Tag: Labor Market

Must-read: Nick Bunker: “Why is U.S. labor market fluidity drying up?”

Posted on by Brad DeLong

Must-Read: Nick Bunker: Why is U.S. labor market fluidity drying up?: “The U.S. labor market is a far less dynamic place than it was 30 years ago…

…Workers today are less likely to get a job while unemployed, move into unemployment, switch jobs, or move across state lines. You’d think just the opposite would be true given some of the discussion about our rapidly changing digital economy, but the data show what the data show. Even still, the reason—or reasons—for the decline in fluidity aren’t known…. Molloy… Smith… Trezzi… and… Wozniak… find that overall fluidity in the U.S. labor market has fallen between 10 percent and 15 percent since the early 1980s. But for some of the individual flows, the decline has been as large as one-third…. The authors find no evidence… that the gain from switching jobs has declined…. While the authors do find some speculative evidence that declines in fluidity are related to declines in social trust, the results aren’t particularly strong…. After their analysis, it seems more likely than not that the decline in labor market fluidity is harmful…

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: Menzie Chinn: “Estimates of the Elasticity of Employment with Respect to the Minimum Wage”

Posted on by Brad DeLong

Must-Read: Menzie Chinn: Estimates of the Elasticity of Employment with Respect to the Minimum Wage: “Some people would have you believe the impact of a minimum wage hike…

…on employment is known to be large and negative. A cursory acquaintance with the literature helps in immunizing one (if one believes in vaccines and the like) against falling for such assertions. The meta-analysis of Doucouliagos, Hristos, and Tom D. Stanley. ‘Publication Selection Bias in Minimum-Wage Research? A Meta-Regression Analysis.’ British Journal of Industrial Relations 47.2 (2009): 406-428. [ungated working paper version] is useful in this regard.

I have drawn the mid-point of the estimate range cited by Professor Neumark (a respected researcher on minimum wages). It is useful to observe that the range he cites (-0.1 to -0.3) is substantially to the left of where the most precisely estimated locate elasticities are located. This suggests caution in attributing too much weight to one single estimate or set of estimates drawn from a single researchers. That researcher might have indeed obtained ‘the holy grail’ of elasticity estimates; but it is useful to recognize the variation in findings nonetheless, if one is to be a social scientist.

Estimates of the Elasticity of Employment with Respect to the Minimum Wage Econbrowser

Must-Read: Heather Boushey: Home Economics

Posted on by Brad DeLong

Must-Read: Heather Boushey: Home Economics: “American businesses used to have a silent partner…

…the American Wife. She made sure the American Worker showed up for work well rested (he didn’t have to wake up at 3 a.m. to feed the baby or comfort a child after a nightmare), in clean clothes (that he neither laundered nor stacked neatly in the closet), with a lunch box packed to the brim with cold-cut sandwiches, coffee, and a home-baked cookie. She took care of all the big and small daily emergencies that might distract the American Worker from focusing 100 percent on his job while he was at work…. For decades, the American Wife gave American businesses a big, fat bonus….

This unspoken yet well-understood business contract is now broken. Moreover, it doesn’t look like we’re going back to it anytime soon. Nor should we. American families look different today. Wives—and women more generally—work outside the home because they need to and because they want to…

Must-read: Danny Yagan: “The Enduring Employment Impact of Your Great Recession”

Posted on by Brad DeLong

Must-Read: Danny Yagan: The Enduring Employment Impact of Your Great Recession: “In the cross section, employment rates diverged across U.S. local areas 2007-2009…

…and–in contrast to history–have barely converged [since]…. I… use administrative data to compare two million workers with very similar pre-2007 human capital: those who in 2006 earned the same amount from the same retail firm, at establishments located in different local areas. I find that, conditional on 2006 firm-x-wages fixed effects, living in 2007 in a below-median 2007-2009-fluctuation area caused those workers to have a 1.3%-lower 2014 employment rate…. Location has affected long-term employment and exacerbated within-skill income inequality. The enduring employment impact is not explained by more layoffs, more disability insurance enrollment, or reduced migration. Instead, the employment outcomes of cross-area movers are consistent with severe-fluctuation areas continuing to depress their residents’ employment. Impacts are correlated with housing busts but not manufacturing busts, possibly reconciling current experience with history. If recent trends continue, employment rates are estimated to converge in the 2020s–adding up to a relative lost decade for half the country.

Must-read: Ben Zipperer: “U.S. Job Growth Slows in January, as the Nation Remains Years Away from Full Employment”

Posted on by Brad DeLong

Must-Read: Almost all of those believing that we are now near full employment here in the U.S. dismiss the low employment-to-population ratio by noting that the population is aging. They very rarely confront the collapse since the late 1990s of the prime-age employment-to-population ratio.

But when they do confront the collapse since the late 1990s of the prime-age employment-to-population ratio, what do they say? I have heard only:

  1. “Peak male”–that the rise of the robots will systematically disadvantaging male workers, and we are starting to see this already. The problem with this is that the decline in employment-to-population since 2000 is about equal for 25-54 year-old males and females.

  2. “It’s too late”–that our failure to induce a rapid recovery in 2009-11 broke the connection of many prime-age workers to the social networks that allowed them to navigate the labor market, and that taking steps to get them back into the labor market could only succeed if accompanied by unwelcome and unthinkable inflation.

