May 19, 2003

Still Bemused

I'm still bemused by the fact that there were 3.3 percent fewer hours worked in the nonfarm business sector in 2003:I (the first quarter of 2003) than in 2000:I. Such a prolonged shrinkage in hours worked--given America's robust demographics--is an extraordinary labor market experience for the United States.

Posted by DeLong at May 19, 2003 04:43 PM | TrackBack


My summer jobs taught me that the US runs on overtime. Once you hit overcapacity, no more overtime. Maybe we need a 36 h work week. 8 til noon on Friday and the weekend starts?

Posted by: bakho on May 19, 2003 09:57 PM


That's why the Democratic candidate should pull out a populist proposal of European style, mandated 4 week holidays. Make it a law. :)

Seriously, their unemployment rate runs only 2% to 5% higher than here...maybe we could stand a few labor market rigidities.

Posted by: andrew b. on May 20, 2003 02:48 AM


andrew b. ,

what if we took in account the prison population?


Posted by: Antoni Jaume on May 20, 2003 06:02 AM


I know how Ed Prescott would interpret those numbers -- reduction in labor supply. Perhaps big income effect of the continuing productivity boom. I doubt that's Brad's interpretation?

Posted by: P O'Neill on May 20, 2003 11:48 AM



We are often in Europe and think that middle class life in France or Germany or Switzerland or the Netherlands compares quite pleasantly to middle class life in America. Who really is better off?

Posted by: jd on May 20, 2003 12:20 PM


Well, 2000:1 was the height of an unsustainable boom, so is that really the best point to measure from?

E.g.: hours worked for 2003:1 were well above hours worked at any point during 1998, which was considered a pretty strong labor market at the time, already well into the boom. But of course one must take growth of the labor force since then into account to get the real picture.

So, out of curiousity I went to the data for the last entire business cycle, available through Fred at the St Louis Fed.

Starting with the previous cycle peak in 1990, I set up a ratio for the index of hours worked over the size of the entire civilian labor force. Indexing the ratio for the 1990 business cycle peak gives 1.0, and changes in the ratio after that show the change in hours worked relative to change in the size of the civilian over-16 labor force.

Interestingly, the ratio for 2003:1 is 1.012 -- which means hours worked relative to the size of the labor force today still are greater even than at the peak of the prior business cycle. (Which is maybe not exactly consistent with the "it's the worst labor market in 30 years ... 50 years ... since Hoover" argument now making the rounds in some quarters).

For the record, here are the year-by-year numbers for the 1st Q each year: 1990, 1.0; 1991, 0.975; 1992, 0.960; 1993, 0.974; 1994, 0.990; 1995, 1.018; 1996, 1.036; 1997, 1.051; 1998, 1.072; 1999, 1.077; 2000, 1.079; 2001, 1.071; 2002, 1.044; 2003, 1.031.

The current 1.031 is above the average for the entire previous trough-to-peak business cycle of 1.028 (from 1991:1 to 2001:1), and about where things were in 1996 -- which people considered a pretty good year at the time.

So, perspecitve: things certainly could be much better, but objectively they are far from very bad relative to recent history and the corresponding point after the last recession (not to mention the recession of '81, when my little ratio was down to 0.89)

Posted by: Jim Glass on May 21, 2003 12:39 PM


"Such a prolonged shrinkage in hours worked --given America's robust demographics -- is an extraordinary labor market experience for the United States."

I dunno. Two years after the NBER-dated cycle peak of 1990 my little demographically-adjusted hours worked ratio was down by 0.04. And two years after the NBER-dated cycle peak of 2001:3 the ratio is down by the exact same 0.04. FWIW.

Posted by: Jim Glass on May 21, 2003 12:58 PM



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