The BLS lead sounds bad enough:
Nonfarm payroll employment declined sharply in December, and the unemployment rate rose from 6.8 to 7.2 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Payroll employment fell by 524,000 over the month and by 1.9 million over the last 4 months of 2008. In December, job losses were large and widespread across most major industry sectors.
But notice that the household survey reported employment losses of 806,000 with this:
The employment-population ratio fell by 0.4 percentage point to 61.0 percent over the month and by 1.7 percentage points in 2008.
Our graph shows the employment-population ratio and labor force participation over the past 10 years. As the latter has declined, the rise in the unemployment rate understates to the true decline in the ratio of employment to population.
This news should tell Congress that we need a big stimulus package ASAP and one that has a lot of bang for the buck. On this score, I think the Senate Democrats have it right:
President-elect Barack Obama's proposed tax cuts ran into opposition Thursday from senators in his own party who said they wouldn't do much to stimulate the economy or create jobs … Sen John Kerry, D-Mass., said, "I'd rather spend the money on the infrastructure, on direct investment, on energy conversion, on other kinds of things that much more directly, much more rapidly and much more certainly create a real job."
Update: Bruce Bartlett provides a very interesting discussion on the effectiveness of various fiscal stimulus proposals.