It's still a recovery

Recent data is all indicating that the economic recovery is back on track (if not the best of all possible tracks) after some tense moments over the summer. Initial jobless claims have started falling again, stocks are up, exports are up,... Earlier this month the Bureau of Labor Statistics reported that hours worked in the second quarter of 2010 rose at the highest rate since the first quarter of 2006. Since October 2009 aggregate hours worked in the private sector has increased 2.4 percent. This would translate into 2.5 million private sector jobs if the workweek stayed constant; the reason we have seen an increase of only 755,000 private sector jobs over that time is that much of the increase in hours showed up as an increase in hours worked per week. Average weekly hours fell from about 34.6 to 33.8 during the recession and have crawled back to 34.2. That is, we've erased about half of the fall in weekly hours. This suggests that meaningful job growth is not too far in the future.

The latest piece of good news is retail sales: up 0.4 percent overall in August, 0.6 percent excluding motor vehicles and parts.



Alan Krueger says there's hope for meaningful recovery in the months ahead. Most interestingly, he argues that the reason recoveries have been "jobless" in the last few decades is that companies use recessions to increase productivity by restructuring. That phase of this business cycle, he says, is over.

So I'm starting to get optimistic again.

Initial claims stay flattish

Initial claims for unemployment compensation dropped a bit this week, but continues on a rather flat trajectory.

Initial claims have been drifting down very slowly since the beginning of the year and have been essentially flat the last three months. I've said before that historically large gains in employment have come several months before initial claims fall below 400,000. On the other hand, it seems unlikely that we'll see big gains in employment if initial claims aren't falling. So modest growth in payroll employment (+50-100,000 private) seems a good bet to me for the month of July. I don't know what's going on with Census employment this month so the overall numbers are hard to predict.

Back to basics

Everything that was happening in the economy in March and April appeared to be vindicating my bold predictions of a strong recovery. Everything that's happened since then seems to argue against this and raises the possibility of a long drawn-out jobless recovery or even double-dip recession. What happened?

Well, one thing that happened is that beginning in May credit spreads - the Baa-Treasury spread in particular - jumped significantly due largely to the Greek crisis. Concerns about the European banking system and the European economy in general, and the possibility of a spillover to the US banking system and economy, caused investors to dump risky assets. This raised borrowing costs and credit availability, which together with a general sense of unease halted business expansion. As the graph below shows in this recession-recovery there has been a strong correlation between the Baa-Treasury spread and economic performance (here given by the change in private payroll employment).

If the slowdown of the last two months was driven by the souring of financial markets, then stabilization of the markets could cause the economy to return to a strong recovery path. The response to Europe's bank stress tests, the leveling off (and slight decline in the last week or two) of the Baa-Treasury spread, and stock market rallies therefore may be a signal of coming strength in the economy.

To be honest I'm not as sold on the strong recovery story now as I was a few months ago, but I'm not dismissing the possibility either.

Should we panic about jobs?

Analysts and stock markets around the world are clearly panicked about the disappointing May jobs numbers. Paul Krugman is warning once again about a "lost decade" scenario as a result of the G-20's apparent determination to begin a fiscal retrenchment before the recovery has found its legs. Commentators on CNBC Friday took the jobs report as evidence of a jobless recovery.

One element of the report that has not received as much attention as it should, however, is the increase in hours worked. The BLS's measure of aggregate hours worked increased by 0.3 (in May, below the increase of 0.4 in March and April but still not bad. For the first five months of 2010 hours worked has increased at an annual rate of 3.4 percent. This is hardly a blistering pace, but it is significantly better than what the US experienced after the 1990-91 and 2001 recessions. Following the 2001 recession, for example, the US did not achieve a sustained pace of hours increases at this level until early 2006. We are certainly not experiencing the kind of rebound we did in 1983-84 when hours worked in some quarters rose at 8 or 9 percent, but 3.4 percent is still consistent with a sustained recovery. Add a guess of 1.5% for productivity growth, and we're looking at GDP growth of 5 percent - in the same range as what the ISM numbers indicate as noted in an earlier post.

One thing that appears to be happening is that the increase in hours worked is affecting the average work week more than employment; as the work week hits normal this summer we should see a pickup in job creation. The big decline in workers working part time as reported in the household survey suggests a shift from temporary work to full-time work. This is obviously good news for the economy, but it does not show up in the headline employment numbers.

