in the first quarter on the weather, it seemed useful to include a few facts.  Sure, it is certainly plausible that bad weather can impact GDP, but neither cold weather or bad snow storms seem to have a really noticeable impact.  More importantly at the end of the piece I offer a way to test if Obama is right about the claim.  My newest piece at Fox News start this way:

The economy took a bad hit during the first quarter this year.  It shrunk at an annual rate of 2.96 percent.  Since the beginning of 1947, there are only 16 of the 268 quarters experienced worse growth. 

The Obama administration blames the slow growth on the “historically severe winter weather, which temporarily lowered growth.” Jason Furman, the chair of Obama’s Council of Economic Advisors, made this assertion again on July 3 and President Obama has made this claim several times.  

But that doesn’t square with the historic data. The five worst winter storms or winters with the coldest temperatures do not match economic downturns. 

In a list of the worst United States winter storms since 1888, Epic Disasters, using National Weather Service data, lists five of the ten worst occurring since 1947.  Four of the five saw economic growth.  Only during the fifth worst stormdid the economy shrink.  The average annualized GDP growth during the quarters when those storms struck was 1.8 percent. . . . .

So can the bad winter storms during the first quarter of 2014 explain the shrinking economy?

The Obama administration has blamed the slow growth on the “historically severe winter weather, which temporarily lowered growth.”  Jason Furman, the chair of Obama’s Council of Economic Advisors, made this assertion again on July 3^rd. 

In a list of the worst United States winter storms since 1888, Epic Disasters, using National Weather Service data, lists five of the ten worst occurring since 1947.  Four of the five saw economic growth.  Only during the fifth worst storm did the economy shrink.  

The media misleading about job growth: Full-time jobs falling, part-time service sector jobs up

The media talks about what a great jobs report came out today.  Take CNN's headline: "Great jobs report: Strong hiring, unemployment down"

The U.S. economy added 288,000 jobs in June, the Bureau of Labor Statistics reported Thursday. 

That number beats economists' expectations and comes along with other good news: Job growth was revised higher for both May and April. 

Taken altogether, that means employers added 1.4 million jobs in the first six months of the year. 

That's the strongest six months for job growth since 2006.  

Meanwhile, the unemployment rate is now 6.1%, down from 6.3% in May. The drop came for the right reasons: More Americans said they had jobs, plus more people joined the labor force. . . .

Barron's has the title "Dow Tops 17,000 on Stellar Jobs Report"
Jobs did rise, but they are part-time, not full-time jobs.  Indeed, full-times jobs has fell significantly and has been down slightly since the beginning of the year.

Unfortunately, the jobs are not only part-time, but about 80 percent are service sector jobs.

It is pretty amazing how the media keeps on making the economy look better than it is.

One thing that is clear is that the percentage of long term unemployed as declined since the long term unemployment insurance benefits were reduced.

Economy shrinks by 1 percent in First Quarter

Pretty amazingly bad news today.

The economy in the U.S. contracted for the first time in three years from January through March as companies added to inventories at a slower pace and curtailed investment. 

Gross domestic product fell at a 1 percent annualized rate in the first quarter, a bigger decline than projected, after a previously reported 0.1 percent gain, the Commerce Department said today in Washington. The last time the economy shrank was in the same three months of 2011. The median forecast of economists surveyed by Bloomberg called for a 0.5 percent drop. . . .

Do you want to see what Obama's "recovery" looks like?  This is the first recovery in US history where the gap between trend GDP and actually GDP has been getting bigger over time.

Talking to Politichicks about the economy and taxes at CPAC

Economist and author (“At the Brink”) John Lott talks about jobs numbers, unemployment, the economy and more with Ann-Marie Murrell and Morgan Brittany.  From CPAC 2014, Washington, D.C. on Friday, March 7th.

"Putting America back to work": Appearance on Canada's Sun News with Brian Lilley

March 7, 2014 20:23
Economist John Lott discusses the employment situation in the United States coming out of the great recession.

Income growth has gotten worse since Obama became president

From the New York Times:

But the report also made plain what many Americans feel in their bones: Wages are stuck, and barely rose at all in 2013. They were up 1.9 percent last year, or a mere 0.4 percent after accounting for inflation. Not only was that increase even smaller than the one recorded in 2012, it was half the normal rate of wage gains in the two decades before the last recession. . . . 

