Blog postings by CEPR staff and updates on the latest briefings and activities at the Center for Economic and Policy Research.

Last week, Donald Trump met for an hour-long meeting with economist John Taylor, who is now regarded as a potential candidate for the opening Fed chair seat, currently occupied by Janet Yellen. Taylor, the man behind the Taylor Rule, which attempts to set rules-based guidelines for the Fed regarding inflation and interest rates, is among the candidates for the chair position, as is Kevin Warsh. Nominating either of these candidates would be a tremendous step backward for the economy, especially following the recent and promising signs of growth for those who are less educated, as well as for blacks and Hispanic/Latinos, since the devastation of the recession.

The Federal Reserve website suggests that the lowest level of unemployment that the US can withstand without causing excessive inflation is within a range of 4.5 and 6 percent. However, in this past quarter in 2017, unemployment averaged 4.3 percent, well below the Fed’s accepted range with no signs of inflation above the target rates. Following strict rules-based policy, as celebrated by economists like Taylor and Warsh, would have led to the maintenance of higher than necessary unemployment rates, as well as a loss in employment, and would contribute to slowing the already lagged recovery since the financial crisis. According to an analysis conducted by the Federal Reserve Bank of Minneapolis, had the Fed complied with the generally accepted rules surrounding target unemployment levels, 2.5 million people would have been kept out of work.

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This is the fourth in a series of blog posts based on the CEPR report, Organizational Restructuring in U.S. Healthcare Systems: Implications for Jobs, Wages, and Inequality, that examines the experiences of healthcare workers over a decade of change from 2005 to 2015.

Employment trends in hospitals and outpatient settings are consistent with the strategies of organizational restructuring that hospitals have undertaken. Hospitals continue to hire the largest share of workers, with employment rising from 5.25 million jobs in 2005 to 5.75 million in 2015 — a growth rate of almost 10 percent. Outpatient centers account for a much smaller number of jobs, just 737,000 in 2015, but the rate of growth of employment was almost six times that of hospital job growth.

The pattern of rapid job growth in outpatient centers held for all race/ethnicity groups. Employment of white workers in these centers increased 47 percent while black workers’ jobs grew by 65 percent, those of Hispanic workers by 103 percent, and of Asian/other workers by 82 percent. Employment of white women increased by just 17 percent.

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Consider Figure 1, which shows the trade deficit as a percent of total trade. Since the early 1970s, there have been three large swings toward bigger deficits: the mid 1970s, the mid 1980s and the early 2000s. Each of these swings was more sustained and each subsequent movement toward balanced trade was less complete than the last, leaving a trend of greater imbalances. By the second quarter of 2017, the United States spent $124 in imports for every $100 worth of goods and services exported. At the end of 1974, however, trade had been balanced.

rosnick trade 2017 09 fig1

To some extent, this trade imbalance reflects oil imports. However, as Figure 2 shows, removing both petroleum imports and agricultural exports from the trade data does not hugely change the story. If anything, restricting to this core trade amplifies the trend.

rosnick trade 2017 09 fig2

 

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Employment fell by 33,000 in September, according to Bureau of Labor Statistics establishment survey, the first decline since September of 2010. The drop was due to the effects of the hurricanes in Texas and Florida. This is shown clearly from the loss of 104,700 jobs in restaurants. Offsetting this bad news, the household survey showed the unemployment rate falling to 4.2 percent, a new low for the recovery.

This was due to a reported surge in employment of 906,000. This increased the employment to population ratio to 60.4 percent, a new high for the recovery. The household data are erratic (reported employment fell 74,000 in August), so this jump is likely to be at least partially reversed next month.

Trying to pull out the effects of the hurricane is difficult. One item that is disturbing was a downward revision to the August job growth number of 51,000 to 138,000. Since the reference period was the middle of the month, this was not the result of the hurricanes. The rate of job growth was already substantially below the 193,000 monthly average for 2016 and 226,000 for 2015. The downward revision for August and the decline in September pushes the pace down further, although October is virtually certain to show a sharp rebound.

