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

The unemployment rate inched up by 0.1 percent in January to 4.8 percent, as the economy reportedly added 227,000 jobs. The modest change in the unemployment rate was also associated with a rise in the employment-to-population ratio (EPOP) to 59.9 percent. This is equal to the previous high for the recovery in March of last year. The jobs growth figure was somewhat higher than had generally been expected, but is somewhat offset by the fact that the two prior months' numbers were revised down by 39,000.

While the rise in the EPOP is good news, it is still well below pre-recession levels. The drop remains low even when looking at prime-age workers (ages 25-54), with the EPOP for prime-age men 2.7 percentage points below its pre-recession peaks and the EPOP for women down 1.5 percentage points. The EPOP for African Americans hit a new high for the recovery, at 57.5 percent. While these data are erratic, the January figure is more than a full percentage point above the year-round average for 2016.

Other data in the household survey were mixed, notably there was a substantial decline in the share of unemployment due to voluntary quits. The January percentage was 11.4 percent, 1.1 percentage point below its November peak.

The payroll job increases were driven by a jump of 45,900 in retail and 36,000 in construction. The January job gains were likely in part attributable to weather, as there were few serious snowstorms in the northeast and Midwest in the period preceding the reference week.

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During the height of the 2008-2009 recession, there was considerable debate about the origins of the soaring unemployment rate. The New York Times and other major media outlets said that the problem was mostly low demand, pointing out that there were more people searching for jobs than companies searching for workers. During the recession, companies decreased their monthly hiring by about a third, despite the fact that the number of Americans searching for work had more than doubled.

The data mostly indicate that workers weren’t choosing to stay unemployed; rather, they were losing their jobs and having trouble finding new ones. This can be seen most clearly by looking at the ratio of unemployed job losers to unemployed job leavers. Unemployed job losers are out of work because they lost their previous job; unemployed job leavers are out of work because they voluntarily left their last job. In 2006, there were roughly four unemployed job losers for every one unemployed job leaver; by early 2010, that ratio had shot up to nearly 11-to-1. This indicates that the vast majority of the drop in employment during the recession was due to companies laying off workers, not to workers leaving their jobs. Moreover, this phenomenon held true for every major demographic group, as can be seen in the figure below:

buffie rawlins dont blame 2017 01 27 01

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Opponents of amendments to the 1990 Clean Air Act (CAA) argued that increased regulations would damage the economy, leading to a loss of jobs and output. However, the legislation’s passing produced nowhere near the economic devastation predicted. Instead, projections by the Environmental Protection Agency (EPA) expect the benefit of the CAA amendments to reach a cumulative total of 2.0 trillion dollars by 2020 or a bit less than 0.5 percent of GDP for this period. For comparison, the estimated cost of complying with CAA regulations is 65 billion dollars or less than 0.02 percent of GDP over this thirty year period. That is $30.77 of benefit for every dollar spent on regulation.

rawlins clean air act 2017 01 30

In 2020 alone, the amendments are expected to prevent over 230,000 early deaths. Those prevented deaths come in the form of decreased adult and infant mortality from exposure to the ozone and fine particle pollution. They also estimate a decrease in chronic bronchitis, acute myocardial infarction, and asthma exacerbation. The amendments will decrease emergency room visits by 120,000, prevent 5,400,000 missed school days, and 17,000,000 lost work days.

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A surge in the trade deficit held GDP growth to just 1.9 percent in the 4th quarter of 2016, bringing the growth rate for the full year to 1.9 percent, the same rate as 2015. The growth rate in final demand in the quarter was even worse, at 0.9 percent, as inventories accumulation added a full percentage point to growth in the quarter. The 2016 GDP growth brought the average for the eight years of the Obama administration to 1.8 percent.

A striking aspect of this report is the weak evidence of any inflationary pressures in spite of the tightening labor market in recent years. The overall GDP deflator increased at a 2.1 percent annual rate in the 4th quarter. The core personal consumption expenditure deflator targeted by the Federal Reserve Board rose at just a 1.3 percent annual rate. There is no evidence of any upward trend in this measure which remains well below the Fed's 2.0 percent target rate.

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In October of 2009, the national unemployment rate peaked at 10 percent; as of December 2016, it was down to 4.7 percent. The Federal Reserve Board voted last month to raise interest rates in part due to this low rate, and the decrease in unemployment has generally been hailed as a sign of recovery. But how accurately do those numbers reflect the current employment situation for most workers? This post looks at prime-age employment rates for several different demographic groups to create a clearer picture of how the recession and recovery affected American workers.

