It looks optimistic mainly because people think of zero as the threshold. In fact, job creation must keep up with population growth in order to prevent the labor market from deteriorating.

Job Creation Math: The Three-Card Monte of Economics: "What does an increase in jobs really mean?

John W. Snow, the Treasury secretary, raised the issue last week by saying that he expected the economy to add 200,000 jobs a month for the next year. With almost three million jobs having been lost since early 2001, the comment had an air of bold optimism to it and caused a bit of a stir on Wall Street."

We are surprised," a senior economist at Goldman Sachs wrote to clients, "that Snow would choose to hand the Democratic presidential candidates this optimistic prediction."

But it looks optimistic mainly because people think of zero as the threshold. In fact, job creation must keep up with population growth in order to prevent the labor market from deteriorating.

These days, the economy must add from 150,000 to 200,000 jobs every month to keep the unemployment rate from rising, economists say.

In 1997, the economy added 250,000 jobs a month, and the unemployment rate fell substantially. But in 1995, 180,000 new jobs were created each month, and the jobless rate ticked up slightly.

Shortly after a downturn ends, people who had dropped out of the labor force during the slump — no longer working or looking for work — begin their job search again. This swells the ranks of the officially unemployed and makes a monthly gain of 200,000 look even smaller.

"It's entirely possible that you'll see an uptick in the unemployment rate even with" a monthly increase of more than 150,000, said Richard Berner, the chief United States economist at Morgan Stanley.

So without changing his meaning, Mr. Snow instead could have said, "We're not going to have enough job growth over the next year to bring down the jobless rate very much, if at all."

Given that the Bush administration last year predicted a monthly job gain of about 300,000 for 2004, Mr. Snow could even have added, truthfully, "This estimate of job growth is about 50 percent lower than the last one the administration made."

http://www.nytimes.com/2003/10/26/weekinreview/26LEON.html