Employment losses in historical perspective

My colleague Chris Magee sent this graphs around about employment losses during different recessions. The first one below show all the recession from the 1970s onwards.

The next one, which I modified to show just the Great Recession and the Great Depression, is below, and gives a sense of the dimension of the Depression.

The sheer size of the Depression is impressive. Even though the last recession is an outlier, it pales in comparison with the Great Depression. You can see in the graph very clearly the Roosevelt recession of 1937-38, and also the fact that the recovery was very slow, even though as one can see from the graph above the current recovery was also slow, by historical standards.

I'm not sure what lessons Chris derived from his graphs, but I would argue that is safe to say that both the macro interventions, the fiscal package and the alternative monetary policy(even if one might have criticisms about particular elements of both), and the more widespread existence of automatic stabilizers, worked very well and precluded another Great Depression. I would see that as some evidence in favor of the New Deal policies and institutions, which essentially were behind the macro policies, and of the importance of Keynesian ideas, which gave theoretical foundation to those policies.

Josh Bivens had a piece on EPI a few years back on the slow recovery which is still worth reading. Btw, his lessons seems to be that there was not enough fiscal stimulus, something that also explains to some degree the persistence of the Depression. I wrote, even longer ago, that one should also take into consideration the conditions of the labor market, and not just the employment recovery, to have a better picture of the economic conditions.

PS: I have done a similar graph with GDP losses comparing the US and Greece. That one indicates the costs of austerity (in Greece).

The danger of a recession

So the BLS has the new job numbers for March. Recovery continues at slow pace, as expected. 98k jobs created, considerably below the 200k average of the last couple of years, and unemployment rate  reduced to 4.5% with the participation rate up a little bit, but still below its previous peak, at 63% of the labor force.

The danger is that many more will suggested that we are now below the natural rate of unemployment (yes, that is a very problematic concept, something discussed here many times, too many to link). The figure above uses the data on the natural rate from the Congressional Budget Office (CBO).

The danger is that because of this view that the labor market is too tight, we end up hiking the rate of interest too much, and at the same time if Trump does not come up with his promised fiscal stimulus and spending on infrastructure we might have just monetary contraction with no significant fiscal stimulus (I'm sure he will reduce taxes for the wealthy, but I wouldn't hold my breadth for the expansionary effects of trickle-down economics). And that might be how we end up having a Trump recession. To be seen.

151,000 jobs created last month

Jobs numbers out today. Employment increased by 151,000 in August, and the unemployment rate is still at 4.9% according to the Bureau of Labor Statistics (BLS) report. This suggests that the slow recovery continues, and that to hike the rate of interest as it seems Janet Yellen suggested last week at Jackson Hole would be a mistake. By the way, Bill Gross, which sometimes sounds reasonable on spending and the effects of fiscal policy (or did in the past) suggested as an innovative solution the need for hiking rates twice before the end of the year. That signals, I think, what the market want, namely higher remuneration. But it would be a terrible idea. Even if the conventional story, best explained by John Williams from the San Francisco Fed, is deeply flawed. That is, the notion that the natural rate of interest (yeah, that concept) is now very low.

More on the slow recovery

The private sector added 156,000 jobs in April, according to the Automatic Data Processing (ADP) report, ahead of the Bureau of Labor Statistics (BLS) more comprehensive release this Friday. As the graph shows there is a slowdown form last month.

This adds to weak manufacturing growth,and a smaller trade deficit, resulting from lower imports, that is, a slower economy. I still think a recession might not be in the immediate horizon. However, the data seem to indicate, as I said before, that there are good domestic reasons for Yellen not to hike the rate of interest.

By the way, not surprisingly labor productivity has been weak, and according to the BLS it "decreased at a 1.0 percent annual rate during the first quarter of 2016... From the first quarter of 2015 to the first quarter of 2016, productivity increased 0.6 percent." This is sometimes reported still by suggesting that "low productivity [is] a puzzle to economists." It shouldn't be a puzzle, of course. Low productivity is the result of low growth. And that is the result of a contractionary fiscal stance, in an economy with too much inequality, and slow growing wages.

Full time employment finally above previous peak!

By the way, if you count workers employed full time only in August this year we surpassed the December 2007 peak, and after a fall in September, we're over again now.

So it took only about 8 years to get back were we were. Yes, the economy is peachy.

The economy is performing well; good to know

New Employment Situation Report is out. Not bad, given the last couple of months. In October, total nonfarm payroll employment increased by 271,000 and the unemployment rate is at 5%.

