Brad DeLong's Semi-Daily Journal (2004)

A comment by one of Louis Rukeyser's guests Friday to the effect that high unemployment was "keeping inflation low" made me wonder whether the ownership class really wants substantially reduced employment. Isn't it really better to have an employers' market in which wage increases can be kept low, and benefits eroded? Looking at things from a shareholder's viewpoint, isn't a situation where millions can only aspire to be a WalMart night lock-in really desirable?

Of course it is, Bob, which is why the Fed fights tooth and nail to maintain "price stability" with regard to labor costs, yet does nothing to deflate asset price bubbles. Welcome to "free enterprise", American style.

The "consensus" forecast (admittedly, always dicey!) is for 8 - 12% profit growth. It's hard for me to see how this translates into much job growth - companies still don't have much in the way of pricing power, costs (raw materials, health care - although health care is being offloaded onto workers in many cases) are increasing, which means that for there to be bottom-line growth on top of a good profits year of 8 - 12%, we can't see much in the way of compensation growth (either hourly or in aggregate).

If one looks at the forecast offerred by CEA in Feb. 2003 for where they predicted payroll employment to be by Dec. 2004, we would have to create 625 thousand news jobs each month this year to hit that forecast. It would seem no one thinks will get there after all.

Harold, of course you're right, and the next member of the so-called liberal media to hold the bush administration to its own tax cuts will lead to job creations forecast will be the first member fo the so-called liberal media to hold the bush administration to its own tax cuts will lead to job creations forecast.

Given that Congress didn't extend unemployment benefits in December, how much of the decline in continuing claims was due to people running out of benefits, as opposed to people finding jobs?

You kvetch about the declining employment-to-population ratio, but it seems as though you have not really drilled down into the data.

Workers ages 16-19 are responsible for the decline in the e-pop. Remove them from the data, and the e-pop ratio is increasing. I, for one, am not going to make dire claims about the labor market based on the e-pop ratio when high school students are making up the bulk of the decline.

"Given that Congress didn't extend unemployment benefits in December, how much of the decline in continuing claims was due to people running out of benefits, as opposed to people finding jobs?"

What I was wondering. I just do not see a reason for corporations to meaningfully increase payrolls right now. Productivity is increasing nicely, earnings are fine, there is little price leverage, wages and benefits are not rising much if at all, demand is simply holding up, there are outsourcing opportunites abroad and global supplies are ample.

Why should the labor market boom?

Anecdotal evidence: I am a very experienced, specialized software engineer, been in my field since 1985. I got more calls from recruiters (2-3 per day) last week than I got in the previous 12 months.

Camille Roy

Good news indeed. Perhaps we are finally in for change, but I am cautious in stance.

Larry makes an excellent point. E-Pop ratio is increasing for both sexes ages 20 and over. Way to go, Larry.

BUT

Things could definitely be better. For men 20+, the E-Pop ratio recently hit a two decade low at 71.4% in August (June 1983: 71.5%). It's begun to climb up (currently at 71.9%) but that's way off from the last cycle peak of 74.5% in Feb 2000. Not only that, if you look at the 50 year data, each successive cycle peak for men is lower than the previous one.

For women 20+, it's a different story. Their e-pop ratio is now at 57.3%, down from this cycle's peak (April 2000: 58.9%) but just barely up from this cycle trough (Sept. 2003: 57.1%). Similarly, over 50 years, they show a slow but steady increase.

So what can we conclude? Overall, e-pop for those 20 and older finally bottomed out in August/September 2003 after about 3 years of steady declines, but there's been slow progress since then to make it back up.

If these trends continue, women 20+ will definitely hit a new record high e-pop quicker than men 20+ can even get back to their previous cycle peak. Women only need to gain 1.6% points of e-pop, whereas men need to gain 3.6% points.

Improvement, yes. Achingly slow, yes. Trouble for men, possibly.

Thank you Larry for inspiring me to dig through the data myself. Cheers!

Camille: Most likely just anecdotal. This could be the result of new software project being started that matched a keyword on your resume. You can't always tell with recruiters calls if two or more recruiters are talking about the same job or company.

I don't get it: people 16-19 looking for work don't really count? Why not?

Oreo: I'd normally dismiss Camille's evidence as being totally anecdotal as well, but in the past few weeks many of my friends (in different fields, I might add) have been hearing the ringing of phones.

