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

The Bureau of Labor Statistics reported somewhat stronger than expected job growth in November, with employers adding 228,000 jobs. This brought the average for the last three months to 170,000. The unemployment rate was unchanged at 4.1 percent.

While the overall employment-to-population ratio (EPOP) ticked down by 0.1 percentage point, the EPOP for prime-age workers rose by 0.2 percentage points, to 79.0 percent. This is an increase of 0.8 percentage points from the year-ago level, but is still 1.3 percentage points below the pre-recession peak.

In spite of measures indicating a continued tightening of the labor market, there is still little evidence of any notable acceleration in wage growth. The annualized growth rate of wages for the last three months, compared with the prior three months, is 2.6 percent, virtually identical to the 2.5 percent rate of increase over the last year.

The relatively low percentage of unemployment due to workers voluntarily quitting their jobs (11.3 percent) suggests that workers still do not feel very confident about their job prospects. This number was 12.3 percent a year ago and had peaked at more than 15.0 percent in 2000.

On the whole, this is a positive report, but one that indicates that the labor market can still tighten further without any major concerns about inflation.

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The Department of Housing and Community Development (DHCD) in Washington, D.C. aims to provide affordable housing and economic opportunities to underserved households and communities through its housing development projects. One of the three strategic objectives listed by DHCD is “…revitalizing neighborhoods, promoting community development and provide economic opportunities.” Like other large cities across the US such as Boston, New York, and San Francisco, Washington D.C.’s government and its stakeholders are placed with a difficult task to secure space for their communities as their cities accommodate an influx of young professionals, and as a commentator recently pointed out “…[t]hese new District residents have undeniably changed the demographic makeup of D.C., which on the whole has become whiter, wealthier, and younger over the past decade.”

By some indicators, D.C. exemplifies the displacement of people of color to a level that is explicitly contradictory to the city’s stated objectives.

Public-private residential development around the city has contributed to unsustainable rent hikes, gentrifying neighborhoods and causing displacement. Private companies push forward luxury apartment development and retail spaces that ignore the needs of the greater Washington community and the many hurdles it faces towards reaching racial and socioeconomic equity.

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I’m a big fan of The Atlantic’s Alana Semuels, but wanted to provide some additional context for her piece on the gender gap in college education (Poor Girls are Leaving Their Brothers Behind). There’s no question that women are graduating from high school and pursuing post-secondary education at higher rates than men. As Semuels notes, when it comes to BA attainment, women age 25–29 caught up with men in the early 1990s, and have outpaced them since then. Yet, there’s not much evidence that women are leaving men behind or even catching up with men because of higher education rates.

In 2000, among men and women ages 25–45, about 84 women were employed for every 100 men. The employment rate for both men and women in this age group is lower today than in 2000, but it has only narrowed slightly. Today, it’s about 85 women employed for every 100 men. By contrast, the gender employment gap has narrowed much more in other wealthy nations, largely due to substantial increases in prime-age women’s employment.

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Catching up on your reading over the long holiday weekend? Prepare yourself for Monday’s smack of reality by reading up on CEPR’s insights into the GOP tax plan. The Senate is scheduled to vote on their version of the tax bill just after Thanksgiving.

Dean Baker, Eileen Appelbaum, and Alan Barber are talking (WBAI, WDET) and writing (BTP and CEPR Blog) about the potential outcomes of both versions of the bill that now includes the repeal of ACA’s individual mandate.

Dean Baker has this statement about the House version of the tax overhaul bill passed last week:

“The Republicans in the House voted to raise taxes on people with cancer, recent college grads and young people still attending graduate school in order to help finance tax cuts to corporations — that are already drowning in cash — and the very richest people in the country. There is no basis for the promised economic boom. This is a transparent giveaway to the people who fund their election campaigns. It is taking the corruption of politics in the United States to a new level.”

 

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This is the fifth 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.