That said, however, there are real concerns as to whether the recovery is sustainable at this point given what's happening in Europe. And the economy is in such a deep hole that we really shouldn't be satisfied with GDP growth in the 4-5 percent range, if that's what we're looking at now.

Jobs report

As always, Calculated Risk has an excellent rundown of details from this morning's jobs report. Details aside (and I won't even mention that my private jobs forecast from yesterday was almost exactly spot on - oops, I just did), the important message is what this says about the big picture.

For about 9 months now, as the economy struggled to get back on its feet, the conventional wisdom has been that we were in for a slow, jobless recovery because of the strong "headwinds" of a weak banking system, heavily indebted consumers, interest rates at zero and therefore unable to drop further, etc. When GDP started to rise in the fall but employment continued to drop, people started talking about how structural changes in the labor market meant we were going to get growth without jobs. Against this consensus was Bob Barbera and me as his scribe arguing that there was no reason to be so pessimistic. The historic record suggests that deep recessions are followed by strong recoveries; the last two recoveries were "jobless" because growth was weak, not because of structural problems in the labor market; the headwinds are real but will weaken as the economy improves; the Fed has engineered a remarkably stimulative monetary policy through unconventional means, the zero bound be damned. Our view, in other words, was that we should expect a normal recovery, not the anomalous scenario that the pessimists were peddling.

As 2009 came to a close the employment situation remained gloomy, and even a fairly good report in March was no cause for celebration. But April's jobs reports is a resounding confirmation of our - I'll call it conventional - view of the strength of the recovery. We have now seen two consecutive months with average employment growth of 260,000 jobs, the vast majority of which are in the private sector. According to the household survey, the economy has added over 400,000 jobs per month since January. The payroll survey is missing much of the job growth because it's based on incomplete data that is more incomplete at turning points. Just as this year's benchmark revisions showed that the economy lost many more jobs in 2008-09 than we initially thought, next year's revisions will probably show that we're now gaining more jobs than we thought. The payroll numbers will look more like the household numbers.

There is strong evidence, then, that the economy is on a track to produce well in excess of 3 million jobs this year (simple extrapolation of the household numbers suggests 5 million, but that seems overly optimistic). Now, a lot of things could still go wrong. The situation in Europe, especially, has the potential to derail the recovery. But looking only at the internal dynamics, this is looking like a self-sustaining, robust recovery.

A strong recovery would have many important implications. It would mean that the Fed and the Obama Administration guessed right. The Fed's unconventional monetary policies and the US Treasury's efforts to support the financial sector worked. The Administration gambled that an $800 billion stimulus rather than $1 trillion or more would be enough to put the economy on the path to self-sustaining recovery and the gamble paid off. I would have preferred a larger stimulus and a supplement this year to support state and local government finances - and a few months from now if there's an economic reversal we may regret that the Administration did not push for those - but for now it looks like the Administration's efforts were sufficient. A strong recovery also means that the Congressional Budget Office's deficit projections - which are based on absurdly low forecasts for growth in 2009-10 - are way too pessimistic. The news from the CBO over the next year will be of declining deficit projections, which one hopes will deflate the fears of the deficit hawks and relieve pressure on the Administration to prematurely withdraw fiscal stimulus. And a strong recovery alters - perhaps dramatically - the Democrats' prospects in this year's election.

Is job growth in the 3-5 million range enough? In one sense, the answer is obviously not. The economy is perhaps 11 million jobs below where it should be, and anything less than a restoration of those 11 million jobs is insufficient. There's still an awful lot of pain out there and there will continue to be pain for awhile. But it is difficult to imagine that the economy can grow at a pace in excess of 3-5 million jobs a year. Growth at the pace the economy has set in the last two months is probably about as fast as we can hope for. It's time for the pessimists to embrace the reality of a strong recovery.

Simple extrapolation

The trend in employment growth since January 2009 (the worst month of job losses during the recent recession) has been remarkably consistent: on average, each month's job performance (in terms of net change in payroll employment) has been about 67,000 better than the month previous. Job gains in March put us right on the trend line for that period. Simple extrapolation of the data suggests a net gain of 232,000 jobs in April.

All of the net improvement in the jobs picture since January 2009 has come from private sector employment. Total government employment has fallen by about 6000 jobs per month on average: cutbacks at the state and local level have offset gains in federal employment. Thus the trend for private sector employment is similar. Extending the trend line suggests, again, +232,000 private sector jobs (implying no net gain in government employment in April).

