Sunday, December 10, 2017

Twenty-One Million Unemployed or Underemployed in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming below Trend Worldwide, Job Creation, Cyclically Stagnating Real Wages, Cyclically Stagnating Real Disposable Income, Financial Repression, United States International Trade, World Cyclical Slow Growth and Global Recession Risk: Part I

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Twenty-One Million Unemployed or Underemployed in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming below Trend Worldwide, Job Creation, Cyclically Stagnating Real Wages, Cyclically Stagnating Real Disposable Income, Financial Repression, United States International Trade, World Cyclical Slow Growth and Global Recession Risk

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017

I Twenty-One Million Unemployed or Underemployed

IA1 Summary of the Employment Situation

IA2 Number of People in Job Stress

IA3 Long-term and Cyclical Comparison of Employment

IA4 Job Creation

IB Stagnating Real Wages

II Stagnating Real Disposable Income and Consumption Expenditures

IB1 Stagnating Real Disposable Income and Consumption Expenditures

IB2 Financial Repression

IIB United States International Trade

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

IIID Appendix on European Central Bank Large Scale Lender of Last Resort

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

I Twenty-One Million Unemployed or Underemployed. This section analyzes the employment situation report of the United States of the Bureau of Labor Statistics (BLS). There are four subsections: IA1 Summary of the Employment Situation; IA2 Number of People in Job Stress; IA3 Long-term and Cyclical Comparison of Employment; and IA4 Job Creation.

IA1 Summary of the Employment Situation. Table I-1 provides summary statistics of the employment situation report of the BLS. The first four rows provide the data from the establishment report of creation of nonfarm payroll jobs and remuneration of workers (for analysis of the differences in employment between the establishment report and the household survey see Abraham, Haltiwanger, Sandusky and Spletzer 2009). Total nonfarm payroll employment seasonally adjusted (SA) increased 228,000 in Nov 2017 and private payroll employment increased 221,000. The Bureau of Labor Statistics states (https://www.bls.gov/news.release/empsit.nr0.htm): “Our analysis suggests that the net effect of these hurricanes [Harvey and Irma] was to reduce the estimate of total nonfarm payroll employment for September. There was no discernible effect on the national unemployment rate. No changes were made to either the establishment or household survey estimation procedures for the September figures.” The average monthly number of nonfarm jobs created from Nov 2015 to Nov 2016 was 193,667 using seasonally adjusted data, while the average number of nonfarm jobs created from Nov 2016 to Nov 2017 was 172,583, or decrease by 10.9 percent. The average number of private jobs created in the US from Nov 2015 to Nov 2016 was 175,500, using seasonally adjusted data, while the average from Nov 2016 to Nov 2017 was 168,667, or decrease by 3.9 percent. This blog calculates the effective labor force of the US at 169,438 million in Nov 2017 and 168,505 million in Nov 2016 (Table I-4), for growth of 0.933 million at average 77,750 per month. The difference between the average increase of 168,677 new private nonfarm jobs per month in the US from Nov 2016 to Nov 2017 and the 77,750-average monthly increase in the labor force from Nov 2016 to Nov 2017 is 90,927 monthly new jobs net of absorption of new entrants in the labor force. There are 21.381 million in job stress in the US currently. Creation of 90,927 new jobs per month net of absorption of new entrants in the labor force would require 235 months to provide jobs for the unemployed and underemployed (21.381 million divided by 90,927) or 20 years (235 divided by 12). The civilian labor force of the US in Nov 2017 not seasonally adjusted stood at 160.466 million with 6.286 million unemployed or effectively 15.258 million unemployed in this blog’s calculation by inferring those who are not searching because they believe there is no job for them for effective labor force of 169.438 million. Reduction of one million unemployed at the current rate of job creation without adding more unemployment requires 0.916 years (1 million divided by product of 90,927 by 12, which is 1,091,124). Reduction of the rate of unemployment to 5 percent of the labor force would be equivalent to unemployment of only 8.023 million (0.05 times labor force of 160.466 million). New net job creation would be minus 1.737 million (6.286 million unemployed minus 8.023 million unemployed at rate of 5 percent) that at the current rate would take 0.0 years (-1.737 million divided by 1.091). Under the calculation in this blog, there are 15.258 million unemployed by including those who ceased searching because they believe there is no job for them and effective labor force of 169.438 million. Reduction of the rate of unemployment to 5 percent of the labor force would require creating 6.786 million jobs net of labor force growth that at the current rate would take 6.2 years (15.258 million minus 0.05(169.438 million) = 6.786 million divided by 1.091124 using LF PART 66.2% and Total UEM in Table I-4). These calculations assume that there are no more recessions, defying United States economic history with periodic contractions of economic activity when unemployment increases sharply. The number employed in Nov 2017 was 154.180 million (NSA) or 6.865 million more people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population of ages 16 years and over increased from 231.958 million in Jul 2007 to 255.949 million in Nov 2017 or by 23.991 million. The number employed increased 4.7 percent from Jul 2007 to Nov 2017 while the noninstitutional civilian population of ages of 16 years and over, or those available for work, increased 10.3 percent. The ratio of employment to population in Jul 2007 was 63.5 percent (147.315 million employed as percent of population of 231.958 million). The same ratio in Nov 2017 would result in 162.528 million jobs (0.635 multiplied by noninstitutional civilian population of 255.949 million). There are effectively 8.348 million fewer jobs in Nov 2017 than in Jul 2007, or 162.528 million minus 154.180 million. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs.

