Employment Dynamics--Gross Job Gains and Losses

Commentary by Bob McTeer

Source: Forbes

The employment numbers we wait for on the first Friday of most months are net changes. How much did employment grow? These small net amounts obscure much of the churn in the labor market—the gross number of new jobs created minus the gross number of new job losses. It is worthwhile occasionally to review these gross numbers, even though we get them with a significant lag.

The latest quarter reported by the Bureau of Labor Statistics on May 1, 2012, for the third quarter of 2011, titled Business Employment Dynamics—USDL-12-0813, showed the best result since the first quarter 2006. “Gross job gains from new and expanding private sector establishments were 7.1 million, an increase of 166,000 jobs from the previous quarter.” “Over this period, gross job losses from closing and contracting private sector establishments were 6.3 million, a decrease of 9,000 jobs from the previous quarter.” Unrounded, there was a net increase in jobs of 753,000 jobs for the quarter.

Given the nature of the job churn—the result of “creative destruction”—it is probably good news that most of the net increase came from new jobs created rather than fewer jobs lost. I will guess, but don’t know, that this pattern has continued for the past two quarters. In any case, it is important to keep in mind that the net numbers we will be watching for on Friday morning are small relative to the much larger gross gains and losses they are derived from. That is a sign of a dynamic economy continuing to evolve and reinvent itself.

View in PDF