Wednesday, July 30, 2014

The economy is shrinking, but more people are finding work

Justin Sullivan

Gross Domestic Product shrank at an annual 1 percent rate in the first quarter of the year and the alternative GDI measure of the same thing shrank even more rapidly.

Which makes it all the more puzzling that the news on the jobs front, thus far, seems fine. The Labor Department today announced that initial claims for Unemployment Insurance benefits have fallen to their lowest level since August 2007. And the jobs numbers from January, February, and March were okay.

Screen_shot_2014-05-02_at_8.46.28_am Those 569,000 net new jobs the economy added in the first quarter weren't runaway growth or anything, but it's a bit puzzling to see more people working in the context of less economic output.

As a mathematical matter, that means that productivity (i.e. output per worker) fell — fell by 1.7 percent to be precise. But qualitatively speaking it's a little difficult to see why that would be the case. What were all these new workers doing, in other words? These things happen. Vox hired a bunch of writers in March but didn't really start publishing until April. But I doubt we singlehandedly explain the trend.

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