There is current interest in past theories of “secular stagnation.” Alvin H. Hansen (1939, 4, 7; see Hansen 1938, 1941; for an early critique see Simons 1942) argues:

“Not until the problem of full employment of our productive resources from the long-run, secular standpoint was upon us, were we compelled to give serious consideration to those factors and forces in our economy which tend to make business recoveries weak and anaemic (sic) and which tend to prolong and deepen the course of depressions. This is the essence of secular stagnation-sick recoveries which die in their infancy and depressions which feed on them-selves and leave a hard and seemingly immovable core of unemployment. Now the rate of population growth must necessarily play an important role in determining the character of the output; in other words, the com-position of the flow of final goods. Thus a rapidly growing population will demand a much larger per capita volume of new residential building construction than will a stationary population. A stationary population with its larger proportion of old people may perhaps demand more personal services; and the composition of consumer demand will have an important influence on the quantity of capital required. The demand for housing calls for large capital outlays, while the demand for personal services can be met without making large investment expenditures. It is therefore not unlikely that a shift from a rapidly growing population to a stationary or declining one may so alter the composition of the final flow of consumption goods that the ratio of capital to output as a whole will tend to decline.”

The argument that anemic population growth causes “secular stagnation” in the US (Hansen 1938, 1939, 1941) is as misplaced currently as in the late 1930s (for early dissent see Simons 1942). There is currently population growth in the ages of 16 to 24 years but not enough job creation and discouragement of job searches for all ages (https://cmpassocregulationblog.blogspot.com/2017/11/recovery-without-hiring-ten-million.html). The proper explanation is not in secular stagnation but in cyclically slow growth. Secular stagnation is merely another case of theory without reality with dubious policy proposals. Subsection IA4 Job Creation analyzes the types of jobs created, which are lower paying than earlier. Average hourly earnings in Nov 2017 were $26.55 seasonally adjusted (SA), increasing 2.4 percent not seasonally adjusted (NSA) relative to Nov 2016 and increasing 0.2 percent relative to Oct 2017 seasonally adjusted. In Oct 2017, average hourly earnings seasonally adjusted were $26.50, increasing 2.3 percent relative to Oct 2016 not seasonally adjusted and decreasing 0.1 percent seasonally adjusted relative to Sep 2017. These are nominal changes in workers’ wages. The following row “average hourly earnings in constant dollars” provides hourly wages in constant dollars calculated by the BLS or what is called “real wages” adjusted for inflation. Data are not available for Nov 2017 because the prices indexes of the BLS for Nov 2017 will only be released on Dec 13, 2017 (http://www.bls.gov/cpi/), which will be covered in this blog’s comment on Dec 17, 2017, together with world inflation. The second column provides changes in real wages for Oct 2017. Average hourly earnings adjusted for inflation or in constant dollars increased 0.3 percent in Oct 2017 relative to Oct 2016 but have been decreasing/stagnating during multiple months. World inflation waves in bouts of risk aversion (https://cmpassocregulationblog.blogspot.com/2017/11/dollar-devaluation-and-decline-of.html) mask declining trend of real wages. The fractured labor market of the US is characterized by high levels of unemployment and underemployment together with cyclically stagnating real wages or wages adjusted for inflation (Section I and earlier https://cmpassocregulationblog.blogspot.com/2017/11/unchanged-fomc-policy-rate-gradual.html). The following section IB Stagnating Real Wages provides more detailed analysis. Average weekly hours of US workers seasonally adjusted remained virtually unchanged, increasing from 34.4 in Oct 2017 to 34.5 in Nov 2017, which could be substantial additional work on a labor force of 160.529 million SA in Nov 2017. Another headline number widely followed is the unemployment rate or number of people unemployed as percent of the labor force. The unemployment rate calculated in the household survey did not change from 4.1 percent in Oct 2017 to 4.1 percent in Nov 2017, seasonally adjusted. This blog provides with every employment situation report the number of people in the US in job stress or unemployed plus underemployed calculated without seasonal adjustment (NSA) at 21.4 million in Nov 2017 and 21.2 million in Oct 2017. The final row in Table I-1 provides the number in job stress as percent of the actual labor force calculated at 12.6 percent in Nov 2017 and 12.5 percent in Oct 2017. Almost one in every five to ten workers in the US is unemployed or underemployed.

