Tag: employment

Must-read: Dean Baker: “Prime-Age Workers Re-Enter Labor Market”

Posted on by Brad DeLong

Must-Read: The Federal Reserve is looking at the past six months and seeing significant improvement in the labor market. It is also looking at financial markets and seeing increased pessimism about inflation. It is having a difficult time reconciling these two.

The reconciliation is, I think, that financial markets now believe that the Phillips Curve is flatter and that the NAIRU is lower than they thought two years ago–and they are likely to be right:

Dean Baker: Prime-Age Workers Re-Enter Labor Market: “The economy added 215,000 jobs in March…

Graph Employment Rate Aged 25 54 All Persons for the United States© FRED St Louis Fed

…with the unemployment rate rounding up to 5.0 percent from February’s 4.9 percent. However, the modest increase in unemployment was largely good news, since it was the result of another 396,000 people entering the labor force. There has been large increase in the labor force over the last six months, especially among prime-age workers. Since September, the labor force participation rate for prime-age workers has increased by 0.6 percentage points. This seems to support the view that the people who left the labor market during the downturn will come back if they see jobs available. However even with this rise, the employment-to-population ratio for prime-age workers is still down by more than two full percentage points from its pre-recession peak.

Another positive item in the household survey was a large jump in the percentage of unemployment due to voluntary quits. This sign of confidence in the labor market rose to 10.5 percent, the highest level in the recovery, although it’s still more than a percentage point below the pre-recession peaks and almost four percentage points below the levels reached in 2000.

While the rate of employment growth in the establishment survey was in line with expectations, average weekly hours remained at 34.4, down from 34.6 in January. As a result, the index of aggregate hours worked is down by 0.2 percent from the January level. This could be a sign of slower job growth in future months.

Must-read: Jared Bernstein: “2015 Was Solid Year for Job Growth”

Posted on by Brad DeLong

Must-Read: Jared Bernstein: 2015 Was Solid Year for Job Growth: “Payrolls were up 292,000 in December and the unemployment rate held steady at a low rate of 5%…

…in another in a series of increasingly solid reports on conditions in the US labor market. Upward revisions for the prior two months added 50,000 jobs, leading to an average of 284,000 jobs per month in the last quarter of 2015. In another welcome show of strength, the labor force expanded in December, leading the participation rate to tick up slightly.

December’s data reveals that US employers added a net 2.7 million jobs in 2015 while the unemployment rate fell from 5.6% last December to 5% last month. While the level of payroll gains did not surpass 2014’s addition of 3.1 million, it was otherwise the strongest year of job growth since 1999.

Simply put, for all the turmoil out there in the rest of the world, the US labor market tightened up significantly in 2015…. We are not yet at full employment. But we’re headed there at a solid clip, and that pace accelerated in recent months…

Graph Employment Rate Aged 25 54 All Persons for the United States© FRED St Louis Fed

I must say, when I look at this graph I find it very hard to understand the thought of all the economists who confidently claim to know that the bulk of the decline in the employment-to-adult-population ratio since 2000 is demographic and sociological. 4/5 of the decline in the overall ratio since 2000 is present in the prime-age ratio. More than 5/8 of the decline in the overall ratio since 2007 is present in the prime-age ratio.

It thus looks very much to me like the effects of slack demand–both immediate, and knock-on effects via hysteresis. And what demand has done, demand can undo. Perhaps it cannot be done without breaching the 2%/year inflation target, but:

  • That 2%/year inflation target is supposed to be an average, not a ceiling.
  • Since 2008:1, inflation has averaged not 2%/year but 1.47%/year.
  • There is thus a cumulative inflation deficit of 4.22%-point-years available for catch-up. And
  • The 2%/year inflation target was extremely foolish to adopt–nobody sane in the mid- or late-1990s or in the early- or mid-2000s would have argued for adopting it had they foreseen 2007-9 and what has happened since.
Consumer Price Index for All Urban Consumers All Items FRED St Louis Fed