I still don't think we're out of the mess, though.

Brad --

I actually think they DO count -- and in fact, BLS data shows the 16-19 year old e-pop ratio hovering near the lowest levels since 1965, and in fact, if it were to drop much further, it would drop to an all-time low.

But I think Larry's point was that it helps to know exactly where the problem lies in the employment data. Surely it's better for society to have a 35 year old (with financial obligations, family obligations, etc.) employed than a 17 year old, who is likely just working for Playstation2 money.

Their money both spends the same, sure, but if you had to pick one to employ, in terms of societal benefit (yes, these are normative statements but hey), you'd hopefully choose the guy with kids to feed.

Now, the labor picture could also be termed not healthy if the 17 y.o. and the 35 y.o. are competing for the exact same job...yikes. Or if the 17 y.o. also has kids to feed. Double yikes.

Still, I thought Larry's point was interesting and worth a look at the data to see if it was true. It was. Thank god I'm not a 16-19 y.o., and I take pity on the teenagers who are trying to find work...

...to hold the bush administration to its own tax cuts will lead to job creations forecast will be the first member fo the so-called liberal media to hold the bush administration to its own tax cuts will lead to job creations forecast.

Remember Shrub and his flacks have been telling us for going on 2 years now that these tax cuts are really a "jobs and growth" plan, and are "carefully crafted", "specifically targeted", "precisely designed", etc. for the purpose of creating jobs, because that's what these guys knew how to do.

It was simple, they said- once the heavy hand of taxation was lifted, business would explode....once people had their tax cuts, the demand would increase jobs to the tune of over 300,00 a month.

When will they be held accountable for this deceit and incompetence?

One last note-- there should be a net gain of 5.5 million new jobs by election day if Bush's plan works the way we've been promised. (The economy was assumed to create 1.4 million without tax cuts.)

We're down 3 million......so, we need 8 million jobs in the next year and a half.

Anyone want to bet?

An important political question: How likely is it that the great job growth, should it actually occur, will be enough to help Bush?

Another data point...I'm a software guy too and have noticed more calls from recruiters. I ask them how the market is, and the consensus seems to be a lot of tire-kicking but little hiring. Salaries have yet to budge.

Good point, Mork.

It occurs to me that it's the start of a new fiscal year, and a new budget, so we might see a rush as managers fill whatever positions they've been able to get approved from higher-ups.

I'm guessing that, at a departmental level, there's a pent-up demand for new bodies which has been kept in check by upper management's desire to keep costs down.

Upper managment probably still wants to keep costs down, so they might allow a few new hires, but they probably aren't willing to open the floodgates.

So if there is a surge of hiring right now, it might not last.

Anecdotally, I've also heard from two companies in the last couple of weeks. Alas, they've got round holes and I'm still a square peg. Or, actually, I'm more of an irregular hyperboloid peg. I expect it'll be some time before firms work through the round pegs, and the square pegs, and start thinking of hiring irregular hyperboloid pegs.

By the way, the Wall Street Journal has a story today that suggests where some of those mystery jobs are, the ones that show up in the household survey, but not the company survey.

Real estate.

There's been a 27% increase in membership in the National Association of Realtors in the last 3 years, about 200,000+.

It's easy and quick to get licensed, and agencies will hire all the agents they can find.

But real estate agents aren't employees, aren't paid salaries, and don't get benefits. So when the Feds call Century 21 of Waterbury, they probably don't report their agents as employees. But when the Feds call a new Real Estate agent, who's having a hard time finding clients because of all the competition, and has no income, he says he's employed.

Meanwhile, the housing market is cooling down, and yet more agents are entering the field, driving down agent incomes.

It would be interesting to know what percentage of all real estate agents are members of the NAR.

Larry wrote: Workers ages 16-19 are responsible for the decline in the e-pop. Remove them from the data, and the e-pop ratio is increasing.

I don't see this in the data, Larry. How did you calculate it? My calculations show about the same decline and pattern looking at the BLS data that excludes teens (16-20). It would be very surprising if they ever drove any important trends in employment since they are are only about 1/12 of the population and their labor force particaltion rate is rarely > 40%.

My husband is a CPA and says that the Bush tax cuts were wrong. He cut dividend taxes which runs the stock market up but doesn't provide jobs. If we want more jobs we need to cut corporate taxes.