August 13, 2003

Signs of a Weak Labor Market

Signs of a weak labor market due to insufficient aggregate demand:

WSJ.com - After Long Boom, Workers Confront Downward Mobility: In five years at Nortel Networks Corp., James Richter won a series of promotions and saw his salary more than double, to $94,000 a year. He figured the upward trend would continue. But the opposite happened. He was laid off in March 2002, and expected to find a new job quickly. But Mr. Richter, 30 years old, got no offers in the telecommunications industry, which was shedding thousands of workers. After six months, he ended up taking a supervisory job at a cable company, even though it paid little more than half as much as his old job.

"I used to identify myself pretty heavily through work," says Mr. Richter, of Cumming, Ga. "Now I'm just Jimmy. I have a job, and I'm glad, and I'll do the best I can at it, but that's what it is: a job." This unusual period in U.S. economic history -- a sluggish recovery, with continued job losses, after a prolonged period of intense growth -- is increasing the ranks of the downwardly mobile. Many workers who have been laid off are eventually finding new jobs, but they're riding the down escalator at a time of life when they expected to be riding up. Even now, as economic growth appears to be gaining steam, it remains unclear how soon the economy will grow fast enough to improve the job market.

While the recession is officially over, this is the first recovery since World War II in which the number of payroll jobs has continued to fall 20 months into the rebound, according to the Economic Policy Institute, a Washington think tank. The previous record was 13 months into the recovery in 1992. In all, 2.7 million payroll jobs have disappeared since the recession began in March 2001. Even when the job cuts stop, economists say, many workers will find their incomes well below the levels reached only a few years ago...

This is why I think the NBER made a mistake in going for an "output" rather than an "employment" definition of the business cycle. Posted by DeLong at August 13, 2003 12:31 PM | TrackBack

Comments

Dubya is toast.

"It's the economy, stupid."

Posted by: Dubya Fan on August 13, 2003 01:00 PM

Well, its not just reduced wage compensation; as you slide down the ladder, there's also a huge benefit loss-- with health care and retirement obligations shifted more and more onto workers' themselves.

So, while the raw numbers of out and out lost jobs are themselves impressively bad (though the 6% level or so official unemployment (that we now "enjoy") used to be called "structural" or even "full employment"), I think if you look beyond "jobs" and into, I don't know, median payroll/benefits (if someone is keeping that stat), the numbers are far nastier.

It would be nice to believe that in this environment, the nation will regard its current government, which oversaw not merely the nation be attacked on its own soil by foreigners, but saw trillions of dollars in wealth go down the toilet, a government surplus of hundreds of billions of dollars turn into a deficit, and millions of jobs lost (and the aforementioned "median wage and benefit" stat), that Bush has no chance of reelection whatsoever.

BUT-- its really up to the Democrats to give a message of "We're the Party of Growth"-- the fact, is, some tweakings to the tax code to make it more progressive (and to actually RAISE REVENUE), and social spending that actually IMPROVES EFFICIENCY (removing burdens from families and businesses to some extent, such as expenses of health care, education, and the like)
which, on net, will be more helpful to growth than the current Neo-Victorian "its IMMORAL FOR THE RICH TO PAY TAXES" Bush II Administration.


Posted by: the talking dog on August 13, 2003 01:22 PM

This is discouraging, and accurate. Employment is the problem, and will dictate the course of this business cycle no matter that weighting to output.

This rise in interest rates is alarming. We have gone from 3.11 to 4.55 with the 10 year treasury since June 13. A 50% rise in yield in such a time frame may be unique since 1945. Has the Fed lost considerable control?

Tomorrow I will even be "balanced."

Posted by: anne - Fair and Unbalanced on August 13, 2003 01:25 PM

I'd like to hear a discussion of the extent to which this "jobless recovery" is merely due to globalization and the competition of other country's labor markets -- i.e., non-domestic factors.

For instance, my employer is hiring overseas very strongly, but very weakly domestically. Domestic workers are being outcompeted on wages.

Are there any econometricians in the house?

Posted by: Kyle Markley on August 13, 2003 01:38 PM

Well. This guy went from about 40k per year to 90k per year in 5 years. His company suffered, and he was laid off. He is now making 45k per year. Weak labor demand, or was he just overpaid at 90k per year?

The stuff about "defining myself through the job" sounds to me like he probably was working 80 hours a week to get that 90k. Now he is better adjusted, probably working a more sane schedule, and is earning a salary that is commensurate with his experience. Why is this horrible?