There is socio-economic stress in the combination of adverse events and cyclical performance:

and earlier http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html and earlier http://cmpassocregulationblog.blogspot.com/2015/05/fluctuating-valuations-of-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/impatience-with-monetary-policy-of.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/02/world-financial-turbulence-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2015/01/exchange-rate-conflicts-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html and earlier http://cmpassocregulationblog.blogspot.com/2014/11/squeeze-of-economic-activity-by-carry.html and earlier http://cmpassocregulationblog.blogspot.com/2014/10/imf-view-squeeze-of-economic-activity.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html)

Table I-1, US, Summary of the Employment Situation Report SA

Nov 2017

Oct 2017

New Nonfarm Payroll Jobs

228

244

New Private Payroll Jobs

221

2247

Average Hourly Earnings

Nov 17 $26.55 SA

∆% Nov 17/Oct 16 NSA: 2.4

∆% Nov 17/Oct 17 SA: 0.2

Oct 17 $26.50 SA

∆% Oct 17/Oct 16 NSA: 2.3

∆% Oct 17/Sep 17 SA: -0.1

Average Hourly Earnings in Constant Dollars

∆% Oct 17/Oct 16 NSA: 0.3

Average Weekly Hours

34.5

34.5

34.4 SA

34.8 NSA

Unemployment Rate Household Survey % of Labor Force SA

4.1

4.1

Number in Job Stress Unemployed and Underemployed Blog Calculation

21.4 Million NSA

21.2 Million NSA

In Job Stress as % Labor Force

12.6

12.5

Source: US Bureau of Labor Statistics

http://www.bls.gov/

The Bureau of Labor Statistics (BLS) of the US Department of Labor provides both seasonally adjusted (SA) and not-seasonally adjusted (NSA) or unadjusted data with important uses (Bureau of Labor Statistics 2012Feb3; 2011Feb11):

“Most series published by the Current Employment Statistics program reflect a regularly recurring seasonal movement that can be measured from past experience. By eliminating that part of the change attributable to the normal seasonal variation, it is possible to observe the cyclical and other nonseasonal movements in these series. Seasonally adjusted series are published monthly for selected employment, hours, and earnings estimates.”

Requirements of using best available information and updating seasonality factors affect the comparability over time of United States employment data. In the first month of the year, the BLS revises data for several years by adjusting benchmarks and seasonal factors (page 4 at http://www.bls.gov/news.release/pdf/empsit.pdf release of Jan 2015 at http://www.bls.gov/schedule/archives/empsit_nr.htm#2015), which is the case of the data for Jan 2015 released on Feb 6, 2015:

“In accordance with annual practice, the establishment survey data released today have been benchmarked to reflect comprehensive counts of payroll jobs for March 2014. These counts are derived principally from the Quarterly Census of Employment and Wages (QCEW), which enumerates jobs covered by the unemployment insurance tax system. The benchmark process results in revisions to not seasonally adjusted data from April 2013 forward.

Seasonally adjusted data from January 2010 forward are subject to revision. In addition, data for some series prior to 2010, both seasonally adjusted and unadjusted, incorporate revisions. The total nonfarm employment level for March 2014 was revised upward by 91,000 (+67,000 on a not seasonally adjusted basis, or less than 0.05 percent). The average benchmark revision over the past 10 years was plus or minus 0.3 percent. Table A presents revised total nonfarm employment data on a seasonally adjusted basis for January through

December 2014.