This post examines the disconnect between the growth in employment of two healthcare occupational categories – medical technician and health aides and assistants – over the decade from 2005 to 2015, and the stagnation or decline in real wages these workers earned. We smooth out year-to-year changes in real wages by using a three-year moving average. For consistency, we also report the three-year moving average for employment.[1]

Between 2007 and 2015, the three-year moving average of total employment increased by about 16 percent in the healthcare industry, which includes five major segments – hospitals, outpatient care centers, physicians’ offices, home healthcare services, and nursing homes. These five healthcare segments account for about three-quarters of all healthcare jobs. Hospitals are the largest employer by far, but employment in this segment grew by just half of the overall growth rate of healthcare jobs. Employment in the much smaller outpatient care center segment grew five times faster than it did in hospitals. Employment in the two largest non-professional patient care occupational categories – medical technicians (mainly allied health technicians and licensed practical/vocational nurses) and health aides and assistants grew at about the same rate as overall employment in healthcare and hospitals. However, outpatient care centers saw even more rapid growth of medical technicians than of overall employment – a more than 60 percent increase for med techs compared with the almost 50 percent increase in overall employment in this healthcare segment.

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The private equity industry likes to say that it brings operational and financial knowledge to the companies that its PE funds acquire, improves their performance and makes them more valuable, and then sells them for a profit. Rosemary Batt and I, in our book Private Equity at Work: When Wall Street Manages Main Street, document that there are indeed private equity firms that make money by improving the performance of the companies they buy. But most PE funds make money by engaging in financial engineering — loading the companies in their portfolios with excessive amounts of debt to boost returns and get a tax advantage; engaging in aggressive tax avoidance; causing the companies they own to issue junk bonds and use the revenue to pay dividends to their private equity owners; requiring the portfolio companies to pay fees to the PE firm for services they may or may not receive; having the companies sell off real estate or other assets with the proceeds pocketed by the PE firm. In the book, Rose and I proposed policies that would rein in financial engineering and provide incentives for PE firms to focus on operational improvements. Unfortunately, the tax plan introduced in the House by Republican Congressman Kevin Brady goes in the opposite direction and provides new incentives for financial engineering.

We draw on Steve Rosenthal’s excellent analysis of the 25 percent tax rate on partnership income for this example of a new opportunity for financial engineering.

A PE-owned partnership that provides a service and is not eligible for the lower 25 percent cap could still benefit from the tax cut. The partnership could borrow money. It would be able to deduct the interest on the loan at its higher tax rate — as much as 35.22 percent (this bizarre rate is due to the complexities of the Republican tax plan). The partnership could then turn around and invest that money in a real estate investment trust (REIT) — a partnership that invests in malls, office buildings, and so on. A business whose income comes from rent is eligible for the lower 25 percent tax rate, so earnings on the investment in the REIT would be taxed at this rate. Even if the interest on the loan is the same as the earnings from the investment in the REIT, the after-tax income of the PE-owned partnership will be 10 percent higher as a result of these transactions. This is easy money compared with the effort it takes to make operational improvements that raise earnings.

High-priced tax accountants will no doubt find many other opportunities to reduce tax liabilities and increase after-tax income of Wall Street firms and their affiliates. Whatever else happens to employment as a result of this tax cut, there is certain to be more jobs for lawyers.

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It’s a new era in America. Fake News, grandiose claims, misinformation, obfuscation…you name it. When the President of the United States tweets things like:

trump tweet 1

And

trump tweet 2

We all feel like we’re going crazy. We can’t understand how this can be happening. It’s all so daunting.

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The Labor Department reported the unemployment rate fell to 4.1 percent in October, another new low for the recovery. The establishment survey showed the economy created 261,000 jobs in the month. The high number is due to a bounce-back from the hurricane-affected growth in September, which has now been revised up to show a small gain of 18,000. The average growth rate for the last three months is 162,000.

The bounce-back from the hurricane also had a large effect on the wage data. Last month's reported 12 cent gain in average hourly wages was heavily impacted by the hurricane. Many new hires in low-paying jobs did not take place and lower-paid hourly workers likely saw their time on the job reduced, thereby raising the overall average. The October data showed a 1 cent decline in the average wage. Nonetheless, wages are still rising at a 2.4 percent rate over the year, which is a bit less than a percentage point above the inflation rate. This puts wage growth in line with productivity growth over the last year, although it means that we are still not seeing any evidence of acceleration even as the market has tightened.