Posted by: rvman on August 13, 2003 02:07 PM

"It would be nice to believe that in this environment, the nation will regard its current government, which oversaw not merely the nation be attacked on its own soil by foreigners,..."

Yeah, 9 months into the Bush Adminstration. If it had been a Gore Administration, we wouldn't have been attacked.

To say that the Bush Adminstration "oversaw" the 9/11 attacks is like saying the adminstration of Ulyses S. Grant "oversaw" the Chicago Fire of 1871.

Posted by: Mark Bahner on August 13, 2003 02:17 PM

Would you use jobs created/lost or unemployment percent or seasonally adjusted unemployment? Then there is the sticky issue of unemployed as people looking for work and excluding people giving up on work. What about changes in demographics such as the baby boom and its effect on unemployment? What about changes in immigration numbers? Would an employment standard be more subject to interpretation and manipulation?

What the investor class seems to miss is that people feel unemployment on a personal level. Calling it a recovery or a recession does not change the visceral experience.

Posted by: bakho on August 13, 2003 02:24 PM

Mark - I agree that political opportunism based on 9/11 is disgusting. A group of Muslim fanatics execute such ruthless plan and that cannot be stopped in advance. Another OK City bombing-like attack probably still cannot be stopped. As a county, we ought to use these events to define ourselves as Americans.

That being said, I've seen a lot more bad manners about 9/11 from the right - including that it was all Clinton's fault, and the President sending pictures of himself on 9/11 in a fund raising request.

I mean, sheez. 9/11 should not be a PR tool - that's what aircraft carriers are for!

sz

Posted by: SZ - FairAndBalanced on August 13, 2003 02:28 PM

Being a member of the community on the escalator down (in terms of wages; up in terms of aggregate happiness), I am curious if there is any measure of total compensation paid to all US workers. In addition to shedding jobs, is the economy shedding income as well?

Posted by: FDL on August 13, 2003 02:32 PM

Mark B.:

Where is your sense of "fair and balanced", man? Clinton ran a war in which no-- as in NO-- U.S. troops were killed in combat. But lie about ONE blow job...

Had the 9-11 attacks taken place 9 HOURS (oh fuck, 9 SECONDS) into the Gore Administration, our friends on the right would never have ceased to call Mr. Gore on it. As in NEVER. Not for 100 years.

Mr. Bush was over 8 months into his watch when 9-11 happened. Maybe it wasn't avoidable. Maybe it was. We'll certainly never know if HE has anything to do with it, will we? So stop defending him-- I'm probably a traitor for even questioning him in the first place, right?

But these particular comments are devoted to the economy (which I contend 9-11 made worse, though Bush's warmongering made even worse still... I forgot-- I can't question anything Bush does... sorrt).

Anyway, please let's see you defend the cheerleader in chief on his performance on jobs and growth. Tell us about how growth-oriented his "repeal of the death tax" policy is, for example, and how exacerbating the deficit will be GOOD for long term growth in jobs and national income.

We're waiting.

Posted by: the (fair and balanced) talking dog on August 13, 2003 03:06 PM

Mark Bahner writes: "Yeah, 9 months into the Bush Adminstration. If it had been a Gore Administration, we wouldn't have been attacked. "

Gore might not have dismissed the warnings of the Clinton administration, the way the Bush people did. So it might have been stopped.

A Gore administration might have had an attorney general in August of 2001 whose priorities included funding for anti-terrorism work, instead of Ashcroft, who was more concerned about New Orleans prostitutes, naked statues, and head shops. Oh, and busting sick people for using pot.

Condi Rice was told in summer of 2001 that there would probably be a hijacking. Was anything done? Nope. Another place where a different administration might have done better.

Posted by: Balanced and Fair, Jon H on August 13, 2003 04:57 PM

Aggregate demand?

I thought the Krugman/Keynes theory of "supply and demand" had been long discredited?

Posted by: Instahack on August 13, 2003 05:05 PM

you are to some extent right . however in a business cycle job creation will only follow business investments . under pecularity of this recession it will be much smaller and later as you no doubt know well . the transfer of jobs is a complex issue . on a macro sense if business / industry can make more money ( by using less expensive labor ) they will have more to invest / expand resulting in ( in long run ) more jobs . also better paying jobs abrad will increase trade with same results . how ever on micro level , the reduction in labor force causes havoc here and now . it is really disappointing ( if you believe in clinton and new democrats.. the present lot are really crass class robbers..
{ i am more of marxist persuations in these maters ]) that they did not put a comprehensive retraining / education policy in place . in long run that is the only solution . what we have is really a patch work of things . my 2c.