An article that discusses the benchmark and post-benchmark revisions and other technical issues can be accessed through the BLS website at www.bls.gov/web/empsit/cesbmart.pdf.

Information on the data released today also may be obtained by calling (202) 691-6555.”

There are also adjustments of population that affect comparability of labor statistics over time (page 5 at http://www.bls.gov/news.release/pdf/empsit.pdf release of Jan 2015 at http://www.bls.gov/schedule/archives/empsit_nr.htm#2015):

“Effective with data for January 2015, updated population estimates have been used in the household survey. Population estimates for the household survey are developed by the U.S. Census Bureau. Each year, the Census Bureau updates the estimates to reflect new information and assumptions about the growth of the population since the previous decennial census. The change in population reflected in the new estimates results from adjustments for net international migration, updated vital statistics and other information, and some methodological changes in the estimation process. In accordance with usual practice, BLS will not revise the official household survey estimates for December 2014 and earlier months. To show the impact of the population adjustments, however, differences in selected December 2014 labor force series based on the old and new population estimates are shown in table B.”

There are also adjustments of benchmarks and seasonality factors for establishment data that affect comparability over time (page 4 at http://www.bls.gov/news.release/pdf/empsit.pdf release of Jan 2015 at http://www.bls.gov/schedule/archives/empsit_nr.htm#2015):

“In accordance with annual practice, the establishment survey data released today [Feb 6, 2015] have been benchmarked to reflect comprehensive counts of payroll jobs for March 2014. These counts are derived principally from the Quarterly Census of Employment and Wages (QCEW), which enumerates jobs covered by the unemployment insurance tax system. The benchmark process results in revisions to not seasonally adjusted data from April 2013 forward. Seasonally adjusted data from January 2010 forward are subject to revision. In addition, data for some series prior to 2010, both seasonally adjusted and unadjusted, incorporate revisions.”

The Bureau of Labor Statistics (BLS) revised household data for seasonal factors in the release for Dec 2015 (http://www.bls.gov/news.release/pdf/empsit.pdf):

“Seasonally adjusted household survey data have been revised using updated seasonal adjustment factors, a procedure done at the end of each calendar year. Seasonally adjusted estimates back to January 2011 were subject to revision. The unemployment rates for January 2015 through November 2015 (as originally published and as revised) appear in table A on page 5, along with additional information about the revisions.”

The Bureau of Labor Statistics (BLS) revised household data for seasonal factors in the release for Dec 2016 (https://www.bls.gov/news.release/pdf/empsit.pdf):

“Seasonally adjusted household survey data have been revised using updated seasonal adjustment factors, a procedure done at the end of each calendar year. Seasonally adjusted estimates back to January 2012 were subject to revision. The unemployment rates for January 2016 through November 2016 (as originally published and as revised) appear in table A on page 5, along with additional information about the revisions.”

The Bureau of Labor Statistics (BLS) revised establishment data for seasonal and benchmarks in the release for Jan 2016 (http://www.bls.gov/news.release/pdf/empsit.pdf): “Establishment survey data have been revised as a result of the annual benchmarking process and the updating of seasonal adjustment factors. Also, household survey data for January 2016 reflect updated population estimates. See the notes beginning on page 4 for more information about these changes.”

The Bureau of Labor Statistics (BLS) revised establishment data for seasonal and benchmarks in the release for Jan 2017 (https://www.bls.gov/news.release/pdf/empsit.pdf): “Establishment survey data have been revised as a result of the annual benchmarking process and the updating of seasonal adjustment factors using an improved methodology to select models. Also, household survey data for January 2017 reflect updated population estimates. See the notes beginning on page 4 for more information about these changes.”

All comparisons over time are affected by yearly adjustments of benchmarks and seasonality factors. All data in this blog comment use revised data released by the BLS (http://www.bls.gov/).