I think the trend in employment has been driven by expansionary fiscal and monetary policy and the economy's natural recuperative powers. I don't see anything in April that would have caused a departure from that trend. Census hiring may pick up in April, which would imply higher total employment.

So I'm going to predict +232,000 private sector jobs in the report tomorrow, and let's say +250,000 jobs overall. Note however that the standard deviation around the trend is large (81,000 for payroll employment), meaning that my 95 percent confidence interval for payroll employment (ex-Census adjustment) is +68,500 to +395,500.

Naturally this puts me in optimistic territory relative to the experts. Calculated Risk says the consensus is +200,000 total payroll employment (other sources I've seen put the consensus in the +170,000 range), of which +28,000 is private sector. I don't know how CR or the conventional wisdom squares that meager private employment forecast versus strong overall forecast with the fact that government jobs have been virtually stagnant for the past year. CR says there should be 100,000 new Census jobs in April, but that will be offset by employment losses at the state and local level. Also keep in mind that the ADP report (which showed +32,000 private sector employment in April and is the focus of the post in CR) badly underforecast private sector growth last month. I suspect that survey does a much worse job forecasting the BLS numbers than advertised.

GDP growth is still subdued

GDP growth in 2010Q1 was 3.2 percent according to the BEA's advance estimate. That's weaker than I thought it would be - I guess the consensus is smarter than I give them credit for. 3.2 percent is not strong enough to bring the unemployment rate down at a satisfactory pace. For that we need growth in the 4-5 percent range for the next year at least.

On the broader question of what type of recovery this is going to be, however, the data for Q1 confirm (for me at least) that we're on track for a traditional recovery rather than the jobless recovery that so many economists are worried about. For the first three quarters of this recovery, GDP has grown at a 3.6 percent annual pace. Compare that to the growth rates in the first three quarters following the 1990-91 and 2001 recessions: 2.0% and 2.3% respectively. The last two recoveries were jobless for a simple reason - GDP growth was too slow. We are on track, I think, for a recovery like that following the 1974-75 and 1981-82 recessions. Following those two recessions, GDP grew at a 4.5% and 6.1% rate respectively for the first two years of the recovery - I'd bet on a 1975-77 recovery rather than a 1982-84 recovery however.

Why the confidence? First, there's the fundamental statistical properties of GDP growth in the past few decades. If you run a regression of GDP growth on a constant, the output gap, and two lags of GDP growth, you find that typically deep recessions are followed by periods of strong growth: every one percentage point output gap adds about a third of a percentage point to annualized quarterly GDP growth. Our current output gap of about 5.9 percent therefore provides a powerful impetus to growth in the coming quarters: the model predicts a growth rate of 5.2 percent for the next four quarters. If we use the model to forecast the next four quarters of growth from a point three quarters into the recovery following the last two recessions, we get much lower forecasts: 3.6% for 1992 and 1.7 percent in 2002-03. Now the standard errors for these forecasts are very large, and in fact growth was somewhat higher than the model predicted in 1992 and somewhat lower in 2002-03 (4.2% and 1.7% respectively). So I'm not going to bet a lot of money on 5.2%. But the point is that strong growth coming out of a recession like this is normal, as is weak growth coming out of a recession like the last two. If you want to convince me that growth will be considerably slower this time around, you have to explain how the economy has changed. And no one has done that to my satisfaction.

The latest GDP report calls into question the most powerful argument that has been advanced for a slow recovery. Economists have been arguing that consumer spending is going to be sluggish during this recovery because households are heavily indebted and housing prices have fallen so much. But consumption spending rose 3.6 percent last quarter, following a 2.8 percent and 1.6 percent increase in the preceding quarters. As long as employment continues to pick up (and I think it will), consumption spending should be able to maintain the current pace for the foreseeable future. Business spending on equipment and software, traditionally a powerful cyclical indicator, was likewise strong last quarter, growing at a 13.4 percent annual pace. This indicates that business investment is not being restrained by problems in the banking sector, another of the headwinds that growth-pessimists focus on.

Weak spots last quarter were business investment in structures - a consequence of overbuilding in commercial real estate during the boom - and spending by state and local governments. There's not much we can do about investment in structures, but state and local government spending should be less of a drag as budgets improve along with recovery. Congress should long ago have provided more relief for state and local governments, and if I were in charge I'd press for this now.