There does appear to be a substantial uptick in wage growth in the data, with the average hourly wage rising 12 cents in September. This brings the year over year increase to 2.9 percent. The average over the last three months compared with the average for the prior three months rose at an even more rapid 3.6 percent annual rate. However these numbers should be viewed with some caution. The hurricanes reduced hiring in the month across the board and the newly hired are generally the lowest paid. This compositional effect can be seen with the loss of restaurant jobs. Since these jobs pay over $10 below the overall average, the loss of more than 100,000 restaurant jobs has the effect of raising the average hourly wage by roughly 1 cent. This compositional effect is occurring within every industry. It is worth noting in this respect that the pay of production and non-supervisory workers rose by 9 cents in September and is up by 2.5 percent over the last year.


The Jobs Flash is CEPR's rapid response to the monthy employment data released by the Bureau of Labor Statistics. This response precedes our Data Byte, a more detailed analysis of the jobs data. You can subscribe to our Data Bytes here.

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Ben Casselman has a NYT piece today discussing new research finding the Great Recession has had a lasting impact on prime-age employment and earnings. It’s a good piece on what looks like important research, but in one paragraph, Casselman cites other research he says links employment among men “in particular” to opioids, disability insurance, and video games. This is the most recent example of something Dean Baker wrote about last year: “implying that the problem of people dropping out of the labor force is a story about men is seriously misleading.”

To the points Dean made last year, I’d add a few more.

First, among prime-age adults, working-class women (HS or less) have fared even worse than working-class men, both in the aftermath of the Great Recession and since 2000. The employment rate for prime-age working-class women is about 8.2 percentage points lower today than in 2000; for prime-age working-class men, it’s 6 percentage points lower. As a result, the large employment gap between working-class men and women is wider today than in 2000.

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This is the third in a series of blog posts based on the CEPR report, Organizational Restructuring in U.S. Healthcare Systems: Implications for Jobs, Wages, and Inequality, that examines the experiences of healthcare workers over a decade of change from 2005 to 2015.

Jobs in the two largest nonprofessional occupation groups ― medical technicians and health aides and assistants ― grew 17.2 percent and 20.0 percent respectively, and in 2015 the number of workers in these jobs reached 5.5 million. Yet median real wages of medical technicians working full-time, full-year in hospitals fell from $22.00 in 2005 to $21.60 in 2015; in outpatient facilities, their pay fell from $17.84 to $17.67. Median real wages of health aides and assistants employed full-time, full-year fell from $14.87 to $14.72 in hospitals and were flat in outpatient facilities, rising by a penny from $14.27 to $14.28 between 2005 and 2015.

The most widely cited explanation for low and stagnant wages is that workers with these earnings must be poorly educated. The assumption, especially for workers earning less than $15 an hour, is that most of them have a high school degree or less. Workers are led to believe that post-secondary education is the key to a pay raise. For healthcare workers in these occupations, however, wages stagnated or fell despite a decline in the share of the least educated workers and an increase in the share of those with a college degree or more.

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Amid threats to the huge gains in insurance coverage under the ACA — most recently, the failed Graham-Cassidy Senate bill — a growing number of people, politicians, and policymakers on the left have begun to push for even bolder, more expansive national health care programs. In the past two months alone, Senator Sanders has pushed forward with his Medicare for All plan, while in the House, Representative Schatz has introduced a Medicaid for All bill and Representative Conyers has moved forward with his single-payer proposal. Medicare for All has also come close to passage at the state level in California and New York.

Proposals like these are vital steps in moving the public debate to a point where universal coverage is seen as politically viable. Bold initiatives are necessary to build public support for broader coverage and wider acceptance of health care paid for by the government due to resistance from the health care industry and the stigma sometimes associated with government-provided health care. For example, the ACA, while far less ambitious than single-payer programs, not only led to wider acceptance and support for Medicaid it also won over a number of physicians and health care professionals once opposed to the Obama initiative.

However, there are many details that need to be addressed before any of these more ambitious plans can be put in place. While other wealthy nations have single-payer-type systems, these programs were all implemented in countries with much lower health care spending than is currently the case in the U.S. The enormity of the task of moving toward a single-payer system is a strong argument for getting there incrementally.

