January 03, 2004

Still Dumbfounded

I'm still dumbfounded at how sharp the fall in the employment-to-population ratio has been...

Posted by DeLong at January 3, 2004 10:21 AM | TrackBack

Comments

I realize this is just a blog, but nonetheless those of us who would like to share these charts with others (like Iowa voters) would appreciate a brief note as to source of the figurtes.

Thanks!

Timothy Wyant

Posted by: Timothy Wyant on January 3, 2004 10:39 AM

____

The fall is 2%. More interesting is that it looks like only 64% of the working-age population is actually working. Where is the other 1/3?
Also, it looks like the number is around 57% between 1950s and 1980s. Where are the effects of more women entering the workforce? Did it only happen in 1980s, where the number jumped roughly 8%?

Posted by: Leopold on January 3, 2004 11:02 AM

____

Along the lines of Timothy, I'm wondering how recent the graph is--does it include the so-called recovery of late 2003? One hears much debate about whether the reported unemployment rate overstates or understates the problems of the job market. A dramatically declining employment/labor force seems to support the latter view.

Posted by: Dimmy Karras on January 3, 2004 11:03 AM

____

The fall is 2%. More interesting is that it looks like only 64% of the working-age population is actually working. Where is the other 1/3?
Also, it looks like the number is around 57% between 1950s and 1980s. Where are the effects of more women entering the workforce? Did it only happen in 1980s, where the number jumped roughly 8%?

Posted by: Leopold on January 3, 2004 11:07 AM

____

The series is the Bureau of Labor Statistics's "employment-to-(working-age-)population ratio (try BLS.gov; I got it from economagic.com). The data are through November 2003. The late-2003 recovery is the teeny upward blip at the very end of the data series.

Yes, the 1973-2000 trend rise is overwhelmingly due to women entering the paid labor force. The employment-to-population ratio is only 64% because of men taking early retirement, women working inside the home, people going to school, people unemployed, et cetera.

Posted by: Brad DeLong on January 3, 2004 11:10 AM

____

You can get this data directly from the bls
web site at bls.com. They have it set up so you can fairly easily download the complete history of almost any data series the BLS publishes.

Posted by: spencer on January 3, 2004 11:14 AM

____

Can someone explain the relationship between this figure and the normal unemployment figure? Wouldn't we have expected the number to drop more?(I thought the unemployment number increased more than 2-3%)

Posted by: crayz on January 3, 2004 11:24 AM

____

Employment went down because of the rise in productivity.

(He actually said words to this effect)

Posted by: George W on January 3, 2004 11:26 AM

____

Brad writes: The employment-to-population ratio is only 64% because of men taking early retirement, women working inside the home, people going to school, people unemployed, et cetera.
Well, given that the unemployment is only roughly 1/6 of all people not employed it would be very interesting to see what happened to the other sectors of this distribution. If lots of women suddenly went to work inside home (without large birth rate increase), we know why the unemployment number stayed the same while workforce partricipation declined. Same for "going back to school" effect.

Posted by: Leopold on January 3, 2004 11:50 AM

____

Brad writes: The employment-to-population ratio is only 64% because of men taking early retirement, women working inside the home, people going to school, people unemployed, et cetera.
Well, given that the unemployment is only roughly 1/6 of all people not employed it would be very interesting to see what happened to the other sectors of this distribution. If lots of women suddenly went to work inside home (without large birth rate increase), we know why the unemployment number stayed the same while workforce partricipation declined. Same for "going back to school" effect.

Posted by: Leopold on January 3, 2004 11:55 AM

____

"I'm still dumbfounded at how sharp the fall in the employment-to-population ratio has been... "

Why? Just eyeballing the graph, it would appear that a fall of similar magnitude and speed has happened six times since 1950, usually after a long expansion, such as we saw in the 1990's.

What strikes me most from this graph is how successful the Reagan boom was in drawing people into the workforce, though that didn't stop inequality increasing throughout the 1980's of course.

Posted by: PJ on January 3, 2004 01:08 PM

____

PJ,
The trends actually have very little to do with any "Reagan boom". The overall trend of a rising ivilian population/employment ratio has been increasing since the 60's, and more women have been joining the workforce since the 40's. The population/employment ratio for men has been dropping (to a lesser degree than women joining the workforce) since at least the 40's, as well.

Posted by: Jonathan on January 3, 2004 01:29 PM

____

PJ,
The trends actually have very little to do with any "Reagan boom". The overall trend of a rising ivilian population/employment ratio has been increasing since the 60's, and more women have been joining the workforce since the 40's. The population/employment ratio for men has been dropping (to a lesser degree than women joining the workforce) since at least the 40's, as well.

