NFP Growth of over 500K in Historical Perspective

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Reader Rick Stryker writes:

It’s a good thing that Mitt Romney didn’t criticize the Biden economy by saying that we should be seeing 500K job increases, because that would have triggered another multi-year rant from Menzie that that’s IMPOSSIBLE!!!

Mr. Rick Stryker mischaracterizes what I wrote. I said the 500K was an unlikely number for a recovery month, and I stand by that, even if we express 500K accounting for growth in the labor force. Below I produce my May 2012 post:

Governor Romney has said that 500,000 is the monthly job creation he expects as normal during a recovery [1]. It actually last happened in May 2010 but is otherwise pretty rare. Reader Rick Stryker argues that the 500K should be expressed in percentage terms, accounting for the size of employment. Nonetheless, breaching the equivalent in percentage terms never happened during the eight years of the G.W. Bush administrations.

 

Figure 1: Month on month growth rate (log differences, not annualized) in nonfarm payroll employment, s.a. (blue), and 500,000 monthly change, expressed in percentage of 2012M04 NFP. Source: BLS April release, via FRED.

In fact, over the last 21 or so years, one has to go back to the Clinton administrations to find such numbers.

 

Oh, and by the way, unemployment has been at or below 4% only 11 times in the past 40 years (essentially at the end of the Clinton Administration).

Here is an updated graph:

Figure 1: Month-on-month growth rate of nonfarm payroll employment (blue), and 500K change in NFP expressed as a percentage of April 2012 NFP (red line). Dashed sky blue line at April 2012, on which Governor Romney made his May 2012 statement. NBER defined peak-to-trough recession dates shaded gray. Source: BLS, NBER, and author’s calculations.

Between Mr. Stryker’s 2012 comment, and May 2020, there were exactly zero occurrences of greater than 500K NFP growth (expressed as a ratio to NFP).

If one wishes to assert that the past two years constitutes a typical recovery, then I guess one could say 500K is “normal”.



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