The unemployment rate only includes workers who have been actively seeking jobs during the last four weeks. However, due to the severity and duration of the most recent recession, many prospective workers simply gave up looking and were not counted in the unemployment rate. To account for these “missing workers”, this post analyzes the employment rate instead of the unemployment rate. By using the prime-age employment rate – the employment rate for workers ages 25 to 54 – it avoids any bias attributable to the aging of the population.

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As Dean Baker notes, the NYT has a story up today on the drop in women’s labor force participation rates since 2000. It’s a useful piece, but incorrectly notes that "men dominate the disability rolls." In fact, 49 percent of people receiving Social Security Disability Insurance as worker beneficiaries are women, and women are 47 percent of adults with disabilities receiving Supplemental Security Income. Finally, while Temporary Assistance isn’t a disability program per se, substantial numbers of parents receiving Temporary Assistance have a disability, and nearly all of them are mothers.

Part of the confusion here may be due to the fact that men who are out of the labor force are more likely than women to give an illness or disability as the reason. But many more women are out of the labor force, and as the table below shows, the absolute number of women reporting not working due to a disability (3.6 million) is slightly larger than the number of men (3.5 million). 

Finally, it’s important to note that disability benefits have not been an important factor contributing to declines in men’s or women’s labor force participation. As Dean notes, the real problems here are on the demand side of the labor market, as well as weak labor market institutions and the absence of work-family supports like quality, affordable child care and paid family leave.

 
Prime-Age Adults Who Did Not Work in 2015 by Reason and Sex
  Men
(Number)
Percentage Women
(Number)
Percentage
Ill or disabled 3,526,717 53% 3,567,269 23%
Taking care of home/family 814,162 12% 9,232,809 60%
Going to school 1,121,192 17% 1,318,703 9%
Retired 659,918 10% 769,744 5%
Other 584,916 9% 397,325 3%
Total 6,706,905 100% 15,285,850 100%

Source: IPUMS CPS ASEC (2016).

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The Labor Department reported little change in the unemployment or employment rates in December, as job growth slowed slightly to 156,000 in the month. The unemployment rate edged up from 4.6 percent to 4.7 percent, but this is well within the margin of error of the survey. The overall employment-to-population ratio (EPOP) remained unchanged at 59.7 percent. The same is true for the EPOP for prime-age workers, which remained at 78.2 percent for the third consecutive month. This is more than 2 full percentage points below the pre-recession peak and almost four percentage points below the 2000 peak.

Some good news in the report is that involuntary part-time employment continues to edge down, while more people are choosing to work part-time. The number of people working part-time, for economic reasons, fell slightly to 5,600,000 in December. It is now down by almost 2.2 million from December of 2013, before the key provisions of the Affordable Care Act took effect. By contrast, the number of people choosing to work part-time has continued to rise, presumably because they no longer need to get insurance from their employer. It now stands at 21,250,000, more than 2.4 million above its pre-recession level.

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While the U.S. is the birthplace of the Internet, it currently falls behind other countries in making high quality broadband connections widely available.

The OECD’s overview on broadband connectivity shows the U.S. provides costlier and lower quality broadband than other countries. Furthermore, the U.S. trails most other countries in percentage of people with broadband subscriptions.

Broadband costs
The figure above illustrates the number of broadband subscriptions per 100 inhabitants in a series of high-income OECD countries. Switzerland tops the list, with almost 52 subscriptions per 100 residents. On the other end of the spectrum, only 31 percent of inhabitants have a broadband subscription in the U.S. The only country with a lower broadband subscription rate is Japan, at 30 percent.

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The International Monetary Fund (IMF) recently released two papers assessing the impact of an aging population on productivity growth, one looks at Europe, the other one at Japan. Their argument is simple: an aging population also means an overall older and less productive workforce.

The IMF’s Japan study supports this finding by showing that prefectures that are aging faster experienced slower economic growth than prefectures with higher population growth. They make the point that the faster aging is to blame for the slower growth; however, this does not take into account that young people tend to move to urban areas where there is  higher productivity growth.

If we compare countries rather than regions,  this link is no longer apparent. Looking at population and productivity growth for a series of OECD countries, there is no obvious connection between these two measures.

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Trump and CEPR

Okay, we aren’t really expecting his endorsement, but we do need your help in fighting his agenda. If you’ve already made your end-of-the-year donation to CEPR, many thanks!

If you haven’t, please consider making a gift today so that we can fight hard for a just economy in 2017.

Thanks for your support,
Dean, Mark, and CEPR Staff

P.S.: Dean's book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer is available for download for free (shh!), or you can order a copy for yourself or a friend. Just click here or on the photo below.

Rigged, by Dean Baker

*Trump photo by Michael Vadon, with modifications, available under Creative Commons.

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The Federal Reserve announced after their December meeting that “in view of realized and expected labor market conditions and inflation” it will raise interest rates to ¾ of a percentage point, anticipating further hikes throughout 2017.