The key to turning this into a self-sustaining recovery, of course, is growth in employment. Here again I think we can rely on statistical regularities for a powerful argument for employment growth in the coming quarter. A regression of employment growth on the previous three quarters' output growth suggests that in the second quarter employment should increase by 624,000 jobs, or just over 200,000 per month. If you think we're going to have considerably less employment growth than that, you have to explain how companies have been producing at the recent pace without hiring more workers. I don't think there's a convincing argument for that. It's more likely that we'll see stronger growth in employment than this - as Bob and I wrote in our Financial Times article a few months ago, companies probably overshot in reducing employment in 2008-09, and now will need to hire at a faster pace to get back to normal staffing levels. I'd bet on monthly employment gains of 250,000 or so for the next three months.

Matthew Yglesias on Christina Romer on the unemployment problem

Christina Romer argued in a talk at Princeton that the reason the unemployment rate is so high is not structural problems in the economy but a simple deficiency of aggregate demand. Matthew Yglesias draws the wrong conclusion:

Every time there’s a downturn a certain swathe of the elite starts to label it unfixable and structural. And the worse the downturn, the louder come the calls. Look at the history of the Great Depression and you see an enormous chorus of voices from the right arguing that nothing could be done and people would just have to suffer through it. They were countered by a chorus of voices from the left arguing that nothing could be done and people would just have to stage a revolution. It wasn’t true then and it wasn’t true now. The fact of the matter is that key people responsible for running the global economy—people at the European Central Bank and the Federal Reserve Board, and the Bank of Japan, people in the United States Senate, people in the Germany cabinet—are screwing up. In the developed world, those countries who’ve been able to respond aggressively to the crisis with aggressive expansion-via-devaluation are all doing pretty well. The bigger developed economies can’t do that exact thing, but they can mount more aggressive expansionary responses—they just aren’t.

That's not how I interpreted her remarks, nor how I think she intended them to be interpreted. I believe Romer was responding to a view that is common among those who criticize the Administration's policies from the left. Their argument is that the disproportionate rise in the unemployment rate during the recession reflects structural problems - firms have figured out how to do more with fewer workers - and therefore we are unlikely to get a significant drop in unemployment unless we have extraordinarily high GDP growth. Romer's point, with which I agree, is that normal recovery-level GDP growth - I would say in the 4-5 percent range for several quarters - should be sufficient to bring the unemployment rate down at a reasonable pace (reasonable meaning as fast as can be expected, not fast enough). The Obama Administration's focus on stimulating demand through fiscal policy, bailing out the financial sector, and supporting the Fed's monetary policy, is the correct approach to the problem.

Aargh again!

Robert Reich pooh-poohs the March employment numbers:

The US economy added 162,000 jobs in March. Great news until you look more closely. In March, the federal government began hiring census takers big time. These are six-month temp jobs, and they tell us nothing about underlying trends in the labor market... A census-taking job is better than no job, but it’s no substitute for the real thing. Bottom line: This is no jobs recovery.

But Reich has also been a major proponent of a "new WPA" to fight unemployment. Hey, the government has just announced a plan to hire a million workers on a temporary basis for the next six months. It's called "Census" rather than "WPA," but you'd think Reich could gin up just a bit more enthusiasm for it nevertheless.

Aargh!

Dave Altig comments on the jobs numbers:

What does seem clear is that the pace of net job creation is still well below the levels required to appreciably improve the unemployment rate or to make a sizable step toward regaining the eight million-plus jobs lost since the beginning of the recession. Updating a calculation referenced in a speech by Atlanta Fed President Dennis Lockhart on Wednesday, at a pace of 162,000 jobs added per month and at the current labor force participation rate, unemployment this time next year would still be just north of 9 percent.

Well yes, but at the pace of job creation in February every man, woman and child in America would have been unemployed by 2046. So that's an improvement.

[In case it's not obvious, my point is that there's no reason to believe that employment gains have reached a plateau at 162,000. For the last year there's been a steady improvement in the employment situation - the growth in jobs each quarter has been better than in the previous quarter (or more precisely, until this quarter, the decline in jobs has been less bad). This trend should continue.]