If anything, a large increase in the 80's is attributable to a) how deep a low point in employment/population ratio we experienced in 1983 and b) a stagnating median wage level, which quite possibly pushed more families in the two-earner direction.

Posted by: Jonathan on January 3, 2004 01:35 PM

____

Sorry about the double post. Movable type takes forever to post, and when it does, it doesn't always show up.

Anyway, the second post is what I really wanted to say.

Posted by: Jonathan on January 3, 2004 01:41 PM

____

The tables are missing Sat. evening.

Why did you remove the link to Steve Roach?
The Morgan Stanley web site is difficult to
navigate and I always found him via you.

Posted by: Bartolo on January 3, 2004 03:51 PM

____

>>Why? Just eyeballing the graph, it would appear that a fall of similar magnitude and speed has happened six times since 1950, usually after a long expansion, such as we saw in the 1990's.<<

And in every such case, the fall in the employment-to-population ratio has come about because of a really large rise in the unemployment rate. Not so this time.

Posted by: Brad DeLong on January 3, 2004 04:32 PM

____

While it seems to be indicating to some that _a lot of people are unemployed and it's all The Shrubs Fault_ there are, as Dr. Delong indicates, other factors.

One which he forgets is that some couples simply aren't willing to do the Both Partners Working routine anymore. Family Values? Rejection of Consumerism? I dunno...I do know that the thought of some of my friends becoming Mr. Mom would have been absurd ten years ago..yet some are "Working in the House" while they persue academic advancement, or other interests, in between making lunch and taking the kids to Soccer.

And they Home School, too.


QM

Posted by: Jody Dorsett on January 3, 2004 04:55 PM

____

Ah. But they were willing to do the two-career thing three years ago. (And I'd bet they'd be willing to do it again if demand for labor was out there.)

I don't expect the next peak in the employment-to-population ratio to be much (if any) higher than the 2000 peak for the reasons Mr. Dorsett sets out. I don't see how the runup we've seen since 1973 from business cycle peak to business cycle peak can continue. But I do think that most of that 2.7% who aren't working now and were in 2000 would kinda prefer what they had then...

Posted by: Brad DeLong on January 3, 2004 05:20 PM

____

My theory is that the drop in employment was caused in part by the Clinton boom, which enabled more people to retire early. I and five men I play tennis with all retired before age 65, although all six wives are still working. We men decided that we had worked enough. Our wives, having started their careers later, seem to feel that they haven't worked enough.

Posted by: David on January 3, 2004 05:21 PM

____

My theory is that the drop in employment was caused in part by the Clinton boom, which enabled more people to retire early. I and five men I play tennis with all retired before age 65, although all six wives are still working. We men decided that we had worked enough. Our wives, having started their careers later, seem to feel that they haven't worked enough.

Posted by: David on January 3, 2004 05:26 PM

____

Jody: double/single income (and Brad, would this not be "Ms." Dorsett?)

One anecdotal point I can offer: one thing I have heard from people (men with mid-range salaries) in the US and in Europe is that they questioned the marginal contributions of their spouses/girlfriends working (marginal in the sense of "on top of", not as a value judgement). The reasoning was that when the mother goes to work, there is an increase in daycare cost (maybe even progressive), transportation, progressive income tax, loss of certain benefits due to higher family income, etc., so that the net contribution of her working is not that great after all for all the effort. On the other hand, she will earn social security credits.

Posted by: cm on January 3, 2004 05:33 PM

____

My theory is that the drop in employment was caused in part by the Clinton boom, which enabled more people to retire early. I and five cronies all retired before age 65, although all our wives are still working. We men decided that we had worked enough. Our wives, having started their careers later, seem to feel that they haven't worked enough.

Posted by: David on January 3, 2004 05:36 PM

____

My theory is that the drop in employment was caused in part by the Clinton boom, which enabled more people to retire early. I and five men I play tennis with all retired before age 65, although all six wives are still working. We men decided that we had worked enough. Our wives, having started their careers later, seem to feel that they haven't worked enough.

Posted by: David on January 3, 2004 05:42 PM

____

Double posts:

I noticed that as soon I submit a post, it appears on the page with the "comments" link. There is a significant delay to the main page ("permanent link"). I never missed a post, it just takes some time. Consider checking the comments link after submitting.

Posted by: cm on January 3, 2004 06:15 PM

____

Brad: "But I do think that most of that 2.7% who aren't working now and were in 2000 would kinda prefer what they had then..."

Bit of a mischaracterization, don't you think? This graph is based on the household survey and, as you mentioned two posts down, the adjusted household survey employment level is fairly flat between 2000 and 2003. The ratio fell solely because the working-age population increased and the number employed did not.