One step could be lowering the age of eligibility to 55 and/or including minors, with the option for others to buy into the system along the lines recently proposed by Senator Bernie Sanders and 16 co-sponsors. However, if we were to go this route, there would need to be changes to the current Medicare program, most importantly, the out-of-pocket cost of Medicare for individuals.

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In the Wall Street Journal on Tuesday, Nick Timiraos highlighted a paper, published by the Mercatus Center, that points to a “rising number of men in their prime working years…who are getting federal disability benefits” as “one big contributor” to the long-term decline in men’s labor force participation. I haven’t read the paper yet, but in an earlier CEPR blog post, I highlighted one of the weaknesses of these kinds of claims: at least over the last two decades, the number of mid-age men (30–49 years old) receiving Social Security Disability Insurance has been flat, even as the number not in the labor force increased by a million. Certainly, we need to do more to allow people with disabilities to work and prosper economically, including expanding and strengthening Medicaid, but cutting Social Security and other benefits for people with disabilities will do little to further that goal.

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Donald Trump will soon make a decision on whether to reappoint Janet Yellen as chair of the Federal Reserve Board or to pick someone else. This decision is getting far less attention than it deserves.

The Fed makes an enormous difference in the lives of tens of millions of people, especially low- and moderate-income people. Its decisions on interest rate policy can determine how many people in the country have jobs. If the Fed raises interest rates and slows the rate of job creation, the people who are most affected are the most disadvantaged in society. Blacks, Hispanics, and the less educated will be the ones who are most likely to be denied jobs as a result of higher interest rates.

Furthermore, a weaker labor market also reduces the bargaining power of those who do have jobs. This means that they will get lower wages than if we had a lower unemployment rate.

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In his column today (also discussed by Dean here), Eduardo Porter writes: “as Professor [Alan] Krueger noted, once workers stop looking for a job, it is tough to draw them back in. 'After they leave the labor market,’ he said, ‘people reorganize their lives.'"

If meant to apply to all people not in the labor force, this is too sweeping.

In a working paper, Chen Song and Chao Wei compare unemployed adults with non-disabled, non-retired (NDNR) adults who are not in the labor force. They find that NDNR men who are not in the labor force look a lot like men who are in the labor force and unemployed.

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This is the second in a series of blog posts based on the CEPR report, Organizational Restructuring in U.S. Healthcare Systems: Implications for Jobs, Wages, and Inequality, that examines the experiences of healthcare workers over a decade of change from 2005 to 2015.

Examining wage trends in hospitals by gender and race/ethnicity we observe that the real median hourly wage of full-time, full-year workers increased for every demographic group over the decade. However, with the exception of white women and Asian/other women, the real wage increases came to less than one dollar an hour. White women’s real median wage increased by $1.24 between 2005 and 2015, Asian/other women saw an increase of $1.50 over that time period.

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As we previously pointed out, the most disadvantaged segments of the labor market benefit disproportionately from low unemployment. This shows up both in terms of getting a disproportionate share of the job growth and also from seeing more rapid wage growth as a result of the tightening of the labor market they face.

The logic is straightforward. When the economy goes into a slump, it is more likely that a retail clerk or person on the factory floor will lose their job than a manager or a highly educated professional, like a doctor or dentist.

This means that when the unemployment rate soars, as it did in the Great Recession, it is the workers at the bottom of the ladder who are at greatest risk of losing their jobs. They are also the ones who see the largest loss in pay, as their bargaining power diminishes with their employment opportunities.

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The Congressional GOP is taking one last shot at repealing the ACA. One of the negative consequences of repeal that has gotten little attention is the impact it would have on disabled people’s ability to work.

Before the ACA, non-elderly adults had limited avenues to public health insurance. If they had a severe disability and received Social Security Disability Insurance for two years, they were eligible for Medicare. If they received Supplemental Security Income, a program that limits eligibility to severely disabled people with very low incomes and assets of $2,000 or less, they could qualify for Medicaid. For disabled adults not receiving SSI, the income limits were even stricter. Thus, working even a modest amount could mean the loss of health insurance.