Not yet quite the breakout we've been looking for

March's employment numbers are in. The first month of substantial job growth in this recovery (except for the blip in November): payroll employment +162,000, unemployment rate unchanged at 9.7%. Consensus forecast was around +200,000, I was hoping for (I had been led to believe!) something in the range of +250,000 to +300,000, so it's not as good as expected. On the other hand:

(1) In the grand scheme of things, the recovery in employment is still pretty impressive and a lot more like 1983-84 than 1991-92 or 2002-03. The reason it's taken so long to get to jobs growth is that the recession was so dang severe. Look at the slope of the lines in recoveries:

(2) The household numbers are much better than the payroll numbers. One possible explanation is that the household numbers pick up increases in self-employment and in employment in new businesses that the payroll numbers miss. Household employment was up 264,000 in March and up 1.1 million since December (though the household employment numbers were more dramatic on the way down as well.) But the household numbers show the same dramatic recovery story as the payroll numbers do.

(3) Part of the reason the payroll number was lower than expected is that Census employment was lower than expected (+48,000 instead of the expected +100,000). Private-sector employment growth, at +123,000, was actually stronger than expected.

(4) One reason employment has not grown much during the recovery is that the average work week is rising instead. Average weekly hours has been increasing since November even as the number of employees has been falling. By comparison, in the "jobless recovery" following the 2001 recession, average weekly hours didn't start rising until mid-2003.

More views on the numbers: Calculated Risk, Financial Times, Paul Krugman.

The obvious take (a la Krugman): +162,000 jobs is better than a kick in the teeth, but short of the level that would signify a truly strong recovery. But we're on the way there.

And yet...

ADP reports private employment down 23,000 in March. But: that doesn't count Census workers, of which the government probably hired around 100,000 this month; ADP has been 70,000 too low on average since October; ADP numbers weren't affected by the blizzard in February while BLS's were artificially suppressed. So it's not hard to see BLS reporting +200,000 even in light of ADP's numbers. But I won't be satisfied with anything less than 250,000.

More employment forecasts

My simple VAR forecasting model (unemployment and continuing claims; employment and initial claims) tells me that December's employment situation will not be much improved over November's: Change in employment = -9000, unemployment rate = 9.9 percent. It shows strong growth in employment starting in January.

Every fiber of my being, however, tells me the employment number will be in positive territory. It's been rising by 70,000 or so every month, so let's say +60,000. That would certainly be consistent with recent economic releases that suggest a quickening pace to recovery. The unemployment rate is dicier: the labor force participation rate has fallen dramatically in this recession, meaning there are a lot of people out there who would ordinarily be working but aren't, and aren't counted as unemployed either. Strong growth in jobs could draw these people back into the labor force while not having a significant effect on the unemployment rate.

Fourth quarter GDP forecasts

The WSJ reports that a number of forecasting firms have increased their projections of fourth-quarter GDP growth, from an average (across 7 forecasting firms) of 3.1% to 3.9%. Economic forecasters have adaptive expectations. In the early stages of recovery forecasters are pessimistic because recent data has been pessimistic. As their pessimistic forecasts are proved wrong, they revise them upward to keep up with events (with a lag, of course). It works the same way on the down swing: in early 2008 forecasters were predicting at worst a mild recession because growth had been slowing mildly in recent quarters. Only when the bottom actually fell out did the forecasts catch up with reality. On the basis of this logic, I'm going to say, add 1% to the consensus forecast: fourth-quarter growth in the 4-5% range.

The magic 400,000 threshold

Smart people like Calculated Risk continue to argue that we won't see positive jobs growth until initial claims for unemployment insurance drop below 400,000. Hence the latest report showing the four-week average of initial claims as of yesterday was 462,000 indicates that, Punxsutawney Phil-like, we are doomed to experience another month of job losses.

True, if you run a regression of the change in employment on initial claims you get something like a 400,000 threshold. And true, coming out of the last recession employment didn't start rising until initial claims fell under 400,000 (that was in September 2003). But that was a pretty strange recession. For one thing, it was incredibly mild and the recovery was very protracted. For another, initial claims were actually below 400,000 throughout most of the recession and recovery, even as employment was falling.

But in each of the recoveries that followed the 1974-75, 1981-82 and 1990-91 recessions, employment started to rise well before initial claims fell below 400,000. As the graph below shows, following the 1974-75 recession employment growth turned positive once and for all in July 1975. That month, initial claims were 445,000 while jobs increased by 249,000. Initial claims didn't dip below the 400,000 mark until November. By that time employment had increased by 1.2 million.

