January 10, 2004

Employment and the Labor Force

Between unemployment's April 1979 low point and its July 1980 peak, the American employment-to-population ratio fell by one percentage point--from 59.8% to 58.8%--while the unemployment rate climbed by 2.1 percentage points. Between unemployment's July 1981 low point and its December 1982 peak, the employment-to-population ratio fell by 1.9 percentage points--from 59.1% to 57.2%--while the unemployment rate climbed by 3.6%. Between unemployment's June 1990 low point and its June 1992 peak, the employment-to-population ratio fell by 1.4%--from 62.9% to 61.5%--while the unemployment rate climbed by 2.6%. In general, during a serious labor-market downturn the unemployment rate jumps up sharply, and jumps up sharply by almost twice as much as the fall in the employment-to-population ratio.

But this past recession has been very different. Since December of 2000 the employment-to-population ratio has shrunk by 2.3%--from 64.5% to 62.2%. From previous experience we would expect such a fall in the employment-to-population ratio to be accompanied by a big jump in the unemployment: 3.5%, 4.1%, or 4.6%. But it hasn't--the unemployment rate today is only 1.8% above its peak. We have had less than half the jump in the unemployment rate I would have expected given the fall in the employment-to-population ratio. We have had more than twice the fall in the employment-to-population ratio that I would have expected given the rise in the unemployment rate.

In an arithmetic sense, it is straightforward to account for this deviation from standard labor-market downturn patterns. Over 1979-1980 the labor-force-to-population ratio jumped by 0.5%. Over 1980-1982 the labor-force-to-population ratio jumped by 0.3%. Over 1990-1992 the labor-force-to-population ratio jumped by 0.3.%

But since December 1990 the labor-force-to-population ratio has fallen by 1.2%--from 67.2% down to 66.0%. On net, a much larger than usual share of those who have lost jobs have stopped looking for work and so dropped out of the labor force. And the fact that they are no longer looking for work--and so are not counted as unemployed--is responsible for the fact that what is the smallest labor-market downturn of the past quarter-century using the measuring rod of the change in the unemployment rate is the largest labor-market downturn of the past quarter-century using the measuring rod of the change in the employment-to-population ratio.

Kash of the Angry Bear reports that the decline in the labor force share over the past three years is concentrated among men, not women: it's not that the boom of the late 1990s and the associated extraordinary employment opportunities led women who in normal times would have preferred not to be in the labor force to find jobs, and that they are now returning to their normal out-of-the-labor-force state. That is not what is going on. He also reports that the decline in the labor force share over the past three years is concentrated among the over and not the under-educated: it is not that the boom of the 1990s allowed a lot of people with low skills and formal education who had a hard time looking for work to get jobs, and that they are now returning to their normal out-of-the-labor-force state. That is not what is going on.

What is going on, then? That is the hard question. My hunch is that finding jobs has been very hard for very long, and that as a result a lot of people have stopped looking. However, the numbers of those who report themselves as falling into the formal "discouraged workers" category are not that great. So the answer is that I really do not know why the labor force has been shrinking as a proportion of the adult population over the past three years.

It is, however, tremendously depressing to look at the evolution of the household survey numbers over the past couple of years. When the recession came to its formal end late in 2001, 63.1% of the working-age population was at work at 66.9% of the working-age population was in the labor force. Since then both numbers have declined by 0.9%--on net, every lost fraction of the population at work has been matched by an equivalent fall in the labor force share. The job market is much worse than it was in late 2001, but the unemployment-rate indicator needle has not moved.

Even more depressing, perhaps, is the decline in the unemployment rate since its peak in June: 120% of the decline in the measured unemployment rate is due to the fall in the labor-force share of the working-age population.

Posted by DeLong at January 10, 2004 04:39 PM | TrackBack

Comments

Told ya - job transfer to Asia got to stop - the sooner the better. If you cannot live without free trade - do not call it trade, call it pollution.

Posted by: Leopold on January 10, 2004 05:05 PM

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We have charts by sex and by education level. What are the labor force participation rates by age bracket?

Posted by: Keith Bloom on January 10, 2004 05:12 PM

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Leopold,
What do you consider the ultimate determinants of GDP growth, and therefore living standards to be?

Posted by: William on January 10, 2004 05:39 PM

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What's interesting about the college graduate labor force participation curve is the marked seasonailty over the last four years: peaking at Christmas, declining over the next 9 months, then rising again (to a slightly lower Christmas peak) over the fall.

But I can't think why that should be.

Posted by: jam on January 10, 2004 05:51 PM

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William writes: What do you consider the ultimate determinants of GDP growth, and therefore living standards to be?

Productivity and partricipation, of course.

Posted by: Leopold on January 10, 2004 05:54 PM

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The reason it's surprising is you'd expect a different seasonality, if seasonality were going to be present: a gradual decline over the year (as labour force participants retire) with a sharp uptick in May as new labour force participants graduate from college (and perhaps smaller upticks in August and January).

There's no way the graph Brad reprints looks like that.

Posted by: jam on January 10, 2004 06:04 PM

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William (and Leopold): How do you define "living standard", and in which way is that linked to GDP?

Certain GDP components have little to do directly with at least my definition of living standard. How much does owning 3 instead of 2 cars or buying a new color/plasma/high-res/projection TV raise your living standard? (I'm not saying it doesn't.) How much does the fact that you now have to work 50 hours weekly instead of 40 raise your living standard? How much, for that matter, does manufacturing bombs, dropping them somewhere, and repairing the damages (presumably all GDP activities?) help anybody's living standard?

If you are waited on/helped in restaurants not by 2 people but by 5, and thus supposedly there is more labor "participation" in the restaurant business, and it still takes the same time to get your food and costs the same (?), how does this help everybody's living standard? (I'm not saying it doesn't.) If you replace 1 million well-paying jobs by poorly-paying ones, participation will be neutral, and so will be living standards, right? Maybe living standards will "rise", because the goods/services those people produce are cheaper, and you can put more money in the stock market or can buy a new TV.

What I want to get at is that all of those indicators are just indicators, and not necessarily good goal functions. Often times people just look at the numbers and extrapolate them to living standards without questioning what they mean and how they come about (and that's difficult at best, of course). Even professionals.

I'm not saying that GDP activities that do not directly contribute to social welfare are useless. Having an effective military, or legal system, has many intangible (and tangible) benefits. For example, it certainly increases social welfare if you are not attacked by others. But many things counted in GDP are "busywork" and are only done to counteract undesired side-effects of other GDP activities, e.g. dealing with the consequences of unnecessary pollution.

Posted by: cm on January 10, 2004 06:29 PM

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jam: I would think those are seasonally adjusted numbers, for the precise reason that you cite.