The employment-population ratio, which seemed to start to inch up last year, however, now looks again stagnant. Even though it seems markets are happy with job creation above 200k per month, we need something more like 400 for a healthy recovery, and to bring the employment-population ratio up. Earnings have inched up a bit.

The danger here is that Yellen and the FOMC use this to really start hiking interest rates by December, after all she says she thinks "the economy is performing well." The question of course is for whom it's performing well.

Decent work is all you need

The International Labor Organization (ILO) argues that beyond the Millennium Development Goals (MDGs), the international community should also address the structural underpinnings behind poverty, inequality and sustainability, the lack of decent jobs.

EPI | Why It’s Time to Give Tipped Workers A Living Wage

By Sylvia A. Allegretto and David Cooper

Raising the wage floor for tipped workers is crucial for a number of reasons. Rising income inequality and the accompanying slowdown in improving American living standards over the past four decades has been driven by weak hourly wage growth, a problem that has been particularly acute for low-wage workers (Bivens et al. 2014). Tipped workers—whose wages typically fall in the bottom quartile of all U.S. wage earners, even after accounting for tips—are a growing portion of the U.S. workforce. Employment in the full-service restaurant industry has grown over 85 percent since 1990, while overall private-sector employment grew by only 24 percent.4 In fact, today more than one in 10 U.S. workers is employed in the leisure and hospitality sector, making labor policies for these industries all the more central to defining typical American work life. Ensuring fair pay for tipped workers is also a women’s issue. Women comprise two out of every three tipped workers; of the food servers and bartenders who make up over half of the tipped workforce, roughly 70 percent are women. Allegretto and Filion give an historical account of the tipped-minimum-wage policy and bring much-needed attention to how the two-tiered wage system results in significantly different living standards for tipped versus non-tipped workers. For instance, tipped workers experience a poverty rate nearly twice that of other workers. This contradicts the notion that these workers’ tips provide adequate levels of income and reasonable economic security.

Read rest here.

Bivens, Josh, Elise Gould, Lawrence Mishel, and Heidi Shierholz. 2014. "Raising America’s Pay: Why It’s Our Central Economic Policy Challenge." Economic Policy Institute, Briefing Paper #378. http://www.epi.org/publication/raising-americas-pay/

Employment is finally reaching the pre-crisis level

The level of employment is finally after 5 years or so close to the pre-crisis levels. Note that unemployment is considerably down, from around 10 in mid-2009 to 6.3 last May according to the Bureau of Labor Statistics (BLS). The growth in employment has more or less kept pace with the growth of population, while the size of the labor force has been almost stagnant, as seen below.

In other words, what has been growing is the number of workers not in the labor force, which are not counted as unemployed. In other words, not a very good picture.

The ‘Better Off Budget’: An EPI Analysis of The Congressional Progressive Caucus Proposal

By Joshua Smith

The Congressional Progressive Caucus (CPC) has unveiled its fiscal year 2015 (FY2015) budget, titled the “Better Off Budget.” It builds on recent CPC budget alternatives in prioritizing near-term job creation, financing public investments, strengthening the middle and working classes, raising adequate revenue to meet budgetary needs while restoring fairness to the tax code, protecting social insurance programs, and ensuring fiscal sustainability. The Better Off Budget aims to improve the economic well-being of the working and middle classes by focusing on ending the ongoing jobs crisis, and it provides substantial upfront economic stimulus for that purpose. This paper details the budget baseline assumptions, policy changes, and budgetary modeling used in developing and scoring the Better Off Budget, and it analyzes the budget’s cumulative fiscal and economic impacts, notably its near-term impacts on economic recovery and employment.

Read rest here.

For Dean Baker's critique of Obama's platform, see here 

The madness of austerity in one graph in historical perspective

Same graph David posted (from Mother Jones) with one addition, total government employment in the period just before  and after the 1990-91 recession together with the 2007-8 one [also I don't show private employment].

The bump of the 1990 census is less visible than the 2010 one. But the obvious difference is the increase in the 1990s and the decrease now.

The Madness of Austerity in One Chart

From Mother Jones

January's job numbers were fairly dismal, but the bad cheer wasn't equally spread. Private sector employment, as usual, increased—by 142,000 jobs last month. At the same time, public sector employment declined. Government employment at all levels was down 29,000 in January.Aside from the brief census blip in early 2010, this has been the usual state of affairs for the past four years, ever since the recession officially ended. The chart below shows public and private sector employment indexed to 100 at the end of the recession. Private sector employment is up 6.8 percent. Public sector employment is down 3.4 percent. And that's during a period when population grew 2.3 percent. On a per capita basis, government employment has declined more than 5 percent since 2009, and it's still declining.This is the price of austerity. If public sector employment had been growing normally during this period, we'd have about a million more jobs than we do now and the unemployment rate would probably be below 6 percent. We are our own worst enemies.