IA2 Number of People in Job Stress. There are two approaches to calculating the number of people in job stress. The first approach consists of calculating the number of people in job stress unemployed or underemployed with the raw data of the employment situation report as in Table I-2. The data are seasonally adjusted (SA). The first three rows provide the labor force and unemployed in millions and the unemployment rate of unemployed as percent of the labor force. There is decrease in the number unemployed from 6.801 million in Sep 2017 to 6.520 million in Oct 2017 and increase to 6.610 million in Nov 2017. The rate of unemployment decreased from 4.2 percent in Sep 2017 to 4.1 percent in Oct 2017 and did not change to 4.1 percent in Nov 2017. An important aspect of unemployment is its persistence for more than 27 weeks with 1.581 million in Nov 2017, corresponding to 23.9 percent of the unemployed. The longer the period of unemployment the lower are the chances of finding another job with many long-term unemployed ceasing to search for a job. Another key characteristic of the current labor market is the high number of people trying to subsist with part-time jobs because they cannot find full-time employment or part-time for economic reasons. The BLS explains as follows: “these individuals were working part time because their hours had been cut back or because they were unable to find full-time work” (http://www.bls.gov/news.release/pdf/empsit.pdf 2). The number of part-time for economic reasons decreased from 5.122 million in Sep 2017 to 4.753 million in Oct 2017 and increased to 4.801 million in Nov 2017. Another important fact is the marginally attached to the labor force. The BLS explains as follows: “these individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey” (http://www.bls.gov/news.release/pdf/empsit.pdf 2). The number in job stress unemployed or underemployed of 12.892 million in Nov 2017 consists of:

· 6.610 million unemployed (of whom 1.581 million, or 23.9 percent, unemployed for 27 weeks or more) compared with 6.520 million unemployed in Oct 2017 (of whom 1.621 million, or 24.9 percent, unemployed for 27 weeks or more).

· 4.801 million employed part-time for economic reasons in Nov 2017 (who suffered reductions in their work hours or could not find full-time employment) compared with 4.753 million in Oct 2017

· 1.481 million who were marginally attached to the labor force in Nov 2017 (who were not in the labor force but wanted and were available for work) compared with 1.535 million in Oct 2017

Table I-2, US, People in Job Stress, Millions and % SA

Nov 2017

Oct 2017

Sep 2017

Labor Force Millions

160.529

160.381

161.146

Unemployed
Millions

6.610

6.520

6.801

Unemployment Rate (unemployed as % labor force)

4.1

4.1

4.2

Unemployed ≥27 weeks
Millions

1.581

1.621

1.733

Unemployed ≥27 weeks %

23.9

24.9

25.5

Part Time for Economic Reasons
Millions

4.801

4.753

5.122

Marginally
Attached to Labor Force
Millions

1.481

1.535

1.569

Job Stress
Millions

12.892

12.808

13.492

In Job Stress as % Labor Force

8.0

8.0

8.4

Job Stress = Unemployed + Part Time Economic Reasons + Marginally Attached Labor Force

Source: US Bureau of Labor Statistics

http://www.bls.gov/

Table I-3 repeats the data in Table I-2 but including Jul and additional data. What really matters is the number of people with jobs or the total employed, representing the opportunity for exit from unemployment. The final row of Table I-3 provides people employed as percent of the population or employment to population ratio. The number has remained relatively constant around 59 percent, reaching 60.1 in Aug 2017, 60.4 in Sep 2017, 60.2 in Oct 2017 and 60.1 in Nov 2017. The employment to population ratio fell from an annual level of 63.1 percent in 2006 to 58.6 percent in 2012, 58.6 percent in 2013 and 59.0 in 2014 with the lowest level at 58.4 percent in 2011. The employment population ratio reached 59.4 in Dec 2015 and 59.6 in Dec 2016.

Table I-3, US, Unemployment and Underemployment, SA, Millions and Percent

Nov 2017

Oct 2017

Sep 2017

Aug 2017

Labor Force

160.529

160.381

161.146

160.571

Participation Rate

62.7

62.7

63.1

62.9

Unemployed

6.610

6.520

6.801

7.132

UNE Rate %

4.1

4.1

4.2

4.4

Part Time Economic Reasons

4.801

4.753

5.122

5.255

Marginally Attached to Labor Force

1.481

1.535

1.569

1.548

In Job Stress

12.892

12.808

13.492

13,935

In Job Stress % Labor Force

8.0

8.0

8.4

8.7

Employed

153.918

153.861

154.345

153.439

Employment % Population

60.1

60.2

60.4

60.1

Job Stress = Unemployed + Part Time Economic Reasons + Marginally Attached Labor Force