Most of those indicators are available in adjusted and nonadjusted form. Typically the adjusted numbers are the ones that are reported and talked about. The rationale is supposedly that you want to know what happens relative to the pattern that you already know.

Posted by: cm on January 10, 2004 06:38 PM

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I'm still going with "lots of people with marginal attachments to the labor force, who entered for the first time in the 1990s, are running back out"; anecodetally it works.

Maybe there's a connection to the underground economy?

Posted by: Jason McCullough on January 10, 2004 07:08 PM

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I know it sounds bizarre, but I discuss how obesity --through rising disability rolls-- might help explain the puzzle at Economists for Dean

Posted by: lerxst on January 10, 2004 08:04 PM

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cm writes:
>
> Typically the adjusted numbers are the ones that are
> reported and talked about. The rationale is supposedly
> that you want to know what happens relative to the
> pattern that you already know.

The procedure clearly makes sense, but does anybody know where the best (ok, easiest) place on the net is to find out (say) what proportion of the variance is accounted for by the obvious trends? And, for that matter, by the less obvious or "unofficial" trends? (OK, so for unemployment claims, I know they always make a point of mentioning separately that the numbers could be off if there were (say) one fewer business day to sign up this week or the week before.)

Posted by: Jonathan King on January 10, 2004 08:20 PM

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Jonathan: adjustment

Look for "X-11" and "ARIMA" in Google. Also "X-12". I have not had the time yet to understand it fully.

The basic principle is to identify common trends in historical data by some fitting procedure and then adjust the current data for it. I think I read on the BLS website that the adjustment is of a multiplicative nature. That is, you basically identify a "coefficient" for each week of the year, and adjust the actual number in that week by that. The procedure supposedly takes moving holidays into account.

Posted by: cm on January 10, 2004 08:41 PM

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Jason: marginally attached running out

Let me quote this from http://www.bls.gov/news.release/empsit.nr0.htm":

"Persons Not in the Labor Force (Household Survey Data)

In December, about 1.5 million persons were marginally attached to the labor force, about the same as a year earlier. (Data are not seasonally adjusted.) These individuals wanted and were available to work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed, however, because they did not actively search for work in the 4 weeks preceding the survey. There were 433,000 discouraged workers in December, also about the same as in December 2002. Discouraged workers, a subset of the marginally attached, were not currently looking for work specifically because they believed no jobs were available for them. The other 1.1 million marginally attached had not searched for work for other reasons such as school or family responsibilities. (See table A-13.)"

From table A-13 (http://www.bls.gov/news.release/empsit.t13.htm"):

"Reasons other than discouragement (3) [...] Includes those who did not actively look for work in the prior 4 weeks for such reasons as child-care and transportation problems, as well as a small number for which reason for nonparticipation was not determined."

The latter is the group of people who "currently want a job", have not "searched for work and available to work now", and are not "[discouraged] over job prospects". With some interpretation from my side, footnote (3) says that the major reasons that 1+ million are not looking are that they think they cannot arrange for or afford childcare or (reasonable?) transportation to prospective jobs.

I can hardly see people running here.

What you may be referring to are people who do not currently want to work. Are you sure that is the same as "I would work, but it's not worth looking"? I know people who have been looking for quite some time (within their field though) and couldn't get a thing. Of course they did not hunt around the whole day, but did house repairs, updated their skills by reading up on technical literature, and things like that.

Of course there are always some people who are doing deals under the table, but I would suspect that those activities are rather in proportion with general business activities (especially in construction). But as they are not measured, it's hard to know.

Posted by: cm on January 10, 2004 09:12 PM

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We expect the middle class to fund too much of our national social development. What this chart says is that it's not rational for students to go into debt to obtain a college education & high skills, unless it's a field that's not vulnerable to outsourcing, e.g. health and law. This chart says that there are jobs at Wal-mart but not at IBM. This chart (the one that shows labor force participation decreasing for the highly skilled and increasing for low skilled workers) also says that the days of American innovation leading the world may well be numbered. Why are the bright students going to go into technology when they'll be stuck with the loans and the companies have ripped off their futures? This chart is an illustration of the new worthlessness of highly skilled labor, in this global marketplace all the free traders have been salivating for. Welcome to the brave new world, the era of the destruction of the American middle class.

Carly Fiorrina and some pi*s head from Intel gave Congress a lecture the other day on how white collar jobs were fleeing this country because we don't spend enough on education. That's right --- we don't spend enough of THEIR PROFITS on educating American youth (and re-educating the workers those two have dumped). There's alot of other stuff we should be spending their profits on. Meanwhile incredibly qualified and experienced Americans are unemployed, without health insurance, facing the loss of everything they've worked for.

The Great American Job Machine is alive and well, generating jobs like gang-busters -- in India and China.

Posted by: Camille Roy on January 10, 2004 10:17 PM

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lerxst: disability masking unemployment

Interesting and plausible point.

However there is one aspect that I would like to comment on, and no offense please:

(Paraphrasing) "People who file under relaxed disability requirements "disappear" from the unemployed, and thus the government is "cooking the books"."

This is at least a bit tendencious. Is it not the rightful purpose of these programs to "remove" people from unemployment and hardship by giving them supplemental income? A different question is whether the benefits are high enough. You cannot for one thing support disability programs (which I trust you do), and then insinuate that it is done to cook the books. Even if the agencies are looking the other way, welcoming the statistical effects, when people with doubtful qualifications are applying, the net effect is that people get some income who otherwise would remain empty-handed at some point, and somebody may also construe the minor insinuation that people with certain pains and limitations are poo-pooed as malingering, which I'm not suggesting. (It would be cooking the books when people who are able and willing to work were being actively pushed/encouraged into disability or early retirement. If this is the case, you should spell it out.)

The article would have almost its full force without this insinuation; if there is supporting evidence it should have been presented. By making such statements you are needlessly opening yourself up to rhetorical attacks of the kind of "you want people to suffer more just to discredit the administration" that we have been seeing in sufficient volume here.

Good article otherwise. You are of course welcome to take strong stands.

Posted by: cm on January 10, 2004 10:31 PM

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Okay, I don't really know much about these matters, but just looking at the overall trends in the chart, it seems to me that in the 1990s, labor force participation was fairly stable. In spite of the booming economy of the late 1990s, it really didn't rise much compared to the growth of, say, the 1970s or 1980s. Could it be that labor force participation, by secular trends, "should" have been declining in the 1990s, and was only kept fairly stable by the cyclical boom, and it declines rapidly now because of the combination of cyclical bust and a secular downward trend, from the beginning of the Great Graying or whatever?

I don't know if that's sensible, but that's what it LOOKS like, to the hasty eyeball.