The statement released by the Fed cited solid job gains and the decline in unemployment amongst their reasoning behind the interest hike. However, as this analysis of the last employment report from CEPR points out, the decline in unemployment was partly due to people leaving the labor force, rather than finding jobs. Furthermore, the employment-to-population ratio for prime-age workers is 2 percentage points lower than before the recession, and 4 percentage points lower than its peak in 2000.

The current labor market, while substantially recovered from the Great Recession, is still significantly weaker than in 2000 and even 2007. We can recall the pressure on the Fed to raise interest rates in 1996, based on fears of inflation. However, Alan Greenspan, then chair of the Fed, did not succumb to that pressure and held rates steady. The result was that between 1996 and 2000, over 11.6 million jobs were added without causing inflation to shoot up.

There is little evidence of any acceleration in the inflation rate regardless of which index is used.

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Since there are many more wage earners than people with substantial stock holdings in the division of corporate income between wages and profits, most people stand directly to gain from a smaller profit share. Nonetheless, there is an argument for a higher profit share (and a lower wage share) if companies will invest more when their profits rise. In that case, higher investment would lead to more growth, which would benefit workers as well, even if their share of income might be somewhat lower. However, as this post shows, the data do not backup up this argument.

Corporate profits before-tax are currently only one percentage point higher as a share of GDP than in 1970. However, after-tax profits are now about 2 percentage points higher compared to their 1970 levels.

merling investment figure1 2016 12
The figure above illustrates before- and after-tax corporate profits as a share of GDP since 1970.[1] Until the 1980s, the spread between before- and  after-tax profits was significantly larger, with a difference of about 3 percent of GDP. This difference has since decreased to about 2 percent of GDP, as corporate taxes have fallen sharply relative to GDP. After tax profits comprised 5 percent of GDP in 1970, and peaked at over 8 percent between 2012 and 2014 before declining in the past two years.

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The following reports on labor market policy were recently released:


The Center for Law and Social Policy

Juggling Time: Young Workers and Scheduling Practices in the Los Angeles County Service Sector
CLASP, UCLA Labor Center


Demos

The Parent Trap: The Economic Insecurity of Families with Young Children
Amy Traub, Robert Hiltonsmith, Tamara Draut

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A common story is that rapid automation is taking away jobs. If humans were being replaced by robots and machines, we would be seeing rapid productivity growth. Since automation generally replaces low-skill jobs, the impact on productivity growth would be significant.

However, if we look the average productivity growth in the past 10 years, the data show we are actually in a period of slow growth.
merling productivity growth 1 2016 12The figure above shows the average yearly productivity growth for 4 periods in the post Word War II era. Between 1948 and 1973, productivity growth averaged 3.3 percent a year. This was followed by a period of slow growth between 1974 and 1995, when growth averaged only 1.5 percent per year. Productivity increased at a rapid pace again from 1996 until 2005, when it picked up at an average rate of 3.1 percent per year. The current period, starting in 2006, records the lowest productivity growth since 1948, at an average rate of only 1.3 percent per year.

Given that productivity growth is at its lowest post-war level, the story that automation is a large threat looming over the job market is not supported by the data.

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As we do every December, we here at CEPR are reaching out to ask that you consider making an end of the year donation to support our work. Usually this entails regaling you with a list of all our accomplishments over the past year.

But this year we decided to do something different (which, given the extraordinary events of this past year, we felt was fitting). We want to talk candidly and honestly about the challenges we progressives face, and discuss where we need to go from here. 

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Federal Reserve interest rate policy is aimed at targeting inflation and unemployment. The impact of interest rates on consumer borrowing and spending is an important channel for this policy since the rates financial institutions charge consumers for loans depend on the Federal Reserve’s interest policy. If the Fed decides to raise interest rates, the cost of borrowing by households would also increase. This post shows trends in consumer debt from 1990 until now.

Over the past 25 years the dollar value of outstanding consumer credit increased dramatically, but the overall share of income consumer credit  has decreased. The current interest rate climate allows for a low debt service level.

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This is the last blog post in a three-part series on the Affordable Care Act’s potential effects on part-time employment. The first and second posts can be read here and here

The first blog post in this series looked at Obamacare’s effect on voluntary part-time employment, arguing that the law may have given workers the freedom to shift from full-time to part-time schedules. The second post said that when some workers cut back on their hours, it likely freed up opportunities for other workers. According to the post, this allowed part-time workers seeking full-time jobs to increase their hours. It may also have given unemployed workers seeking part-time jobs a better shot at being hired.