Recovery from the 1981-82 recession: employment growth turns positive for good in March 1983 (+173,000) while initial claims are 481,000. Initial claims don't fall below the magic 400,000 until October (by that time the economy had created 2.3 million jobs!). [Note: this is monthly data; Eviews is messing up my horizontal axis labels for some reason.]

Recovery from the 1990-91 recession: Employment begins to rise for good in March 1992 (+50,000) while initial claims are 428,000. Initial claims rise to as high as 442,000 before dropping below 400,000 in October. By that time 818,000 jobs had been created.

So excepting the 2001 recession, during previous recoveries employment began increasing 4 to 7 months before initial claims fell below 400,000. Four hundred thousand is not the magic number.

Retail sales up in February

February was supposed to be a down month for retail sales because of the blizzard. Surprisingly, the Census Bureau reports sales were up 0.3 percent for the month. Excluding motor vehicles and parts the increase was a pretty amazing 0.8 percent (that's 9.6 percent on an annual basis and

up 4.2 percent from February 2009. Why were the auto numbers so weak? Well, cars are sold outside. Hard to check out the new models when they're buried under 3 feet of snow. Toyota's troubles didn't help either.

I believe 2010Q1 GDP numbers are going to be very good. March employment should be strong as well. Happy days are here again,...

Good news, bad news

Paul Krugman says anyone who calls the -11,000 jobs number for November good news is nuts. Obviously if the economy lost 11,000 jobs a month on average for a long period of time we'd be in bad shape. -11,000 is good news because it shows the economy is turning, not because it's where we want to be. We were in an eighteen wheeler whose brakes had gone out, hurtling towards a cliff. After heroic effort, inches before the precipice, we have turned the truck so we are running along, not toward the cliff. With continued effort we can look forward to turning the truck around completely; and that will be good news.

Krugman's benchmark for good economic news is +300,000 jobs per month. That's sensible. At the current pace of improvement we'll be there by April.

March employment and the Census

Calculated Risk runs the numbers and says if employment grows 200,000 in March, that's a pretty weak report. I'm inclined to agree, since March's number has to make up for the blizzard-suppressed February number, but at the same time perhaps beggars should not be choosers. I'm a little puzzled at CR's attitude toward Census workers. Beginning in March the Census Bureau will start hiring workers by the gajillions. CR calls this a "distortion" to the data. I say a job's a job - if Congress had passed a big jobs bill that created the same number of jobs, would CR call that a distortion?

Initial UI claims continue to fall

The US Department of Labor reports:

In the week ending Dec. 4, the advance figure for seasonally adjusted initial claims was 421,000, a decrease of 17,000 from the previous week's revised figure of 438,000. The 4-week moving average was 427,500, a decrease of 4,000 from the previous week's revised average of 431,500.

Further evidence that the labor market is picking up speed after the slowdown in the spring and summer. As the graph indicates, we're ahead of the pace compared to the recoveries that began in 1991 and 2001 but behind the pace set in the recovery beginning in 1982.

More optimism on 2010 growth prospects

We're starting to hear fewer of the "jobless recovery" forecasts, more projections of a fairly decent recovery. Janet Yellen forecasts GDP growth of around 3.5% in 2010 and 4.5% in 2011. Joseph Carson projects 3.7% in 2010. These numbers, of course, are less than satisfactory given that the economy has so far to go to full employment - Yellen, while centering her speech on a forecast considerably more optimistic than the consensus, argues with some passion that this rate of growth means we remain in dire circumstances for far too long.

But even this modest level of growth means that we'll have substantial growth in jobs over the next year. The surge in productivity growth in 2009 must have been a temporary phenomenon. I can't believe American businesses have figured out how to squeeze 5 percent or so more production out of the American workforce on a sustained basis. Most likely 2009's surge means that growth of productivity in 2010 will be below trend (this is the argument Bob and I made in our Financial Times piece in January). Trend productivity growth is supposed to be a little below 2 percent. If productivity growth in 2010 is a little under 1 percent, then the GDP growth forecasts above imply growth in hours of somewhere in the 2.5-3.0 percent range. Shave some off for an increase in the average work week, and it's easy to envision of 2 percent growth in jobs - roughly 2.6 million - and maybe more. This translates to over 200,000 jobs per month, far above the Obama Administration's forecast of 95,000, and a rate consistent with a fairly substantial drop in unemployment.