In states that adopted the ACA’s Medicaid expansion, disabled workers are not subject to an asset limit and can earn considerably more without putting their coverage at risk.

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While the benefit from lower unemployment in terms of more people having jobs is pretty straightforward, there is also a benefit to workers in the form of higher wages. The basic story is that lower unemployment means a tighter labor market and therefore more rapid wage growth.

The relationship between low unemployment and more rapid wage growth shows up most clearly for more disadvantaged workers. When the economy goes into a slump, it is more likely that a retail clerk or person on the factory floor will lose their job, than a manager or a highly educated professional, like a doctor or dentist.

This means that when the unemployment rate soars, as it did in the Great Recession, it is the workers at the bottom of the ladder who are at greatest risk of losing their jobs. They are also the ones who see the largest loss in pay, as their bargaining power diminishes with their employment opportunities.

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Healthcare, which accounts for 12.8 percent of private sector employment is one of the most important sources of jobs in the economy. In our report, Organizational Restructuring in U.S. Healthcare Systems: Implications for Jobs, Wages, and Inequality, we examine in great detail what has happened to workers over the decade from 2005 to 2015 as the consolidation of hospitals and the decentralization of health services and jobs accelerated.

In this blog post, we examine broad trends in employment and wages. Overall in health care, private sector employment grew by 20 percent from 2005 to 2015. Hospitals continue to provide the lion’s share of Jobs, but employment grew by just under 10 percent in this decade, more slowly than in healthcare overall. By contrast, employment in the much smaller outpatient care sector increased by almost 60 percent – six times faster than in hospitals.

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The drop in employment rates among workers — and especially men — without college degrees has been widely noted. The employment rate for men over the age of 25, with just a high school diploma is down by more than 5.0 percentage points compared with its pre-recession level in 2007. It is down by more than 7.0 percentage points when compared to its 2000 level.

While this drop in employment rates is not in dispute, the explanation is. The predominant view in the economics profession is that the drop is explained mostly by changes in the labor market and changes in the motivations of this group of men.

The labor market explanation hinges on the idea that the spread of technology has reduced the need for workers without more education. We need fewer people now to dig ditches or to turn screws on assembly lines. This argument holds that the declining employment rate among men is part of a long-term trend, so we shouldn’t find the drop in recent years surprising.

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Two years ago, in August of 2015, the national unemployment rate stood at 5.1 percent. This was at or below widely accepted estimates of the non-accelerating inflation rate of unemployment or NAIRU. This meant that if these estimates were right, the inflation rate would start to increase if the unemployment rate fell further or possibly even if it stayed at its 5.1 percent level.

As it turns out, the unemployment rate has continued to fall and stood at 4.3 percent in August of 2017. Inflation has remained steady or even fallen slightly. By all measures, it is below the 2.0 percent rate targeted by the Federal Reserve Board.

Many economists, including some at the Fed, wanted to raise interest rates enough to prevent any further decline in unemployment out of concerns over inflation. Fortunately, the Fed did not go along with this position.

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The Bureau of Labor Statistics reported that the economy added 156,000 jobs in August, somewhat less than most economists had expected. This figure, combined with downward revisions of 41,000 to the prior two months data, brought the average over the last three months to 185,000. The household survey also showed some evidence of weakness with the unemployment rate edging up to 4.4 percent and the employment-to-population ratio falling back 0.1 percentage point to 60.1 percent. Perhaps more noteworthy was a drop of 0.3 percentage points in the employment rate of prime-age (ages 25 to 54) workers to 78.4 percent.

Other data in the household survey were mostly positive. The number of people involuntarily working part-time fell by 27,000; it is now only slightly larger as a share of the workforce than before the recession. The number of people choosing to work part-time went up by 187,000, reaching a new high. This number has increased by more than 2.6 million since the end of 2013 when the Affordable Care Act took effect. It indicates that many people are taking advantage of the opportunity to get insurance outside of employment and therefore opting to work part-time.