  3. “Stop and smell the roses”–that people found out in the late 1990s that they really did not want to work that hard and that long anyway.

May I say I find all three of these profoundly unconvincing?

Ben Zipperer: U.S. Job Growth Slows in January, as the Nation Remains Years Away from Full Employmenth: “Estimates of full employment vary, but one natural point of comparison is the tight labor market of the late 1990s…

…For the entire 1998-2000 period, the employed share of the prime-age population (ages 25 through 54) was at least 81 percent, reaching 81.9 percent in April of 2000. In the most recent business cycle, the prime-age employment rate was above 80 percent during the final quarter of 2006 and first quarter of 2007. A full employment standard of 81 percent therefore lies somewhere in between the peaks of the last two business cycles. Some of the brightest news in today’s employment report is that the employed share of the prime-age population moved to 77.7 percent, up from 77.4 percent in December…. Last month’s increase in the prime-age employment rate is excellent progress. But as part of its mandate to promote full employment, the Fed should consider the projected progress of the labor market as it considers slowing the rate of employment growth.

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: Jeffrey Sparshott: “Where the Jobless Rate Is 2.3%, Here’s What Happened to Wages”

Posted on by Brad DeLong

Must-Read: Jeffrey Sparshott: Where the Jobless Rate Is 2.3%, Here’s What Happened to Wages: “In Lincoln, Neb., average hourly earnings were stagnant until the unemployment rate crossed below 2.5% in the fall of 2014…

…Then, wages took off. Since last October, they gained as much as 10.9% from a  year earlier. The jobless rate in October: 2.3%…. ‘I continue to judge that there remains slack in the economy, margins of slack that are not reflected in the standard unemployment rate, and in particular I’ve pointed to the depressed level of labor-force participation, and also the somewhat abnormally high level of part-time employment,’ Federal Reserve Chairwoman Janet Yellen said this week…

Fed officials’ median projection for the normal long-run unemployment rate was 4.9% as of December. But economists don’t agree on a specific number, or even whether the economy has already reached full employment. In October and November, the unemployment rate was 5% and wages showed signs of firming…. ‘While most indicators have been trending in the right direction, nominal wage growth and the prime-age employment-to-population ratio remain far outside of target ranges, and provide ample evidence that the economy has a way to go before reaching full employment,’ said Elise Gould, an economist at the left-leaning Economic Policy Institute….

Private-sector wages across Nebraska have been growing faster than the national average. The state bumped its minimum wage to $8 an hour from $7.25 at the start of 2015 and will raise it to $9 at the start of 2016, but many firms are moving beyond that. One of the state’s biggest private employers, Bryan Health, in November moved its starting minimum wage to $11 an hour from $8.45….

But to highlight the fine line between apparent full employment and signs of slack, one only need look as far as Omaha. The larger city is only about an hour away from Lincoln and, with the unemployment rate at 2.9%, many companies there also worry about finding enough workers. But wages haven’t taken off. Indeed, for the first time on record, average hourly earnings in the Lincoln metro area surpassed those of Omaha earlier this year.

Screenshot 12 19 15 12 42 PM

Must-Read: Nick Bunker: Trying to Get a Grip on the “Gig Economy”

Posted on by Brad DeLong

Must-Read: Our smart young Equitable Growth whippersnapper Nick Bunker reads Dourado and Koopman and, correctly, sees the “gig economy” as a positive way of trying to turn our current sow’s ear of a low-pressure labor market into some reasonable facsimile of a silk purse. When put that way, what we need is not a halfway house between W-2 employees and 1099 independent contractors, but more expansionary monetary and fiscal policy:

Nick Bunker: Trying to Get a Grip on the “Gig Economy”: “The trend… starts around the year 2000…

…The sharing economy companies didn’t get started until at least eight years later… follows rather than causes the bulk of the increase in independent contracting. Dourado and Koopman point out that business dynamism… began to decline around 2000 as businesses stopped creating jobs at the rate they once did. These new gig-based or sharing economy businesses seem to be seizing the opportunity created by a structural change in the U.S. labor market rather than causing it…. If we want to understand this trend, perhaps we should change the focus of our investigations.

Must-Read: Eric Chyn: Moved to Opportunity: The Long-Run Effect of Public Housing Demolition on Labor Market Outcomes of Children

Posted on by Brad DeLong
Implosion of the former Lexington Terrace housing projects near downtown Baltimore, Saturday, July 27, 1996. (AP Photo/Gary Sussman)

Must-Read: Huh. It now looks like the huge benefits that got us excited back in the “moving to opportunity” policy days may have been an underestimate:

Eric Chyn: Moved to Opportunity: The Long-Run Effect of Public Housing Demolition on Labor Market Outcomes of Children: “This paper provides new evidence on the effects of moving out of disadvantaged neighborhoods…

…on the long-run economic outcomes of children…. Public housing demolitions in Chicago… forced households to relocate to private market housing using vouchers…. Compar[ing] adult outcomes of children displaced by demolition to their peers who lived in nearby public housing that was not demolished[,] displaced children are 9 percent more likely to be employed and earn 16 percent more as adults…