Posted by: Julian Elson on January 10, 2004 10:34 PM

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How convenient to say the difference MUST be due to all those people who quit looking for work. That's CNN's standard line. I'm not convinced. Could it be because the statistics are all based on skewed data in the first place? What's your take on this?:
http://www.capmag.com/article.asp?ID=3084

Posted by: Rick Gaber on January 10, 2004 10:54 PM

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How convenient to say the difference MUST be due to all those people who quit looking for work. That's CNN's standard line. I'm not convinced. Could it be because the statistics are all based on skewed data in the first place? What's your take on this?:
http://www.capmag.com/article.asp?ID=3084

Posted by: Rick Gaber on January 10, 2004 10:55 PM

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Although I had some elementary exposure to matters of labor market, I am certainly far from capacity for independent research in that area. So the question I pose stems from, let's say common sense. Brad writes:

"...In general, during a serious labor-market downturn the unemployment rate jumps up sharply, and jumps up sharply by almost twice as much as the fall in the employment-to-population ratio.

But this past recession has been very different. Since December of 2000 the employment-to-population ratio has shrunk by 2.3%--from 64.5% to 62.2%...."

My question is about the upward trend BEFORE the recession:

How did the upward trend in the subject ratios preceding the last recession compare to upward trends preceding the previous recessions?

In fact somebody in another thread on this subject as I recall posted remarks implying something like that this last telekom boom was really really huge. But that got sort of,uhm, not worked on.

You see I move from bare bottom elementary things like conservation of matter and energy (or if you like, what goes up must come down type of stuff) and so please forgive if this is a stupid question and feel free to ignore it.

Also the absolute numbers that correspond to these percentages would be helpful.

Posted by: bulent on January 10, 2004 11:25 PM

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Camille: Uh-oh. Thanks for talking about the other charts, I missed them first due to my browser settings. Scary stuff.

Regarding how too much is burdened on the middle class (and I would rather say the working people) -- just wait for somebody to give us the lecture of how "only" the working people benefit from unemployment insurance, social security, and _their own_ education.

Regarding outsourcing to Asia, I rumorwise heard of technology companies that are supposedly having unofficial hiring quotas -- X positions in India/China for every 1 position in the US. One must be careful though not to slide into xenophobia on this topic. I work with a lot of Indians and some Chinese, and they are all nice, reasonable, and competent people. These guys just want to conduct a good life like everybody else. They are not at fault for all this.

Posted by: cm on January 10, 2004 11:35 PM

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Brad writes:

"...it is not that the boom of the 1990s allowed a lot of people with low skills and formal education who had a hard time looking for work to get jobs,..."

This reminds me:I recall reading an advertisement sector specialist saying something like this: "... these job cuts appear to be permanent but then during the boom times the sector hired a lot of people who should have never been in advertisement business in the first place..."

So, putting this together with A Zarkov's comments about "make-believe college education", it would appear that a lot of **low skill college graduates** were hired during the telekom boom, and now they have become discouraged.

Posted by: bulent on January 10, 2004 11:44 PM

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What kind of numbers are associated with baby boomers? It could be that male baby boomers who have some way of making ends meet are saying "well, enough is enough", while female baby boomers still need and /or enjoy work and they are not particular about pay or status at work place?

And I recall issuing of several hundred thousand hb1(?) whatever visas during boom time which allowed engineers from India to go take jobs in US and then once things took a dive they went back home. Could it be that they figured in labor force participation numbers but not in population numbers?

Posted by: bulent on January 11, 2004 12:03 AM

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I'll say it once again:

America has no choice but institute 15 years of mandatory education -- college ed for every body (or would that be 16 years -- well whatever).

Industrial Revolution made imperative universal primary education, and then secondary education.

Whatever revolution/evolution coming up/in process now (and it is happening because productivity keeps going up, like Industrial Revolution was made both possible and inevitable by productivity increase) is making imperative the 15 year mandatory education.

The sooner this becomes understood the better, both for America and the rest of the world.

Howard Dean?

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P.S.: Well, look, if you don't believe me, just build the scenarios and run simulation for (a) keep mandatory ed as is , (b) hike up years of mandatory education.

Posted by: Bulent Sayin on January 11, 2004 12:29 AM

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Bulent: re low-skilled graduates

At the time (and now from people who witnessed the years before Y2K in the US) I heard how companies are hiring any "warm bodies". So to some extent there appears to be some truth to this, but I'm not sure those were all college graduates.

A lot of this massive hiring was for web designers/programmers in internet-related business (e-commerce, online presences of traditional businesses, etc.), a field where prior experience hardly existed or was far short of demand, which made entry easier for people without deeper engineering backgrounds. But also in telecom-related equipment and software manufacturers who needed armies of bodies for product development and support.

Combined with (suspected by me) prejudice against older, experienced, and "inflexible, opinionated, outdated" workers, the lure of at times ridiculous salaries, bonuses, stock options, other goodies, and "fun factors" compelled many young and bright people to abandon their educations, graduate at lower degrees than planned, or change their field of work.

Most of this has unwound, and it has probably greatly contributed to reduction in employment. But after the "great unraveling" of the dot.com boom, other things have happened -- offshoring of non-dot.com jobs to mostly India and China, the scale of which promises to be large. There are feedback loops in the system -- any company is under the pressure to build presences in Asia when their customers and/or business partners are moving there. For example, an IT service company that works for a business relocating to India has to build an India office, or will lose business to other companies that do, or Indian companies. When you are selling products to such a company, you need support staff in India, and considering shipping costs, you may want to build your products there or elsewhere in Asia as well (which you are probably doing already anyway). Once the India/China office is there, you will find out that communication and travel between there and headquarters is difficult to manage and expensive (for example, India is 10.5 (13.5) time zones removed from the US East (West) coast), which sets up more cost-cutting incentives for moving additional funtions there.

I heard rumor-wise that not too long ago, some major technology companies had incentive programs for their experienced Indian and Chinese US employees to move back to Asia and build & lead teams there. One incentive that I heard was paid relocation and 1-2 years continued US salary. Reportedly there was such an onrush of people willing to move back -- presumably for cultural and family reasons -- that the incentives were soon reduced. As a side note, the latter may also tell us that once business in Asia picks up for real, we may as well see an exodus of Asian workers from US companies. But who knows?

US companies may be under the impression that they can control their outsourced Asian parts for a long time to come, and certainly they will for at least a few years, but I'm doubtful. One consequence that is already visible is that the living standard in the Asian tech centers is -- deservedly -- picking up, and once it becomes self-sustaining, local companies will form, poach talent from outsourced operations, and start competing with them.

Posted by: cm on January 11, 2004 12:31 AM

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"... the lure of at times ridiculous salaries, bonuses, stock options, other goodies, and "fun factors" compelled many young and bright people to abandon their educations,..."