See more here.

The Economic Policy Institute on the Unfinished March

An EPI Report that is worth reading on the incomplete economic goals of the civil rights movement . From the intro:

"On August 28, 1963, more than 250,000 people participated in the March on Washington for Jobs and Freedom. They marched for equal access to public accommodations, voting rights, and the end of racial discrimination in employment. While achieving the full measure of these rights remains a work-in-progress, legislative and policy commitments to these goals were secured. But the marchers also demanded the following:

• decent housing
• adequate and integrated education
• jobs for all
• a minimum wage worth more than $13 an hour today

Fifty years later, on all socioeconomic measures, African Americans still lag whites by wide margins. At the same time, economic opportunities are shrinking for working people of all races. Until we achieve all of the march’s goals, there is little hope for reducing black-white socioeconomic disparities and providing genuine opportunity for economic advancement to all Americans."

Read the rest here.

Nonfarm payroll employment rose by 204,000 in October

Total non-farm payroll employment rose by 204,000 in October, which is better than expected but still too low for a healthy recovery. The unemployment rate was ticked up to 7.35, according to the Bureau of Labor Statistics (BLS) report released today. Read the BLS report here.

More on part time jobs and Obamacare

I posted Dean's short answer to the question of whether the Affordable Care Act (ACA), aka Obamacare, led to an increase in temporary jobs. The GOP talking point being that firms cannot afford to pay, and prefer to reduce the hours of their workers so as to not be forced to pay health benefits. Below a figure from the Bureau of Labor Statistics (more here, or here).

Part time jobs are declining as a share of total employment, and stand now below the peaks of other recessions like the Eisenhower and Reagan ones. Note that the definition of part time refers to those who worked 1 to 34 hours during the survey reference week for an economic reason such as slack work or unfavorable business conditions, inability to find full-time work, or seasonal declines in demand.

Dean Baker on part time jobs and Obamacare

Dean Baker on the GOP's talking point that Obamacare has led to an increase in part-time jobs, since companies cannot afford to hire them full time. As it turns out a figment of their imagination.

More here.

Government jobs since the crisis

The figure above shows all employees, not just the federal ones. The spike in 2010 is related to the census. And yes we are below the levels we had at the beginning of the crisis. Shutdown will not help.

Implications of Financial Capitalism for Employment Relations Research

New paper by Eileen Appelbaum, Rose Batt and Ian Clark of CEPR

Increasing share of the economy is organized around financial capitalism, where capital market actors actively manage their claims on wealth creation and distribution to maximize shareholder value. Drawing on four case studies of private equity buyouts, this article published in the British Journal of Industrial Relations challenges agency theory interpretations that they are ‘welfare neutral’ and show that an alternative source of shareholder value is breach of trust and implicit contracts. It also shows why management and employment relations scholars need to investigate the mechanisms of financial capitalism to provide a more accurate analysis of the emergence of new forms of class relations and to help us move beyond the limits of the varieties of capitalism approach to comparative institutional analysis.

See here (subscription required).

Gains from Trade? The Net Effect of the Trans-Pacific Partnership Agreement on U.S. Wages

By David Rosnick

Recent estimates of the U.S. economic gains that would result from the proposed Trans-Pacific Partnership (TPP) are very small — only 0.13 percent of GDP by 2025. Taking into account the un-equalizing effect of trade on wages, this paper finds the median wage earner will probably lose as a result of any such agreement. In fact, most workers are likely to lose — the exceptions being some of the bottom quarter or so whose earnings are determined by the minimum wage; and those with the highest wages who are more protected from international competition. Rather, many top incomes will rise as a result of TPP expansion of the terms and enforcement of copyrights and patents. The long-term losses, going forward over the same period (to 2025), from the failure to restore full employment to the United States have been some 25 times greater than the potential gains of the TPP, and more than five times as large as the possible gains resulting from a much broader trade agenda.

See rest here.

Employment continues to grow too slowly

The BEA released its Employment Situation Summary. Only 162,000 new jobs created, when need more like 400,000 per month for a healthy recovery. Unemployment rate fell to 7.4%, nut mostly for the wrong reasons, that is people leaving the labor force. Graph below shows the steady and slow recovery.

Still below the employment levels of before the crisis. And things are going to get worse in the next couple of months with more pressures, associated to the debt-ceiling again, for fiscal spending cuts.