Must-Read: Nick Bunker: How the U.S. Housing Boom Hid Weaknesses in the Labor Market

Must-Read: But I cannot help but think that the argument of this paper is fundamentally wrong:

Nick Bunker: How the U.S. Housing Boom Hid Weaknesses in the Labor Market: “The share of workers ages 25 to 54 with a job has been on an overall decline since 2000…

…This decline hit prime-age workers without a college degree particularly hard…. Kerwin Kofi Charles and Erik Hurst of the University of Chicago and Matthew Notowidigdo of Northwestern… detail the relationship between share of prime-age, non-college-educated men working in manufacturing, working in construction, and those not employed. The combined share of these three series seems to stay relatively constant at about 50 percent, with increases in construction employment offset by declines in manufacturing employment or declines in non-employment. So perhaps increased demand for construction workers during the housing bubble offset the declines in manufacturing employment. Looking at trends in employment across metropolitan areas in the United States, the three authors find evidence that the construction industry did end up hiring workers who left the manufacturing sector…. The results of this paper support the larger idea that declining employment and labor force participation among prime-age men is primarily a result of declining demand for the types of labor that many of them traditionally provided…

The first two figures in the paper show the share of non-college men with jobs holding roughly steady until 2000, and then declining:

Pubs aeaweb org doi pdfplus 10 1257 jep 30 2 179

And the number of manufacturing plus construction jobs staying roughly constant until 2000, and then declining:

Pubs aeaweb org doi pdfplus 10 1257 jep 30 2 179

Share. Number. Share. Number. The non-college male employment share held up perfectly well through 2000 in spite of the fact that the average non-college male had a smaller and smaller chance of landing a job in manufacturing-and-construction. “Declining demand of the types of labor… traditionally provided” has no effect on employment shares–until after 2000. I believe that declining demand had a big effect on the price of labor–on real wages. But I see no sign it had any effect on the chance of a non-college male getting a job.

And look at non-college women:

Pubs aeaweb org doi pdfplus 10 1257 jep 30 2 179

Lagging men by 12%-points in employment in 2000, but by 15%-points today.

I see no reason to think that there is a cross-gender cross-era thing in employment shares for shifts in economic structure that lead to a declining demand for labor in traditionally “male” sectors to explain. Slack demand and thus a broken labor market is a much better hypothesis to start with.

June 30, 2016

AUTHORS:

Brad DeLong
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