Well I know of at least one case: The son of an old friend of mine sort of dropped out of college and started a business in those days, I don't know what he did afterwards...

OK, so Brad has caught onto something: Unemployment figures don't mean much in themselves at this critical point of obvious transition, you gotta look at the status and structure of the entire labor market.

Your comments, cm, inspire me a second question:

US has (had?)for a long time been world's number one destination of foreign capital, and probably number one in attracting foreign direct investment capital as well, which is really the thing that helps with the jobs front. I wonder how US has been performing recently in that area.

Posted by: Bulent Sayin on January 11, 2004 12:49 AM

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cm writes: One must be careful though not to slide into xenophobia on this topic. I work with a lot of Indians and some Chinese, and they are all nice, reasonable, and competent people.

The benefits for Asia from job outsourcing ("do you want India to stay a poor country?") is a smoke-screen promoted by US companies that sell on US markets and want to be able to lay off US workers with impunity. IBM does not set out to develop Indian industry when it lays off thousands of people in US. If a cheaper source of labor becomes available, IBM would be out of India in a heartbeat. If you want to do a good deed, contribute to a worthy cause. Defending US companies laying off US workers is not one of them.

Posted by: Leopold on January 11, 2004 12:58 AM

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Rick: I read Luskin's article. The numbers that he presents appear to be consistent with the BLS numbers. However he does a fair bit of interpretation that has little support, like the suggestion that the difference in household and establishment data is explained by hiring in newly formed companies and self-employment, which is supposed to be evidence of a strong recovery and a vindication of US entrepreneurship. And then I'm reading thinly veiled suggestions that the surveys are garbage, and all the economists and officials out there don't know what they are doing. Well.

I'm actually inclined to think that part of the self-employment effect is there; people who can't land a salary job may be more successful with contract gigs. But I suspect much of that is not self-employment by choice, but necessity. A friend of mine is doing just that after having been laid off and looking for a job almost a whole year, but the hair in the soup is that according to what he says he is making no more but sometimes significanly less on the contracts, but with no benefits, vacation, stock, etc. at all. So on the bottom line he is probably making significantly less, and the contracts are limited in duration.

Also there is one additional thing about self-employment which is hard to quantify -- people who have their own one-person or family business will probably consider themselves employed even if clients are hard to come by. While this is technically in line with the survey criteria, it will distort the measured numbers when they respond to the household survey -- not technically, but in spirit.

To some extent Luskin has a point that the numbers are questionable, but everybody who cares to read the fine print in the BLS news release and thinks a bit will know that, and you can probably not do much better using this kind of statistical method. The bottom line is that the numbers should not be over-interpreted, and BTW, the usually quoted numbers are seasonally adjusted, and not the raw data. That somebody is laid off because the Christmas sale is over will not give them much consolation, although it can be expected based on historical evidence.

Finally, the employment numbers are just a few indicators of several, and do not say much about the living standard of the working people. A minimum-wage job and a CEO job are each one job.

Posted by: cm on January 11, 2004 01:13 AM

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Leopold: I'm not defending US companies. Of course they care squat about foreign workers. The sole point of this statement was to remind people that it's not "Indians stealing our jobs", although most people here certainly understand this. Sometimes comments sound like they are directed against Asian countries (not the specific one from Camille though).

Don't interpret too much into my posts. I try to be factual, not a tough talker.

Posted by: cm on January 11, 2004 01:20 AM

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Leopold: And neither did I suggest somebody wants to keep India poor. Put a label on me by what I say, not what you interpret. By most people's standards I'm probably a left-leaning worker, but I'm happily taking heat from both sides ...

Posted by: cm on January 11, 2004 01:25 AM

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Bulent: re foreign investment

I have not been following it a lot, but supposedly foreign investment in the US has subsided, with China and Japan propping up the dollar to keep their local industries price-competitive. I also read a number of statements that it's mostly private investment that has taken a hit, and central banks are intervening to control exchange rates.

Posted by: cm on January 11, 2004 01:31 AM

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cm: sorry, did not mean to be harsh on you. It is just that you hear "racism" as soon as you start explaining the stupidity of an argument that the only way to make India less desperately poor is to take some money out of the pocket of US engineers and call center people.

Posted by: Leopold on January 11, 2004 01:45 AM

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"What you may be referring to are people who do not currently want to work."

I didn't mean the technical term; I was talking about people I know - musicians, dealers, only occasionally employed types, those with moderate psychological issues - those on the edge of employable society - who got jobs for basically the first time ever in the 1990s boom.

Posted by: Jason McCullough on January 11, 2004 02:03 AM

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Leopold: it's OK. The important thing is not to forget that people are people. And in regard to having to listen to stupidities, I hope you are not constantly high on andrenaline :-)

Which reminds me, I have to share this gem that I witnessed last week (?) on CNBC (no I didn't watch it, I was just present when it played): "The dollar is down, but all other currencies are up." (At least! Thank God!)

Posted by: cm on January 11, 2004 02:24 AM

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I tend not to agree with some of the things this feller Leopold says but this not one of them:

"..IBM does not set out to develop Indian industry when it lays off thousands of people in US. ..."

Right. Americans are now beginning to understand that capital has no nationality, no nationalistic motivations (even though they may pretend to harbor them, in order to cheat the working class into nationalistic posture when that suits their interests).

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cm on capital flow to US on decline:

Well I think those are two main issues that need to be looked at in some detail then:

1- Labor market is shrinking, both in terms of supply and demand.

2- FDIC foreign direct investment capital flow to US is shrinking (while US capital goes out elsewhere).

Other phenomenon:

-There is excess capacity in manuf (and other "old" sectors, I understand).

- But Boston is shooting for a hundred thousand new and well paid jobs in and related to biotechs.

Look, the crux of the matter is I think this:

Bush response to productivity growth has been to impede it, so that old fashion businesses could remain profitable for a while longer: He lowered taxes; he did away with environmental restrictions; he started a war.

Bush policies are aimed at stopping further individual development of US citizenry, because otherwise the advanced citizenry, better educated, more conscious, more autonomous, would demand that a few things be changed in the way valee added is shared and investment decisions are made. That kind of development would not suit the kind of people like Mr. Rumsfeld and the guy who did it to Enron and the people who empowered them in the first people -- old fashion capitalists.

Dem response should be exactly the opposite to that: Support productivity growth: For starters, institute 16 year mandatory education.

If you don't believe me, simulate it, 12 versus 16 years of mandatory education.

Posted by: Bulent Sayin on January 11, 2004 02:30 AM

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Jason: people on edge

Even so, the technical definitions apply to them as well, although it's tricky, as by your description they may be a bit outside the "mainstream" w.r.t. to the type of activities they are pursuing.