Other data in the report are mixed. The fall in the unemployment rate was associated with a drop in labor force participation. The employment-to-population ratio fell by 0.2 percentage points, partly reversing a 0.3 percentage point jump in September. On the other side, there was a sharp drop in involuntary part-time employment to 4,753,000, bringing this measure down to pre-recession levels. We also see that less-educated workers continue to be big gainers from the tight labor market. The unemployment rate for workers with just a high school degree fell to 4.3 percent, 1.2 percentage points below its year-ago level. The unemployment rate for workers without a high school degree fell to 5.7 percent, 1.7 percentage points below its year-ago level.

In short, the labor market is continuing to improve, but there is no basis for concerns that excessive wage growth will lead to an inflationary spiral. Workers are now seeing respectable wage gains that give them their share of productivity growth, but there is much ground to regain.

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Women in the United States across races and ethnicities make approximately 80 cents to a man’s dollar. However, some groups of women make disproportionately less than that; namely blacks and Hispanic/Latina women, making the wage gap an issue that strongly depends on gender, race, and ethnicity.

A closer look at Bureau of Labor Statistics data on usual weekly earnings by race, ethnicity and gender shows that the gender wage gap increases as earnings increase across all races and ethnicities. In addition, the divide between men and women’s earnings widens at a steeper rate among whites and Asians than with blacks and Hispanics/Latinos. At the first decile, black women and Hispanic/Latina women make earnings far closer to that of their black and Hispanic/Latina male counterparts than white and Asian women do to their respective male counterparts.

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In mid-October, the International Monetary Fund (IMF) and the World Bank Group held their Annual Meetings in Washington, DC. In events throughout the week, the Fund and the Bank stressed the importance of globalization, emphasizing “Its long-acknowledged benefits to economic growth, poverty reduction, and consumers’ access to varied goods at lower prices.” Missing from the schedule was a broader discussion of the IMF’s role in globalization, and the effects of its policies on developing countries.

On October 9, the Center for Economic and Policy Research hosted a panel in which the renowned economist Jeffrey Sachs, CEPR Co-Director Mark Weisbrot, and Nancy Alexander of the Heinrich-Böll-Stiftung provided their perspectives on both the Fund’s policies and global trends in development. The event centered on the release of CEPR’s “Scorecard on Development 1960-2016: China and the Global Economic Rebound,” the fourth report in a series examining global macroeconomic trends over the past 50 years. Previous “Scorecard” reports found a dramatic slowdown in economic growth and social indicators in low- and middle-income countries during the 1980–2000 period when the IMF’s policies were most influential in developing countries. Critically, the latest report found that China was responsible for much of the improvement in economic and social indicators sometimes attributed to the “Washington Consensus” variety of globalization.

Below are excerpts from each panelist’s presentation, as well as links to each panelist’s lecture:

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Jeff Hauser runs the Revolving Door Project, an effort to increase scrutiny on executive branch appointments and ensure that political appointees are focused on serving the public interest, rather than personal professional advancement.

Today’s announcement that the Trump Administration would install David Kautter as the Commissioner of the Internal Revenue Service on November 12th, 2017 without a Senate confirmation process marks a further erosion of the Senate’s “Advice and Consent” power and a great day for all tax evaders, past and future.

Kautter, a tax avoidance professional, has no history of work at the IRS, which many people have incorrectly assumed is (as it ought to be) a precondition for an ostensibly temporary hire.

However, Kautter does have experience with the IRS. When Kautter was Director of National Tax at EY (formerly Ernst and Young) National Tax practice, their practices were so abusive that they ultimately had to pay $123 million to avoid criminal indictment.

Why would the American people trust Kautter to rein in tax evasion when his firm behaved so egregiously under his ineffective and/or malevolent watch?

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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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