The speed limit view of job creation is greatly overstated. Here are the fastest periods of six-month job growth in the United States since 1950 (scaled to today's job level)

We can and likely will do much better than 500K or 600K per month.

Slightly more nuanced 🧵follows.
These examples are a long time ago but I would argue conditions are better for job creation now than ever before:

--Huge stimulus

--Highest opening rate ever recorded

--A large number of unemployed

--People getting vaccinated, COVID coming down, policy restraints ending.
Moreover, the rate of people finding jobs is notably low right now as @p_ganong points out. If it was just normal we would be adding an extra 500,000 jobs a month give or take.

I've gone the opposite way on the "speed limit" view on the pace of job creation than @paulkrugman. All of last year I was emphasizing what I called the "slog": a period when the pact of job creation would be limited by the difficulty matching people to jobs.
I have also emphasized that after the "partial rebound" (a period we're still in) it will get harder to match people to jobs. It is easier to bring people back from temporary layoff than to match them to entirely new jobs.

At *some* point should get harder to add jobs.
But we're not close to that point. Still lots of COVID and non-vaccinated people in April and May. The only reliable economic data we have is for an eternity ago in COVID time.
And moreover, just read this piece and think about how awful it would have been for the ARP to cut 11 million people off UI in March and April--even if they would have forced more people into jobs more quickly.…
IF the strong version of the speed limits view is right then potential GDP is substantially lower than we thought, inflation risks are substantially higher than we thought, and the American Rescue Plan was way too many dollars per month (but not enough months).
I do think there are some limits. You can't employ 9m people in a single month even if there are 9m job openings. The short-run NAIRU is higher than the long-run NAIRU. The last few million jobs might be particularly hard to get back and take longer than we (or I) would like.
The most important policy to speed up job growth is to wait another month or two or three or four.

I would bet the pace of job creation over the next six months is meaningfully faster (maybe 50% faster) than it has been the past three months.
I also think there is a good chance that we get at least one month with 1 million jobs and I just hope it is me and not @Austan_Goolsbee doing @SquawkCNBC that month.

• • •

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with Jason Furman

Jason Furman Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @jasonfurman

10 Jun
We have had more inflation in the first 5 months of this year than most forecasters expected for the full year. How should we revise our forecasts? Not obvious:

1. Expect less (or even negative) inflation going forward.

2. Only getting started (expect more going forward).

A 🧵
FIRST VIEW is based on mean reversion. A lot of the inflation we have seen is in specific categories like vehicles, travel and restaurants. Some of those increases could reverse and others could level off. This is a striking illustration of that.
Going for this view is the fact that I believe there is a very likely case for substantially faster job growth going forward so the supply-side of the economy could start catching up with the demand side.
Read 11 tweets
10 Jun
Nominal wages are about 0.9% above their pre-pandemic trend. BUT prices are about 1.4% above their pre-pandemic trend. So as of May real wages were down--with the notable exceptions of financial activities and leisure and hospitality.

(Caveat: some data kludge, see below.) Image
This is as of May, could easily change, potentially by a lot in coming months, depending on what happens to nominal wages and nominal prices.

Hopeful story: there is more of a story of mean reversion in prices (i.e., many *way* above normal and will come down) than in wages.
The data kludge caveat: the average hourly earnings data is seriously distorted by composition effects (low wage workers not back). The ECI data adjusts for this composition but only goes through March. So I used ECI through March and AHE to extend to May. Introduces some error.
Read 4 tweets
9 Jun
My thinking:

1. People's 90% confidence intervals are systematically too small (as in, stuff happens outside them more than 90% of the time).

2. Especially true of economic forecasters (how many jobs numbers in the last 15 months were outside your 90% confidence interval?)
3. This year two types of uncertainty are much larger than usual: (a) the virus could mutate and escape the vaccine and (b) our combination of positive demand and supply shocks plus reallocation is way out of our sample.
As for the numbers, I would think a 5%+ chance we have mandatory social distancing in December. Last time around prices fell 0.8% in a two month period. Plus add in all of the other randomness and unforeseeable events.
Read 5 tweets
8 Jun
Another interesting but impossible to interpret question fro the IGM forum on "The current combination of US fiscal and monetary policy poses a serious risk of prolonged higher inflation."

What is "serious risk" and "prolonged higher inflation"?…
Inflation was below the Fed's 2% target for a long time before this crisis. If it is 2% after this crisis that would be "prolonged higher inflation" but almost everyone would agree it was good. If this is what I thought should I answer yes or no to the question?
What if I think inflation will rise to 3% but that is a better rate than the 2% target? How should I answer the question?
Read 5 tweets
8 Jun
The age composition of employment changes is interesting, I haven't all my thoughts together on it so sharing while I continue to scratch my head. And any thoughts most welcome.

A short 🧵
Teen employment is stunning. It is already above its pre-pandemic rate. Also:

--The unemployment rate is the lowest since the 1960s (lowest ever for Black)

--40% of the job gains in the last two months were age 16-19 (4% of the population)
Hard to be sure what it means given that these data are very noisy & disaggregating more would run into seasonal adjustment issues. But some factors may be: reduced immigration, shift to online schooling or increased time off from school, and many of them are not eligible for UI.
Read 6 tweets
8 Jun
How to forecast inflation? Four approaches, different answers from each:

1. Micro: component-by-component
2. Macro: slack
3. Macro: quantity theory
4. Macro: nominal GDP - real GDP

A 🧵 on thinking about these.
MICRO: COMPONENT-BY-COMPONENT. Some people are skilled/experienced at this, I'm not one of them. For example, might think used car prices temporarily spiked and will fall when the temporary bottleneck ends up airfares still need to rise.
This can be very useful for shorter-run forecasting but ultimately the microeconomic stories can only tell you about relative prices.

Two countries, one might have 1% average inflation and the other 10% average inflation and no micro story can distinguish them.
Read 16 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!