Instead of advancing a new argument about Obamacare’s effect on part-time work, this post simply examines the changes in different types of part-time employment over the past couple of years. Regardless of whether we believe that Obamacare is behind these positive changes, it’s clear that the forecasts made by the law’s critics simply haven’t come true.

It is worth noting that part-time employment is actually down slightly since before Obamacare went into effect. But more importantly, the experience of working part-time has itself improved dramatically. For instance, the share of part-time workers with health insurance increased nearly 6 percentage-points between 2013 and 2014. And after three years of completely stagnant wages, part-time workers saw significant wage growth beginning in 2014. If Obamacare is supposed to immiserate part-time workers, this misery isn’t showing up in the data; if anything, part-time workers’ wages and benefits both began rising right when the Affordable Care Act (ACA) went into effect.

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This is the second blog post in a three-part series on the Affordable Care Act’s potential effects on part-time employment. The first and third posts can be read here and here.

In 2013, critics of the Affordable Care Act (ACA) rolled out a new complaint about the law: it would lead to a dramatic increase in involuntary part-time employment. Maria BartiromoRobert Samuelson, and Fox News all argued that firms would move workers from full-time to part-time status due to the law’s “employer mandate”. And while most critics have since shifted to other arguments against the ACA, Fox News has continued pushing this particular line.

To be clear, there is anecdotal evidence that at least some firms really are cutting back on their workers’ hours. So there has undoubtedly been at least some increase in involuntary part-time employment as a result of the mandate.

However, the discussion surrounding the employer mandate paints a rather incomplete picture of the ACA’s effect on involuntary part-time work, for two reasons. First, the discussion often lacks empirical evidence about the potential size of the mandate’s impact. To the extent that economic analysts have looked into this particular issue, they have generally found that the mandate caused little to no increase in involuntary part-time work, with even the largest purported increases being completely invisible in the aggregate national data.[1]

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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.

As I’ve noted previously, Donald Trump’s relationship with billionaire hedge funder John Paulson seems likely to be very, very good for Paulson.  

Paulson, who came to fame making $4  billion personally by betting against the housing bubble, also seems about to win big on having bet against pre-election favorite Hillary Clinton.

Interestingly, it now seems clear that the relationship between Paulson and Trump is mutually profitable.

First, per the Wall Street Journal, “Hours after being announced as President-elect Donald Trump’s nominee for Treasury secretary on Wednesday, Steven Mnuchin sent shares of Fannie Mae and Freddie Mac way up after he said government control of the companies should end.”

Second, “One beneficiary of the rally: John Paulson, who has been a Trump donor and adviser, as well as a business partner of Mr. Mnuchin. His hedge-fund firm, Paulson & Co., is invested in the two mortgage firms’ [“Fannie” and “Freddie,” aka government-sponsored enterprises, “the GSEs”] preferred shares, according to a person familiar with Mr. Paulson’s firm.”

Third, “The president-elect himself may benefit if the firms’ stocks move. According to a financial disclosure form filed in May, Mr. Trump has invested between $3 million and $15 million in three funds run by Mr. Paulson."

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This is the first blog post in a three-part series on the Affordable Care Act’s potential effects on part-time employment. The second and third posts can be found here and here.

In 2013, shortly before the main provisions of the Affordable Care Act (ACA) went into effect, critics warned that the law might have dire effects on working hours. They said that the ACA would lead employers to shift workers from full-time to part-time positions, prompting a dramatic increase in involuntary part-time employment. CNBC host Maria Bartiromo argued that the law would make the U.S. “a part-time employment country”; Washington Post columnist Robert Samuelson and others stated that the U.S. would become “a nation of part-timers.” In contrast, there is an extensive literature on health insurance related “job lock.” (Gruber and Madrian review this literature.) According to this literature, there is reason to believe that many workers are employed full-time only because they need health care insurance. If they have the option to get insurance outside of employment, they may decide to take time off from a job to care for children or other family members, they may start their own business, or they may decide to work part-time. There is considerable evidence that many workers have chosen the option of voluntary part-time employment since the exchanges were put in place at the start of 2014.

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The following reports on labor market policy were recently released:

 

Center for American Progress

Making Paid Leave Work for Every Family
Moira Bowman, Laura E. Durso, Sharita Gruberg, Marcella Kocolatos, Kalpana Krishnamurthy, Jared Make, Ashe McGovern, and Katherine Gallagher Robbins


Institute for Women’s Policy Research


Undervalued and Underpaid in America: Women in Low-Wage, Female-Dominated Jobs
Ariane Hegewisch, Emma Williams-Baron, Barbara Gault


Urban Institute


Practical Considerations for Pay for Success Evaluations
Sarah Gillespie, Akiva Liberman, Janine M. Zweig, Devlin Hanson, Mary K. Cunningham, Mike Pergamit

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