For the musicians it's more clear -- their performances or teaching sessions are jobs, and if they are willing to perform but cannot find reasonable gigs (more substantial than playing for a dinner and a few beers), they are un/underemployed at least in spirit. The casual workers, similarly. The psychological cases -- that shouldn't make them a special category, unless they are effectively unemployable by underperformance (disability?).

For the dealers it is less clear, are their activities "jobs" or "trade"?

So everybody other than the dealer should be covered by the criteria (although the musician may be considered self-employed and thus disqualified for unemployment -- not benefits, but counting).

Posted by: cm on January 11, 2004 02:39 AM

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... I tend not to agree with some of the things this feller Leopold says ...

Its ok. I disagree with some of the things he says and I am him (he is me?). Thanks for making the effort, anyway.

Posted by: Leopold on January 11, 2004 03:15 AM

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apparently , according to what I have read, it is difficult to give even 12 years of education, for a fair percentage, wouldn,t the drop out for 16 years be even greater?

Posted by: big al on January 11, 2004 04:06 AM

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Of course the total drop out numbers, if not the rate, through 16 years of mandatory ed would be higher. But average years of education of US citizenry would go up significantly . This, however, would be only one of the main benefits.

With 16 years of mandatory education, besides from increased average years of education nationwide, and productivity implicaitons thereof, the following potential benefits should be simulation studied:

1- Expanding education sector and expanding employment opportunities in that sector and related ones (good for communities and local economy too).

2- Increased average age of entry to labor market, with a number of consequences that would contribute to further modernization and democratizaiton of American society.

That's a rough picture for now that I have in mind.

Posted by: Bulent Sayin on January 11, 2004 07:48 AM

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cm:

Your posts are of a high quality, and your clear determination to emphasize descriptive analysis and deemphasize normative statements is refreshing. Maybe you should consider starting your own 'blog...

Posted by: Stephen J Fromm on January 11, 2004 08:50 AM

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[Cite to Luskin article omitted]

Posted by Rick Gaber at January 10, 2004 10:54 PM

My take on Luskin's article is a bit different than cm's.

I see it as premised on what are either willful distortions or indicators that Luskin really doesn't know what he was talking about. (Hard to assign probabilities over those outcomes, I know.)

First, pasting the CPS and establishment surveys for being surveys is a classic rhetorical trick to undermine results one doesn't like. It's also not a "mystery" why traditionalists would use CPS to measure the unemployment rate, since surveying establishments can't tell you the size of the labor force, for instance. But when the overwhelming majority of employment remains wage-and-salary employment on formal-sector firm payrolls (and let's not forget that the establishment and household survey employment growth relationship was reversed over the boom), the suggestion that payroll employment is "increasingly irrelevant" is not well-founded.

Second, some of the intertemporal comparisons from the CPS are not completely appropraite. The CPS has a couple of recent discontinuities from the Census 2000-based population controls, the effect of which is apparently that the official series understate employment prior to the breaks.
http://www.bls.gov/cps/cpscomp.pdf

Third, it isn't really true that the establishment survey "completely ignores... newer and smaller businesses." There are obviously limits on getting new businesses into the panel (and deceased ones out) in a timely fashion, but the establishment survey estimates incorporate a model of firm creation and destruction to try to account for that effect, plus there's the annual benchmarking of the estimates. (Luskin's assertion that small and new businesses are the engines of job growth are also dubious, but I doubt he's read the Haltiwanger-Davis research on job creation and destruction.)

Fourth, the magnitude of the self-employment effect depends critically on the periods one compares. Over, say, the last ten years, self-employment growth has been quite a bit slower than total civilian labor force growth (~5% from December '09 to December '03, versus ~13% for the labor force) -- it was actually during the '80s when the level of self-employment increased dramatically.

Posted by: Tom Bozzo on January 11, 2004 08:53 AM

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"(Luskin's assertion that small and new businesses are the engines of job growth are also dubious, but I doubt he's read the Haltiwanger-Davis research on job creation and destruction.)"

Tom,
Pardon my ignorance on this matter but isn't the Haltiwanger-Davis research on Canada?
Is it possible that the United States has differenet characteristics?
Also, couldn't the last ten years which slowed a slowdown in self-employment growth be an abberation? The reason I think this might be is the tremendous improper allocation of capital that occurred during the 90's, particularly the late 90's, as an incredible number of unsustainable businesses were funded by the capital markets. Once the capital markets turned off the spigots these businesses basically vanished. I don't think we are going to see that sort of speculation from the capital markets, therefore that sort of job growth for a long time, if ever.

Posted by: William on January 11, 2004 09:59 AM

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to follow up on the very good comments by cm,
I suspect the story that ties a lot of this together is the dot.com boom and bust. In the 1990s you had many young males employed in the boom that did not have the traditional education backgound because it was a new industry. Now that the boom has gone bust these types of jobs have been destroyed -- one quick way to judge that is to look at capacity utilization. In hi tech at the end of the bubble cap use was 90% to 100%. Now it is 80% for semis, 70% for computers and 50% for communication equip. Just as a rough guess we can assume that job in hi-tech are now some 40% to 60% of what they were at the peak with almost all of the drop due to the bust and very little due to outsourcing. Employment in the tech industry in the boom was highly skewed to young males with non-traditional educations -- I do not have data on hand to support this, just a thesis. These geeks are probably now the young males that the angry bear is showing having dropped out of the labor force. This line of thinking shows that much of the very unusual labor force behavior this cycle is largely a consequences of the HT bust. Moreover, these are the industries that were experiencing 50% growth rates in the 1990s and accounted for much of the productivity boom
-- much of the discussion of productivity in this and other web site ignores the clear evidence that the productivity boom has been limited to a few industry and was not spread evenly throughout the economy. The telecom industry has experience almost no growth in the recovery. Semis output has soared, but that industry is extremely high in fixed costs and low in variable costs so that did not lead to employment growth. Computers have had nice growth the past two years but most of the jobs created probably were just assembly line jobs at Dell and Gateway and very few jobs in R&D type work that would employ the young geeks thay probably are the ones dropping out of the labor force.

I do not have time to work more on this thesis right now, but the comments by the angry bear
led me to think about this thesis and I will look into it some more after I put out by monthly publication.

Posted by: spencer on January 11, 2004 10:43 AM

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Re: Low Skill Graduates

The reference to possible discouragement of low skill graduates in IT services is, IMO, interesting, but likely to miss the big picture.