Must-read: Max Ehrenfreund and Carolyn Y. Johnson: “One of the Biggest Fears about Obamacare Never Happened”

Posted on by Brad DeLong

Must-Read: Max Ehrenfreund and Carolyn Y. Johnson: One of the Biggest Fears about Obamacare Never Happened: “Opponents warned that the law would discourage large numbers… from working…

…force millions into part-time jobs and make it more difficult to find work. Three new studies released this week suggest that, so far, it hasn’t happened…. If the law has had any effect on the labor market, it’s been a small one. ‘There were a lot of stories about employers, with anecdotes about employers shifting jobs to part-time,’ said Larry Levitt, an economist at the Kaiser Family Foundation not involved in the new research. ‘You can’t deny those stories–they’re real. They’re just not generalizable. It’s not what is mostly happening’…

Must-Read: Martin Wolf: America’s Labour Market Is Not Working

Posted on by Brad DeLong

Must-Read: Martin Wolf: America’s Labour Market Is Not Working: “In 2014… close to one in eight…

…of US men between the ages of 25 and 54 were neither in work nor looking for it… far higher than in other members of the group of seven leading high-income countries: in the UK, it was 8 per cent; in Germany and France 7 per cent; and in Japan a mere 4 per cent…. The proportion of US prime-age women neither in work nor looking for it was 26 per cent, much the same as in Japan and less only than Italy’s…. Participation rates for those over 16. These fell from 65.7% at the start of 2009 to 62.8% in July 2015… 1.6 percentage points of this decline was due to ageing and 0.3 percentage points due to (diminishing) cyclical effects…. Yet… the UK experienced no decline in labour-force participation after the Great Recession, despite similar ageing trends…. Back in 1991, the proportion of US prime-age men who were neither in work nor looking for it was just 7 per cent. Thus the proportion of vanished would-be workers has risen by 5 percentage points since then…. What has been happening to participation of prime-aged women is no less striking….

The comforts of idleness cannot be a plausible explanation since the US has the least generous welfare state among high-income countries. High minimum wages cannot be blocking job creation…. In the case of prime-aged women, the absence of affordable childcare would seem a plausible explanation…. The numbers with criminal records created by mass incarceration might also help explain the difficulty in finding jobs…. The relentless decline in the proportion of prime-aged US adults in the labour market indicates a significant dysfunction. It deserves attention and analysis. But it also merits action.

Must-Read: Jared Bernstein: September Jobs

Posted on by Brad DeLong

Must-Read: Jared Bernstein talks about the firm establishment survey, but there is also information in this month’s employment release from the household survey. The employment-to-population ratio is now back to 59.2%–a level it reached last October. No progress in raising the anemic and disappointing share of Americans with jobs in 11 months:

Civilian Employment Population Ratio FRED St Louis Fed

Now some of this is demography: the aging of the very-large baby-boom generation into retirement. But not much of it is demography: since 2000, the total employment-to-population rate has fallen at a faster pace than the prime-aged rate, but that faster pace is only 0.07%/year faster:

Graph Employment Rate Aged 25 54 All Persons for the United States© FRED St Louis Fed
Jared Bernstein: September Jobs: “Someone asked me the other day what the Fed would have to see…

…in this jobs report to make their mind up one way or the other about a rate hike in either their October or December meeting. The answer is: no one report could have that effect. If the report was a large outlier… it would be considered… um… a large outlier. If it was somewhat off trend, like today’s report, it would raise eyebrows…. If… suspicion is reinforced by the next two jobs reports, the Fed will very likely incorporate that into their evaluation at their December meeting and hold their target rate near zero…. ‘High-frequency’ data is but a dot on a painting by Georges Seurat. It’s not enough by itself to paint a picture of what’s going on in the job market, but if you combine it with a bunch of other dots, you may be onto something.