I spent last week flitting around the globe - London, Paris, New York - and then I got the flu. Not the H1 swine thing, at least I don't think so, as I am not too bad. All this travel isn't that glamorous, honestly. Raleigh-Durham in North Carolina, Boston, Heathrow, Charles de Gaulle and LaGuardia Airport lounges in the space of a week - horrid! And then you get frequent-flyer miles so you can fly some more. I have no idea why they won't let you trade them in for something really useful like golf balls or wine.
Over the past week, the labour market has received a great deal of attention around the world and the news has been universally bad. Unemployment continues to rise and employment is falling apace. Turns out it is a pretty good time to be a labour economist.
I keep hearing people say that the labour market is a lagged indicator. It may have been in the past, but not during the great financial pandemic of the Noughties. Based on the decline in non-farm payroll employment, the business cycle dating committee of the National Bureau of Economic Research called the recession in the US as starting in December 2007, well before output fell. In the UK and the euro area, the labour market turned down in the second quarter of 2008, just as output fell. I will be looking for signs of green shoots in labour markets. To see recovery, I will be looking for firms to start hiring again in one or two sectors at least, even if the national numbers are not improving. There are no signs anywhere that firms have started creating new jobs.
I was in Paris to give the keynote address at a "high-level" meeting of OECD employment and labour ministers to consider how to tackle the jobs crisis. It was a really interesting meeting, following on from the G20 meeting in Pittsburgh. There were representatives from all 30 members of the OECD, plus their counterparts from Chile, Estonia, Israel, the Russian Federation, Slovenia and Brazil, which have applied for membership. It's also quite a time to be an employment minister. I was struck by the message that came out strongly in the final communiqué, and from the OECD in its latest Employment Outlook, which was that this thing is far from being over. The same message came out of the G20 meeting in September - this is not the time to take away the monetary and fiscal stimuli. And labour markets around the world are looking awful, especially for the young. It's a pity George Osborne didn't get an invitation, as he would have learned something.
My discussant was the Dutch employment minister, who explained that the Netherlands had been pretty successful in keeping unemployment from rising much at all, even though the drop in output had been broadly similar to that of the UK. According to the most recent
estimates from Eurostat, the Statistical Office of the European Communities, only 3.5 per cent of the workforce in the Netherlands is unemployed, compared to 7.9 per cent in the UK, 9.9 per cent in France, 7.7 per cent in Germany, 12.5 per cent in Ireland and 18.9 per cent in Spain.
It turns out that this is because of, in large part, the Dutch government's creation of 50,000 public-sector jobs. Good on them. Old-style Keynesian expansion does seem to work.
And then I was on Wall Street as the latest US jobs and unemployment numbers were released. They were much worse than the markets expected. Unemployment reached 9.8 per cent, a 26-year high. There are now more than 15 million Americans out of work. The figure would have been even higher if the participation rate had not fallen, which happens when people become discouraged by searching for a job and withdraw from the labour force. A few other facts stand out. Public-sector employment is falling quite rapidly, down 50,000 in the month. Unemployment rates were higher in August than a year earlier in all 372 metropolitan areas, while unemployment among blacks between the ages of 16 and 19 was 40.8 per cent. The unemployment rate for Americans under age 25 was 18.5 per cent, compared with 19.7 per cent in the UK. The young are being hit hard.
Non-farm payrolls in the US, which are calculated from establishment surveys, fell by 263,000. But, most worryingly, employment as measured by surveys of people fell by 785,000 in a single month (see the table below). The household survey has a more expansive scope than the establishment survey because it includes the self-employed, unpaid family workers, agricultural workers and private household workers. I suspect we are now seeing a shake-out of private household workers, such as nannies, cleaners and gardeners, whom people can't afford in a deep recession.
How to spot a trend
Barack Obama said he is exploring "any and all additional options" to bolster the economy, and called the report "a sobering reminder that progress comes in fits and starts and that we're going to need to grind out this recovery, step by step". In contrast to the UK, where there continues to be politically opportunistic talk of public spending cuts, there is even talk in the US of the need for a second fiscal stimulus package.
If anything, it looks as if the jobs picture in the US may have started to get worse again. This is bad for the rest of the world, as the US is likely to drive any recovery. It was first into recession, and likely will be first out, but not yet.
There is a lesson here for the UK, which is essentially that one or two data points don't make a trend. In July, the US unemployment numbers fell and then, wham, over the next two months they increased by 680,000. So beware the talk of green shoots, especially from those who have an incentive to be optimistic. You shouldn't read too much into a few months of rising house prices when wages are falling, profits are down and credit is scarce. I will be looking carefully for signs of a recovery in the UK, so watch this space.
David Blanchflower is professor of economics at Dartmouth College, New Hampshire, and at the University of Stirling