“People are running in place in terms of their living standards,” said Ethan Harris, co-head of global economics at Bank of America Merrill Lynch. “There’s almost no growth in spending power.” As recently as 2008, when the economy sank deeper into recession and Lehman Brothers collapsed, wages still managed to rise by 3.5 percent, before inflation. But the combination of a backlog of workers left behind in the recession’s wake, as well as productivity gains resulting from new technologies, means salaries may not rebound anytime soon. . . .

In understanding the data for 2008, realize that the price level fell slightly -0.13 percent that year. So that 3.5 percent growth in wages was entirely real.  

Fox News Poll: 74 percent of Americans say US still in recession

From a new Fox News poll:

As President Obama starts his sixth year in office, his job ratings remain near record lows and more voters think his policies have hurt rather than helped the economy.  And even as voters continue to hold mostly negative views on the economy and the direction of the country, a new Fox News poll finds they see some improvement. 

A third of voters say they like both Obama and his policies -- a dramatic drop from 47 percent who felt that way in October 2012.  In addition, 62 percent now say they dislike the president’s policies, up from 51 percent the month before his re-election. 

Voters aren’t impressed with Obama’s economic policies:  while 27 percent think they’ve helped, a 40-percent plurality says they’ve hurt the economy.  And another 33 percent don’t think the president’s policies have made much difference either way. . . . .

Nearly 70% of Americans say the economy is generally in poor shape

From CNN Money:

Despite a recent string of positive economic news, Americans say they aren't feeling the improvements. 

A new CNN/ORC poll released Friday showed people were pessimistic that the economy was improving. Nearly 70% said the economy is generally in poor shape, and only 32% rated it good. . . .

Evidence that the changes in part-time jobs over this year have been related to the employer health insurance mandate

If you graph out the data on the change in part-time jobs and take into account that the Obama administration announced a temporary delay in the employer mandate in early July, it sure looks like part-time jobs were increasing for a few months as employers thought that they were getting closer to the mandate going into effect and that as soon as the mandate was put on hold there was a sudden drop in part-time jobs.  The reason that others are missing this pattern is that they aren't taking into account the Obama administration announcement and the fact that there is no reason to push people into part-time employment a long period of time before the rule finally goes into place.

Note that there were no similar sudden swings in full-time jobs over the same period of time.

With the one year delay, the number of part-time jobs seems to have gotten back to its original trend.  If I am right, we will again see an increase in part-time jobs next year.  Obviously these changes are small, but it appears that this small variation could be related to Obamacare.

The data from the BLS.gov is available here.

Obama's CEA hides impact of the Affordable Care Act on part-time workers by looking at wrong time period

Betsey Stevenson, who is with the Obama's Council of Economic Advisors and also Justin Wolfers' wife, has this claim:

New data out today in the Bureau of Labor Statistics Monthly Employment Report show that of the increase in employment since the Affordable Care Act became law, more than 9 out of 10 positions have been full-time. . . .

So how is this consistent with my previous post that "96 percent of net jobs added this year have been part-time jobs"?  There is a simple explanation.  They are looking at the change in jobs since March 2010.  My discussion was clearly only about the changes that have occurred this year.  To me it doesn't make much sense to look at the change over the entire period because many of the regulations didn't start for years.  For example, what if that the change was due to the employer mandate?  But that regulation was not supposed to go into effect until the end of this year.  Given that firms apparently preferred full-time workers for these jobs, there is no reason to expect them changing the jobs from full-time to part-time so far in advance.  Obama's economists don't really explain why they expect noticeable changes to occur 3.75 years before the employer mandate.

Just to remind people of the pattern in full-time and part-time jobs this year.

Newest Fox News piece: "Jobs numbers reflect another bleak month for American workers"

My newest Fox News piece starts this way:

Friday’s new job numbers show something workers already knew: they face a very bleak job market. Unfortunately, Americans have been facing tough times for many years now. According to the latest Gallup poll, Obama’s job approval rating on the economy stands atjust 35 percent. 

After over four years, this continues to be, by far, the worst recovery on record. And that goes for income as well as for job growth. 