Wage growth continues to be moderate, with the average hourly wage up 2.5 percent over the last year. The annual rate of increase in the average hourly wage, comparing the last three months with the prior three months, is also 2.5 percent. As a result of the weak growth in the hourly wage and a modest decline in the length of the average workweek, average weekly earnings actually fell slightly in the month.

The job growth in the establishment survey was unusually concentrated in the good producing sector, which accounted for 70,000 new jobs. Manufacturing led the way with a gain of 36,000, of which 13,700 were in autos. Construction added 28,000 jobs, an unusually large gain. Mining added 6,500 jobs as a result of a gain of 6,800 jobs in support activities for mining. Coal mining jobs were unchanged and now stand 2,100 above their year-ago level. Job growth in health care was just 20,200, down from an average of about 27,000 over the last year. Job growth in restaurants was also weak at 9,200.

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Trump’s Medicare trustees recently released their report on the health of Social Security and Medicare. Trump’s trustees reported that there was a sharp improvement in the projections of Medicare’s finances during the Obama administration – this is notable because it signals bipartisan agreement that the projected shortfall is markedly smaller than what policymakers were looking at a decade ago.

Some critics of the Obama administration questioned the validity of this projection and accused the Trustees, four out of six of whom are political appointees of the president, of manipulating the numbers for political purposes. These critics claimed that Obama’s trustees were deliberately understating the financial problems facing Medicare over its planning horizon.

For this reason, the fact that the 2017 Trustees report largely confirms the drop in the shortfall projected by the Obama trustees is very important. In fact, the 2017 report shows an even better picture for Medicare, with a projected shortfall of just 0.64 percent of payroll over the 75-year planning period.

This new projection implies that almost 82 percent of the projected shortfall was eliminated by economic and policy changes during the Obama years. In fact, this figure understates the true improvement since the 75-year horizon starting in 2017 includes years that are considerably worse for the program demographically than 75-year horizon that began in 2007.

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Since 2014, 14 million workers have gained access to paid sick days. Breakdowns of this finding, part of the latest National Compensation Survey conducted by the Bureau of Labor Statistics (BLS), show across-the-board increases in workers' ability to take time off when they are ill without facing financial burden. State and local laws, now totaling 40 (seven states, two counties, and 31 cities), have been instrumental in extending paid sick leave benefits to more workers.

More workers now have access to paid sick days

According to the BLS report, 72 percent of civilian workers, or 97.3 million people, have access to paid sick days as of March 2017, compared with 83.3 million people (65 percent) in March 2014. Over just three years, access expanded by seven percentage points, with 14 million additional workers covered. As shown below, the increase in access since 2014 covers all groups but is particularly strong for part-time workers and those earning lower wages.

PSD
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The Bureau of Labor Statistics reported the economy added 209,000 jobs in July, somewhat more than what the consensus estimated. The revisions to the prior two months data were largely offsetting, so bringing the three month average to 195,000. The strong job growth brought the unemployment rate back down to the 4.3 percent rate reached in May, the low for the recovery. There was also a slight uptick in the employment-to-population ratio to 60.2 percent, a new high for the recovery.

Some of the other data in the report were more mixed. While the single month wage growth was strong at 9 cents per hour, this is a very erratic figure. The rate over the last twelve months was 2.5 percent.

Furthermore, the average wage for the last three months compared with the prior three months grew at just a 2.3 percent annual rate. While this is a very modest deceleration, clearly it is not possible to make the case that wage growth is accelerating in spite of the relatively low unemployment rate.

The percentage of unemployment due to voluntary quits fell back to 10.9 percent. By comparison, this figure was over 12.0 percent in 2006 and 2007 and peaked at more than 15.0 percent in 2000. The low share of quits suggests that workers are not confident in their labor market prospects.

It is also worth noting that the data continue to refuse to comply with the skills shortage story. The employment rate for college grads actually fell 0.2 percentage points in July and is unchanged over the last year. By contrast, the employment rate for those with just a high school degree is up by 0.8 percentage points over the last year.

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