Remember Brad's SF Chronicle post about people just having to do a lot more work in the same time. Having looked for work not too many years ago (as a mostly low skill graduate) and having checked entry level listings recently, I would say that the low skilled can't expect to make anything more that average wages (after years of work). Meanwhile, the trend of the last few years is to simply dump more work onto them. Anecdotal evidence, including that article, suggests to me that the workplace has become a lot more stressful without being financially more rewarding. Who would want to work like that until retirement?

I am out there getting more skills. Is it possible that others are doing the same?

Posted by: Wolf on January 11, 2004 11:11 AM

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bulent, it is hard enough to keep people in school until they are 18, they want to be away from parent oversight, do a lot of sex , booze, with a job which will allow it. To tell them they are going to have to wait three or more years before they are free, will only work for the more intelligent children.

Posted by: big al on January 11, 2004 11:40 AM

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Aw, c'mon, I think most kids who don't go to college don't do so for financial reasons and I think most of them would love the opportunity.

Posted by: bulent on January 11, 2004 12:36 PM

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cm:

I agree with Stephen Fromm about quality of your posting here and that you might want to consider launching a blog of your own.

Posted by: bulent on January 11, 2004 12:40 PM

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Bulent, I teach to 12-16 individuals, and an awful lot of them has no interest whatever to learn. It is not that they cannot learn things, it is that they deem school unworthy. Now some are interested in learning, but it is hard to do so in an ambient where those who are not interested can be noxious simply to kil time.

DSW

Posted by: Antoni Jaume on January 11, 2004 01:05 PM

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Take a look at the proportion of women and men who have earned a 2 or 4 years college or graduate school degree since 1930. Quite a wonderful rise and no reason the rise will not continue if education is valued, pushed, and readily accessible.

Posted by: anne on January 11, 2004 02:19 PM

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Antoni Jaume: It is easy to get frustrated teaching, unless you don't particularly enjoy it and emjoy it a hundred percent of the time. I used to teach Turkey's cream of the crop; I mean they were the top one percent from national test for higher ed entrance, and look how I complained once:

"Interesting mixture, my students were. There were a few who rightfully thought I was a complete peasant in terms of knowing any thing about philosophy. There were quite a few who were destined to become full fledged Yuppies and I am pretty sure they made it -- though Yuppies are no longer a la mode, I understand. The majority, though, were too much utilitarian for my taste, too much interested in learning to test (and so they hated me for all those open books-open notes tests I did!). Here is what happened one day:


You see, if you play around a bit with what they call EOQ Economic Order Quantity formula in Industrial Engineering, it takes a form very much akin to E=m.c2. So one day in class I take about half a minute of a diversion to point out to that fact and I get a devastating question from one of my students:

"Sir, are you just kidding or should we take notes!?"

Life can be hard sometimes."

So for me, my students were not interested enough in learning either, they studied for grades and diploma and landing a well paid job. And that was a reason why I got bored of teaching.

Still, I think mandatory education should become 16 years, first in US and Europe, then elsewhere.

Anne has clearly observed what good a larger number of college graduates can do to a country. The GI Bill I think did a lot of good to America. And I think the Dems should study that scheme and look for ways of adapting it to our day.


Posted by: bulent on January 11, 2004 03:01 PM

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Not everyone involved in the late 90's boom held on and watched NASDAQ bust. Here in Seattle I personally know a number of very well educated individuals who 'cashed out' early and are now able to spend their lives working on things that interest them. Some are back in school studying entirely different areas - e.g. boatbuilding at local Community College - which they will pursue more as a hobby than a source of income. Others volunteer, travel, etc. Myself, I consult four months a year, in any given month I might be in or out of the labor force.
There have also been a number of public and private voluntary early retirment programs that provide health insurance and a reduced pension which combined with income from modest savings allow people to leave the rat race early.

Posted by: Fred on January 11, 2004 05:18 PM

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William,

My recollection is that the Haltiwanger-Davis stuff was based primarily on U.S. Census data. Potentially the more pertinent critique would be that the data are not especially recent (the series available via Haltiwanger's home page extend through 1993).

The slowdown in self-employment growth happened very early in the '90s, so the tech bubble isn't necessarily an explanation, though.

--

Spencer -- I do know of some anecdotes that would support your theory, though I wonder just how non-tradiitonal the education of the typical dot-com geek really was. The ex-dot-commers I know have college degrees (not necessarily in technology majors) and generally sought employment in other sectors. My guess is that the geeks would not be dropping out of the labor force entirely, but I don't have data to back that up.

Wolf has a good point about people using the slump to educate or re-educate themselves, as does Fred regarding early-outs.

Posted by: Tom Bozzo on January 11, 2004 06:31 PM

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big al: Are you suggesting that only stupid people are horny and boozing? (Tongue in cheek.) Don't you know how much sex and booze are going on in college? It's an age thing, and has little to do with education.

Posted by: cm on January 11, 2004 06:52 PM

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Thanks for the flowers, everybody. It is a pleasure to be on this board. Regarding an own blog, I frankly don't have the energy at this time. It is hard work, you need a thorough background and have to do a lot of research. That is, if the thing should be substantial and not the web equivalent of talk radio. I'm grateful to those individuals who are providing the blogs that we are frequenting. Their efforts are much larger than may appear on the surface. I will keep considering it, though.

Posted by: cm on January 11, 2004 07:05 PM

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Fred, William: cashed-out individuals

Don't overvalue personal anecdotal evidence. There are 250+ million people living in this country. I'm not saying your experience is not significant. I also have some anecdotes of mine, e.g. I know of people who traded stock and by either sound judgement or luck (well in hindsight it's always genius, is it not) managed to dump everything at the top, and were in the position to buy a house with cash. But there are (1) regional differences, and the nationwide statistics may apply in your area to a lesser extent, and (2) the people that anybody knows or knows of are not necessarily a representative (in the statistical sense) sample of the population, as often times there is something that correlates you with the people that you know.

Posted by: cm on January 11, 2004 07:27 PM

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bulent: I don't think much more than 10 years of mandatory education makes sense, and will actually improve things. In my school we used to have quite a few people for whom everything beyond grade 6 was torment, but they probably still benefited from 10 grades, although there was an opt-out procedure after 8 grades with significant hurdles, so it was used only in rare cases where people were seriously underperforming. And if done well, 10 grades will give you a quite good foundation.

However it is important that higher education and research be accessible in sufficient volume and quality. Otherwise over time innovation and your scientific and technological base will be eroded ("make-believe education" and focus on prestigious titles instead of substance?). It is a process with feedback loops (aka vicious/virtuous circle): cutting of education funds, less innovation, reduced/not growing enough productivity, more low-qualified unemployment and lower education funds and obversely for increased education investment. Unfortunately (?) the delays in the system are quite long, so it is difficult to see how it is happening, and when it is, it's slow to turn around.