Too often the media’s gauge of whether the economy is improving rests solely on the number of jobs created or the unemployment rate. And indeed, 169,000 jobs were added in August, but what is rarely mentioned is that at the same time 204,000 more working age people were added to the workforce. 

True, the unemployment rate has also fallen from its peak of 10 percent down to 7.3 percent. But that doesn't mean many new jobs. . . . .

Continued weak job growth during Obama's recovery

Updated with today's new jobs numbers

Click on figure to make it larger.

Numbers continue to be Stunning. 96 percent of net jobs added this year have been part-time jobs

Updating the job numbers with the new numbers that are out today continues to show that virtually all the jobs created this year have been part time jobs.

So far this year there have been 848,000 new jobs.  Of those, 813,000 are part time jobs (for both economic reasons and noneconomic reasons).   As can be seen in the above screen shots from the BLS.gov, the total part-time jobs changed from 26.437 million in January to 27.250 million in August.  To put it differently, an incredible 96% of the jobs added this year were part-time jobs.  (It isn't clear to me why we see the differences in part time for economic and noneconomic reasons.)  However, these numbers raise a question about whether the employer mandate that has already been forcing some companies to move to part-time workers so as to avoid government imposed penalties is having a significant impact.  Might the relationship between the recent part time jobs and overall job growth be stronger as we were getting closer to what people thought would be the implementation of Obamacare's employer mandate?  Might we now see a divergence with the very recent one year delay in the employer mandate?  Or was the 2012 election the defining event for firms to begin to study the impact more?  Data from the BLS.gov.

UPDATE 4: Using the sum of the part-time economic and noneconomic reasons.  The relationship that appears to exist this year seems interesting.

Using the numbers from Table A6

UPDATE: The BLS.gov also provides a sum of these two numbers (available here) where they get a total of 532,000 (thanks to the "Department of Numbers" for pointing this out and to Nick for emailing me about their post).  That implies that 63% of jobs added this year were part-time jobs, which is still an amazingly high number.  Department Numbers uses this number Total Part Time Workers (LNS12600000) rather than the sum of the Part-Time for Economic Reasons (LNS12032194) and Usually Work Part Time Noneconomic Reasons (LNS12005977).  At least part of what is going on has to do with the seasonal adjustment of the components produces a different result than seasonally adjusting the total.  I can't see any reason that looking at the total makes more sense than looking at the sum of the two components.  Indeed, a strong case could be made that it is better to seasonally adjust the components and not just the total.  In any case, whether it is 63% or 96% or someplace in between, it is still a large portion of the increase in jobs that is due to part time employment.

Steve Bronars, a friend and a labor economist, argued that the most useful comparison might be to look at only Usually Work Part Time Noneconomic Reasons (LNS12005977).  In that case, there was an increase in part-time workers of 875,000, but only an increase in jobs of 848,000.  Thus, the increase in part-time jobs equals 103% of the increase in jobs from January to August.

UPDATE 2: Ben at the Department of Numbers now says that the percentage using Table A-6 is 59%, not 63%, but that is using a different time period.  It is easy to verify the 63% using the "total part-time" number for the change from the beginning of the year (January through August) (63% = 532,000/848,000).  532,000 = 27,999-27,467.  848,000= 144,170-143,322.  It seems pretty clear to me that the number to compare the 96% to is 63%, not 59%.

UPDATE 3:  Tyler Cowan writes: "As Ben Engebreth points out, based on these BLS charts, the correct number seems to be 59% not 96%, though the higher estimate does still seem to hold in Lott’s (more cumbersome and less transparent) sources."  But he provides no explanation for why this should be correct nor does it appear that he has checked the issues discussed in this post.

Hiring and Quits have both still lower than they were during the recession

Hiring falls during a recession, but it has continued to fall during this "recovery."  Amazingly, we are 4 years into the "recovery" and monthly hiring over the last three months is still slightly lower than it was during the recession.  Who would have thought that was possible?

Quits over the last three months are also still lower than during the recession.  To put it simply, people are apparently more afraid of quitting their jobs now than they were during the recession.

This data is from the BLS.gov JOLTS data.

Comparing job growth over recoveries since 1970

Note that job growth during a recovery is usually greatest after more severe recessions.