Posted by: badri on August 13, 2003 08:49 PM

you are to some extent right . however in a business cycle job creation will only follow business investments . under pecularity of this recession it will be much smaller and later as you no doubt know well . the transfer of jobs is a complex issue . on a macro sense if business / industry can make more money ( by using less expensive labor ) they will have more to invest / expand resulting in ( in long run ) more jobs . also better paying jobs abrad will increase trade with same results . how ever on micro level , the reduction in labor force causes havoc here and now . it is really disappointing ( if you believe in clinton and new democrats.. the present lot are really crass class robbers..
{ i am more of marxist persuations in these maters ]) that they did not put a comprehensive retraining / education policy in place . in long run that is the only solution . what we have is really a patch work of things . my 2c.

Posted by: badri on August 13, 2003 08:50 PM

Man, there has been a lot of talk about how to define a recession (notice how I stayed on topic?). I guess that is to be expected when the usual indicators of recession diverge. So here's a question - what's a business cycle? I mean, if were are going to shift to defining recessions and expansions by the employment cycle, then it ain't really a business cycle anymore, is it? It strikes me that the discussion about defining recession is either a) mostly for political convenience or b) mostly an issue that will matter in the popular press.

Recession is just a label slapped somewhat arbitrarily on periods of time during which economic acticity isn't up to snuff. Slapping that label on a period of time doesn't change outcomes, by itself, in any way I can think of. We can easily know when GDP falls, when employment falls, when industrial output falls, when consumption falls, without trying to stick some number of these factors under a single label.

Defining recessions by contraction, rather than by below trend performance, is arbitrary. Picking industrial output, though sensible at the time the decision was made and certainly useful because industrial activity varies more than service sector output, no longer makes as much sense as it once did.

All of this verbiage (none of which is about the September 11 attacks, by the way) is meant to ask in regard to recession definitions and timing "so what?"

Posted by: K Harris on August 14, 2003 06:15 AM

I'm kind of glad Clinton didn't put into effect more job training programs. After all, what would they have trained? Probably more network administrators - MCSE certification was the "big thing" in the late 90's. Just what the economy needs right now, more unemployed network administrators. Job training works when there is a "mismatch" of skills and jobs. What is the "mismatch" right now? Mostly too many high-tech skill sets, not enough...what?

Posted by: rvman on August 14, 2003 08:44 AM

I'm kind of glad Clinton didn't put into effect more job training programs. After all, what would they have trained? Probably more network administrators - MCSE certification was the "big thing" in the late 90's. Just what the economy needs right now, more unemployed network administrators. Job training works when there is a "mismatch" of skills and jobs. What is the "mismatch" right now? Mostly too many high-tech skill sets, not enough...what?

Posted by: rvman on August 14, 2003 08:50 AM

I'm kind of glad Clinton didn't put into effect more job training programs. After all, what would they have trained? Probably more network administrators - MCSE certification was the "big thing" in the late 90's. Just what the economy needs right now, more unemployed network administrators. Job training works when there is a "mismatch" of skills and jobs. What is the "mismatch" right now? Mostly too many high-tech skill sets, not enough...what?

Posted by: rvman on August 14, 2003 08:50 AM

Certainly many people (esp. in the tech field and the industries dependent thereupon) are finding their incomes "well below the levels reached only a few years ago" but if their salaries in say 1999 were ridiculously high, why is this such a problem? Surely we each know a dozen people who left college and started earning high and, in the event, unsustainable salaries, who now somehow think they're still worth the $94,000 even though the market doesn't agree. They either hold out for a job that pays like their old one did during the boom or take a more reasonably paying job only reluctantly. I am not going to be crying any tears for Richter and his ilk.

Does anybody have any information on whether the proportion of exempt-status jobs has increased recently? My personal observation is that many people who seem to do the fairly routine, non-professional work that should count as non-exempt are in fact working a lot of unpaid overtime, thus off-setting much of the output lost by having fewer workers. I'd be curious to know if this is happening anywhere other than my little corner of the world and to a degree that it could play a role in the strange "jobless" nature of the recovery.

Posted by: Sally on August 14, 2003 11:26 AM
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