Posted by: cm on January 11, 2004 07:47 PM

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"...In my school we used to have quite a few people for whom everything beyond grade 6 was torment..."

You means "every thing the school would give them at the time". What the school gives can be changed.

"...And if done well, 10 grades will give you a quite good foundation..."

A good foundation for what? Cleaning job at Wal-mart?

Let me put it this way, then: Consider two armies in hostility. They have equal strengths -- numbers, weapon systems, logistics, strategic advantage, command and control, every thing -- except that the bulk of the troops in one army is high school grads and the other army is all college grads. Which army do you think would win?

Or consider two economies with average years of education of labor force being 8 years in one and 12 years in the other. Which one would be more competitive? Which one you would like to be part of?


"..I don't think much more than 10 years of mandatory education makes sense..."

I find it hard to believe that you really think so.

Posted by: bulent on January 11, 2004 08:39 PM

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Bulent: mandatory education

We are talking about _mandatory_ education.

I'm not saying that people should not have 12 or 16 years of education. Even today, people who go to school for 10 years and to vocational school afterwards, get a measure of 12-13 years of education. Some vocational schools include a highschool program.

All I'm saying is I'm not sure that making 12+ years of education mandatory will help much. Many people already get that, although one may consider vocational training not as "education".

Maybe we are arguing about semantics. I would say that people should be encouraged and _enabled_ to get even more than 16 years of education. But maybe this should not take the form of extending school (and you didn't say this), but rather encouraging more research.

I do believe that 10 years of education can give you a good foundation for way more than a Walmart job (well OK, maybe after fairly including the vocational training we get to 12 years as well).

I'd say my first 10 grades gave me a good foundation, but that alone would certainly have made me fit for the labor market.

So I would agree with you if you meant the 12/16 years to include vocational training.

Posted by: cm on January 11, 2004 09:17 PM

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"..So I would agree with you if you meant the 12/16 years to include vocational training..."

U-uh. I meant every body getting a Harvard style, well-rounded arts and science education, even the prospective engineers, including, especially including, the software sweatshop slaves -- poor things -- before they get to study engineering.

And I am totally opposed to allowing vocational training alone to any young person at secondary education level at this time.

For a period of transition in less developed countries, however, like Turkey, I could agree with your proposition about vocaitonal training.

Posted by: bulent on January 11, 2004 09:38 PM

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Oops, that should read "that alone would certainly _not_ have made me fit for the labor market".

Bulent: OK, then let's disagree about _mandating_ a well-rounded arts & science education for everybody. My concern is not that it wouldn't be useful/desirable or that it would be pearls thrown to sows for people who are not going to pursue engineering or scientific careers, but that I'm not sure that it would help much to _force_ this extended curriculum on the "subjects" of the education.

But then maybe I'm again misreading you -- you may be talking about an environment where overall productivity is so high that everybody can join the productive forces at age 25+?

And what about the empirical observation/allegation that many/most (?) historical scientists and inventors made the majority of their innovative contributions during their twenties? I'm not sure whether that's even true, or whether it could be an artefact of the "traditional" environment in which they were operating. But speaking for myself and a number of coworkers that I have had, many agreed that we were (effectively, not by ability) more innovative (not necessarily productive) in academia, not in our industry jobs. And by coincidence that corresponds to the same age range, so it's hard to say whether it's an age thing or an environmental thing. (I suspect the latter though.)

Anyway, just a thought.

Posted by: cm on January 12, 2004 12:43 AM

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"...you may be talking about an environment where overall productivity is so high that everybody can join the productive forces at age 25+?..."

Correct. I keep in perspective a high productivity society. And the obstacle is not science and technology, it is politics. Productivity itself, however, has a way of creeping up and eventually forcing politics its way, as it did through Industrial Revolution and later on through institution of the welfare state.

There is going to be 16 year mandatory education (or effectively universal coverage of it) in US, one way or another, sooner or later. If US makes that a project and pursues it, however, things would be easier for every body, even perhaps for old style Enron type capitalists.

Posted by: bulent on January 12, 2004 02:17 AM

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Perhaps you should focus on a low cost education, or educational oppurtinites beyond year 12 for everyone, before trying to mandate such...

Posted by: Rusty on January 12, 2004 03:09 AM

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An idea in the backburner here is that once you set your coordinates towards making 16 year educaiton (or, in general, x year education), mandatory, or effectively and virtually have universal coverage, then you begin to put in place means and ways of achieveing it, like allocating public funds, increasing cost effectiveness, discussing philosphy, concepts, and modes of education, etc.

The political will and decision to move in tthose directions must be in place first, I think. It would very possibly be a whole different ball game, I mean 16 year mandatory ed.

Posted by: bulent on January 12, 2004 05:28 AM

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Questions:
Does Social Security Administration release any numbers on how many different social security accounts had reportable income in any given year? If so, how do these numbers correlate with employer or other surveys? Also, how does employer survey correct for individuals who work for two different companies?

Posted by: fred on January 12, 2004 07:20 AM

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I'm coming late to the party, but what the heck. I'll probably repeat myself in some later response.

What some folks here are talking about seems to be the notion of a "reservation wage." many of those who were extraordinarily well paid during the late 1990s have a cushion which makes getting a job unnecessary, and they have very little idea of what their skills are worth in today's economy. They may also have the impression that they don't like what their skills will bring in today's economy. In either case, they are on the sidelines. Part of this notion of reservation wage is that, as time passes and need begins to bite, the reservation wage falls. People do, over time, adjust to conditions in the labor market. That means some of those lucky in the bubble will be back. Others, those who have arranged things well enough, will never feel the pinch and so won't lower their reservation wage. Those who do eventually come back will, all else equal, put pressure on wages among equally skilled individuals.

Another measure of labor market health upon which the good Perfessor has remarked recently is duration of unemployment. Interesting thing about that. The tally of those who have been unemployed less than 5 weeks has fallen a good bit, while the tally of those unemployed for 15 weeks or more has risen. Both would tend to boost the average duration of unemployment, but they suggest very different things. The 5-weeks-and-less crowd are having less trouble getting jobs. Decent job skills and not long gaps means relatively good access to jobs - once again. Lacking either (not everybody, mind you, just a generalization) means the 15-week and longer crowd is having a very hard time finding work. Looks like a labor market in transition. Political note: the 5-week-and-under crowd is more likely to vote than the 15-week-and-over crowd.

Those who think that market prices tell us a good bit about supply and demand will want to know that the y/y rise in hourly earnings is at 2.0%, the lowest since 1987 (there I go, repeating myself, just like I said I would), while productivity suggests that hourly wages should be rising fast. That suggests, to me anyhow, that the labor market remains out of equilibrium. For all that the jobless rate has fallen 0.7% from the (exaggerated) high, the price for labor is very soft.