Posted by: dc on January 3, 2004 06:15 PM

____

Just eyeballing the graph, it pretty much describes a straight line since 1970. My question is how much higher can it reasonably be expected to go assuming that the economy continues to grow at a reasonable rate over the next few decades?

There has to be a ceiling somewhere below 100% for any but the most exceptional times (massive wartime mobilization of the workforce with most young men overseas fighting for instance)

Posted by: Jason on January 3, 2004 06:25 PM

____

re: why only 62% to 64%.

I would guess that this is the series that includes everyone over age 16. I do not think that there is an upper age cutoff so the denominator is everone over age 16.

My understanding is that the Bubble pulled extra people into the workforce so part of the adjustment may be folks not particularly wanting to or needing to work. I know that a number of folks who participated in the the dot com bust I was in have not gone back to work (and have no need to work). The "natural" participation rate may be on the order of 62-63%.

Things I would be interested in knowing:
How many H1-Bs were there in 2000 verses now? All of the ones I knew are back in their country of origin. Maybe this is why the participation rate has not fallen even farther.

What has happened to college enrollments? Are people increasing their skills (creating human capital) during the slowdown?

Posted by: Robert Monical on January 3, 2004 11:14 PM

____

Robert: your bubble argument seems plausible to me, although it will probably not account for all of the 2%.

H1-Bs: In the business unit where I work, I know of 2 out of perhaps 30-60 or so H1's who were laid off. (I don't know everybody's visa status. Nationality is not a good guide; many H1's managed to get Greencards.) As much as I hate to say it, those 2 were nice people, but not very competent in their work. Even if there are more that I don't know about, they are a minority here.

Posted by: cm on January 3, 2004 11:38 PM

____

CM,
(First, having the name "Jody" made life interesting for an infantryman;))

The question of the "profitability" of a double income family is what I am speaking of. If there is enough demand for workers that the market will pay enough to make the "net profit" so to speak worthwhile, then I think that some people will lean towards having both partners working. That the cost of childcare and so on is a worthwhile expense.

OTOH, when there is not so much demand, that either salaries offered and/or benefits decline...as they have...then the costs of child care, as well as the more intangible cost of not having a parent with a young child at all times, negates the economic benefit of both partners working.

I'm fairly certain that many households that _used_ to have two incomes, that now only have one, would go back to two incomes "if the money were right".

On the gripping hand, my friend Bob would probably never go back to work in an office. He is feeling quite fulfilled by his life, and amazed at that by his own admission, where he is the partner who works in the home. A former advertising executive he finds time and inspiration for the painting he always said he wanted to do, but could never get around to doing. Though it it still a bit of a shock to see him tooling about town in his Caravan full of kids! :))

What ever the exact cause of the "missing 1/3 of the work force" is, it is important to remember that such graphs only tell us that _something_ is happening. They never tell us exactly why that is. And it is usually far more complicated than we really imagine.

QM

Posted by: Jody Dorsett on January 4, 2004 07:57 AM

____

So, what was it again that the labor supply curve looked like?

Posted by: Bulent on January 4, 2004 10:36 AM

____

I wonder if the recent productivity boom is related to this?

At my job, and seemingly many other jobs, employees are being pressured to work harder and harder. Working life is less pleasant than it was several years ago. That's something to consider if you could work, but don't really have to.

Posted by: rps on January 4, 2004 02:44 PM

____

rps: I have to agree fully. More people are working during evenings or on weekends, but maybe I only see it now as I have joined their club. But I try to cut down on it.

Also it depends a lot on individuals. Everything is subject to negotiation, and everybody but the most boneheaded manger knows that overworking people in the longer run (exceeding a few weeks at a time) is counterproductive, and in many cases what you get out of pressure is not increased performance but increased busywork. Often times people perceive a request where only a question is asked. (And some managers are very good at making subtle use of this.) Of course I also evaluate very carefully what managers at all levels are saying, but at the same time most people are reasonable, and know they shouldn't push too hard when the performance on the other side is good, and the person is willing. At least I hope that's generally the case.

Posted by: cm on January 4, 2004 03:56 PM

____

I am wondering (because doesn't tell us) whether Brad's wonderment at the fall in the ratio is not due to its persistence after the end of the official period of recession. A fall of the magnitude Brad notes is large, but that is related partly to its duration. The thing that a good bit of the back-and-forth here seems to get at is that the participation rate, when it began falling, was at the highest level in the series history. This is not like GDP and car sales and the like, growing as the economy grows. The rise in this series is evidence of structural change. I would guess that the lack of prior prolonged declines in the ratio is at least in part because the trend component of the series offset the cyclical component. If the 67.4% reading of April 2004 represents an oddity, extraordinary demand for labor (remember rising real wages?) pulling the ratio to an extreme, then the secular trend has changed, its rise has ended. In such case, the cyclical component is no longer masked by the secular trend.

That might have something to do with the tame jobless rate. Certainly, a lower participation rate would mean fewer people claiming to be in the work force than would otherwise be the case. Haven't had time to think it through yet.

One hobby horse of mine is the notion that a job is not a "good". Leisure is a "good", so while I think Bush failed utterly at shoring up labor demand, I am not sure that an end to the secular rise in labor market participation is a bad thing.

Posted by: K Harris on January 6, 2004 04:48 AM

____

Thank you, I just wanted to give a greeting and tell you I enjoyed reading your material.

Posted by: role on January 6, 2004 08:35 AM

____

K Harris: good point about jobs/leisure, it's a double-edgeed sword for many people (including myself). But don't forget that most people are willing and want to do something useful (i.e. contribute to society), but many are excluded. Many of the jobless actually want to do something. On the other hand, once you have a job, it is not unlikely that more work is forced onto you than you want. And your livelihood (income, healthcare, acknowledgement of your success, ...) is still largely tied to or based on your job.

Posted by: cm on January 6, 2004 09:39 AM

____

CM,

Speaking of a national health plan... OK, you weren't, but I couldn't pass up the chance. I think there are lots of ways to do something useful without having a paying job. The problem is that we, as a culture, have gotten ourselves around to the point that so much depends on having a job. There is no affordable health insurance program for those who read great books, tell stories to kindergarteners, raise roses in public garden plots - unless they do so for a paycheck. Housing has proven a wonderful investment, but getting into a privately owned abode on one median income is not the easiest thing - home builders have a natural inclination to build expensive homes.

There is a history of US cultural scorn (though not universal) for those lazy Europeans who stay in school too long, work short weeks, take long vacations, drink wine over lunch and have stringent work rules. I'm against stringent work rules, too. If you're on the close, you ought to be busting you ass (like I am now). I am very much opposed, however, to a system that imposes real hardship on people who chose to lead a less materially rich life, in favor of a more balanced one. Universal health coverage would go a long way toward allowing more balanced lives.

I agree with your point that many people out of work wish they had jobs, but I don't think all of them want jobs because they love punching a clock and looking at the same tiny bit of the world for 8 hours every day. They want work because they are having a hard time making ends meet. In depressed communities, households often have one adult out of work and the other in a low-wage job. Some have two out of work (I can name names in Danville Kentucky).

Posted by: K Harris on January 6, 2004 10:10 AM

____

Make that "on the clock."

Posted by: K Harris on January 6, 2004 12:58 PM

____

K Harris: Staying long at (graduate) school is not necessarily an effect of laziness. While students mostly rely on student loans (which are really half subsidy/half loan), and handouts from their parents, they have a desire to be economically more independent, or even the necessity, to work in addition to make the income they need for a living or want for financing trips, their own apartment, etc., even if their parents could afford to pay their lifestyle (and perhaps living off your daddy is being a bit despised culturally -- it smacks of those rich kids from better families). This is matched by many companies relying on relatively well-paid interns for certain jobs, which also provides the win-win aspect of students getting to learn about the real world, and companies being able to check them out for potential hiring. (There are also grunt jobs of all kinds of descriptions of course.)

Regarding shorter workweeks and long vacations, the picture is more mixed than appears at first sight. For one thing, as a matter of fact the _average_ effective workweeks and vacations are certainly shorter. But there is also a large amount of partially unreported overtime being done -- due to more rigid labor laws, it is harder to get rid of workers, and as a consequence employers are more cautiously hiring, which makes it difficult to adjust for peaks with additional workforce. There are also a host of other issues that encourage (involuntary) overtime, and many smaller companies are exempted from some rules, and enforcement for them is more lax.

There is some evidence of people with higher education working effectively (and increasingly) longer, and at least Germany also has a concept similar to that of "exempt" workers. Even in companies governed by collective-bargaining agreements, job descriptions outside (and above) the tariff can be defined, typically managerial or higher-rung engineer posts.

Finally, there is a growing segment of self-employed people -- although according to recent discussions, the growth is mostly in outsourced functions where companies are effectively discharging the high social security taxes.

So there is no reason to despise Europeans as lazy; most people are working at least as hard as US employees.

Posted by: cm on January 6, 2004 04:32 PM

____

Make that "(average) vacations are longer" above, of course.

Posted by: cm on January 6, 2004 04:39 PM

____

Are there more graphs separated by sex and another series for age group?

Posted by: northernLights on January 7, 2004 10:29 AM

____

Post a comment
















__