By the way, cheers for cm and for spencer. They base their conversation on facts, logic and a good grasp of the data and theory. Much to be admired.

Posted by: K Harris on January 12, 2004 08:19 AM

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Cheers! Not many of us (including me) do that and I appreciate those few who do and enjoy discussing topics with them.

Posted by: bulent on January 12, 2004 10:26 AM

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We still seem to be missing a breakdown by age.

If the women aren't moving out of the market and the un-college'd aren't, then that leaves college-educated men.

If college-educated YOUNG men are neither working nor looking for work, then we have one set of conjectures. (More of them are in jail now? ((Drug dealers and Enron managers now doing time?)) Dot-com young wealthy taking a breather or going back to college after the bubble? A bunch of French-poetry majors who have lost jobs in advertising ?) If college-educated OLDER men are not working or looking, then the prime conjecture is, again, Boomers taking early retirement. Getting out while the getting is good. (Just wait until their 401Ks and IRAs go into net withdrawal...)

The "fix", presuming a fix is necessary, also depends on the demographic of the change. Helping young men get jobs, or job skills, might be fixed by -- just for instance -- boosting the military manpower targets. This wouldn't do much for old guys.

So, where do we look for age data on this fascinating question?

Posted by: Pouncer on January 12, 2004 11:38 AM

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Thank you K Harris.

Some numbers.
last year from Dec to Dec payroll employment rose from 108,62,000 to 198,656,000 -- a rise of 14,000
within margin of error so say it was flat.

over same period manuf payrolls fell 516,000 or
roughly 0.5% of total employment.
Out of this 85,000 was in high tech manuf industries, or less than 0.1%. so non-ht was 431,000 or about 0.4% of total employment.

In addition information services employment fell 42,000. But that includes traditional movies, records,publishing, and Broadcasting. Backing these out, this category fell 48,000 A third category, computer systems design and related services fell from 1,142,700 to 1,135,700 a drop of 8,000. The two areas combined fell 56,000 or about 0.05% of total employment.

So you have traditional manuf employment falling
an ammount equall to about 0.4% of total employment and HT manuf falling of 0.1% of
total employment and other Ht down 56,000
or about 0.05% of total employment.

so you have manuf HT jobs reducing total employment 0.1% from manuf and 0.05% from all other versus 0.4% from traditional manuf.

So you have a maximum impact of outsourcing reducing employment 0.15% while traditional manuf
cut employment growth 0.4%.

I know I am giving this estimate to the people most impacted by outsourcing but it is like a house fire. You hear on the morning news a that a 3 decker burned down last night and forget by noon. Unless it was an exceptional fire the firemen and police that fought it will forget it in a few weeks. But the people that lived in that house will never forget it and it will impact them the rest of their lives. You are too close to the subject to look at it objectively.

Using these estimates high tech accounted for about 1 million of the 3 million job decline
since the economic peak. But the bulk of the
drop in HT employment was in the first year.

Posted by: spencer on January 12, 2004 11:44 AM

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Spencer,

The point is that the more educated the person, the higher the impact. If someone works minimum wage and is displaced, the impact is almost zero - the economy will always have minimum-wage jobs. If an economics professor is displaced, he might as well just jump from the bridge - nowhere else he will attain the same level of accomplishment. I feel sorry for longshoremen that may be displaced by technology. However they are affected nowhere near as much as the engineers IT industry is throwing out for a quick buck.

Posted by: Leopold on January 12, 2004 02:32 PM

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Spencer,

The point is that the more educated the person, the higher the impact. If someone works minimum wage and is displaced, the impact is almost zero - the economy will always have minimum-wage jobs. If an economics professor is displaced, he might as well just jump from the bridge - nowhere else he will attain the same level of accomplishment. I feel sorry for longshoremen that may be displaced by technology. However they are affected nowhere near as much as the engineers IT industry is throwing out for a quick buck.

Posted by: Leopold on January 12, 2004 02:37 PM

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I agree with the point made by: Julian Elson

What happens if we reached a fundamental peak in the late 90s of labor force participation? Just a theory, but the aging of the baby boomers and the general lengthening of life creates a demographic effect on that % that is not trivial and is likely to cause a peak at some point. I don't know for sure if it was the late 90's but it very well could be.

There's plenty of anecdotal evidence of numerous baby-boom mid-tier managers and veteran factory workers that accepted buy-outs / retirement packages over the last 5 years. These are mostly people in their 50s and 60s who could work, count as part of the working population, but don't really have to, and won't work unless its excessively worth their time away from their early retirements.

Also, my understanding of the data is that it counts all US residents over the age of 15 (ie. 16+) which means that it includes the growing number of people age 70+ as a % of the total population.

Posted by: alex on January 12, 2004 04:11 PM

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I agree with the point made by: Julian Elson

What happens if we reached a fundamental peak in the late 90s of labor force participation? Just a theory, but the aging of the baby boomers and the general lengthening of life creates a demographic effect on that % that is not trivial and is likely to cause a peak at some point. I don't know for sure if it was the late 90's but it very well could be.

There's plenty of anecdotal evidence of numerous baby-boom mid-tier managers and veteran factory workers that accepted buy-outs / retirement packages over the last 5 years. These are mostly people in their 50s and 60s who could work, count as part of the working population, but don't really have to as long as their health benefits hold up, and won't work unless its excessively worth their time away from their early retirements. Furthermore, even if they choose to work, they can't apply for unemployment benefits because they are receiving retirement pay.

Also, my understanding of the data is that it counts all US residents over the age of 15 (ie. 16+) which means that it includes the growing number of people age 70+ as a % of the total population.

Posted by: alex on January 12, 2004 04:16 PM

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I agree with the point made by: Julian Elson

What happens if we reached a fundamental peak in the late 90s of labor force participation? Just a theory, but the aging of the baby boomers and the general lengthening of life creates a demographic effect on that % that is not trivial and is likely to cause a peak at some point. I don't know for sure if it was the late 90's but it very well could be.

There's plenty of anecdotal evidence of numerous baby-boom mid-tier managers and veteran factory workers that accepted buy-outs / retirement packages over the last 5 years. These are mostly people in their 50s and 60s who could work, count as part of the working population, but don't really have to as long as their health benefits hold up, and won't work unless its excessively worth their time away from their early retirements. Furthermore, even if they choose to work, they can't apply for unemployment benefits because they are receiving retirement pay.

Also, my understanding of the data is that it counts all US residents over the age of 15 (ie. 16+) which means that it includes the growing number of people age 70+ as a % of the total population.

Posted by: alex on January 12, 2004 04:17 PM

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sorry

Posted by: alex on January 12, 2004 04:28 PM

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