Source: US Bureau of Labor Statistics

http://www.bls.gov/cps/

The balance of this section considers the second approach. Charts I-1 to I-12 explain the reasons for considering another approach to calculating job stress in the US. Chart I-1 of the Bureau of Labor Statistics provides the level of employment in the US from 2001 to 2017. There was a big drop of the number of people employed from 147.315 million at the peak in Jul 2007 (NSA) to 136.809 million at the trough in Jan 2010 (NSA) with 10.506 million fewer people employed. Recovery has been anemic compared with the shallow recession of 2001 that was followed by nearly vertical growth in jobs. The number employed in Nov 2017 was 154.180 million (NSA) or 6.865 million more people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population of ages 16 years and over increased from 231.958 million in Jul 2007 to 255.949 million in Nov 2017 or by 23.991 million. The number employed increased 4.7 percent from Jul 2007 to Nov 2017 while the noninstitutional civilian population of ages of 16 years and over, or those available for work, increased 10.3 percent. The ratio of employment to population in Jul 2007 was 63.5 percent (147.315 million employed as percent of population of 231.958 million). The same ratio in Nov 2017 would result in 162.528 million jobs (0.635 multiplied by noninstitutional civilian population of 255.949 million). There are effectively 8.348 million fewer jobs in Nov 2017 than in Jul 2007, or 162.528 million minus 154.180 million. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs.

Chart I-1, US, Employed, Thousands, SA, 2001-2017

Source: Bureau of Labor Statistics

http://www.bls.gov/data/

Chart I-2 of the Bureau of Labor Statistics provides 12-month percentage changes of the number of people employed in the US from 2001 to 2016. There was recovery since 2010 but not sufficient to recover lost jobs. Many people in the US who had jobs before the global recession are not working now and many who entered the labor force cannot find employment.

Chart I-2, US, Employed, 12-Month Percentage Change NSA, 2001-2017

Source: Bureau of Labor Statistics

http://www.bls.gov/data/

The foundation of the second approach derives from Chart I-3 of the Bureau of Labor Statistics providing the level of the civilian labor force in the US. The civilian labor force consists of people who are available and willing to work and who have searched for employment recently. The labor force of the US NSA grew 9.4 percent from 142.828 million in Jan 2001 to 156.255 million in Jul 2009. The civilian labor force is 2.7 percent higher at 160.466 million in Nov 2017 than in Jul 2009, all numbers not seasonally adjusted. Chart I-3 shows the flattening of the curve of expansion of the labor force and its decline in 2010 and 2011. The ratio of the labor force of 154.871 million in Jul 2007 to the noninstitutional population of 231.958 million in Jul 2007 was 66.8 percent while the ratio of the labor force of 160.466 million in Nov 2017 to the noninstitutional population of 255.949 million in Nov 2017 was 62.7 percent. The labor force of the US in Nov 2017 corresponding to 66.8 percent of participation in the population would be 170.974 million (0.668 x 255.949). The difference between the measured labor force in Nov 2017 of 160.466 million and the labor force in Nov 2017 with participation rate of 66.8 percent (as in Jul 2007) of 170.974 million is 10.508 million. The level of the labor force in the US has stagnated and is 10.508 million lower than what it would have been had the same participation rate been maintained. Millions of people have abandoned their search for employment because they believe there are no jobs available for them. The key issue is whether the decline in participation of the population in the labor force is the result of people giving up on finding another job.

Chart I-3, US, Civilian Labor Force, Thousands, SA, 2001-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/data/

Chart I-4 of the Bureau of Labor Statistics provides 12-month percentage changes of the level of the labor force in the US. The rate of growth fell almost instantaneously with the global recession and became negative from 2009 to 2011. The labor force of the US collapsed and did not recover. Growth in the beginning of the summer originates in younger people looking for jobs in the summer after graduation or during school recess.

Chart I-4, US, Civilian Labor Force, Thousands, NSA, 12-month Percentage Change, 2001-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/data/

Chart I-5 of the Bureau of Labor Statistics provides the labor force participation rate in the US or labor force as percent of the population. The labor force participation rate of the US fell from 66.8 percent in Jan 2001 to 62.7 percent NSA in Nov 2017, all numbers not seasonally adjusted. The annual labor force participation rate for 1979 was 63.7 percent and also 63.7 percent in Nov 1980 during sharp economic contraction. This comparison is further elaborated below. Chart I-5 shows an evident downward trend beginning with the global recession that has continued throughout the recovery beginning in IIIQ2009. The critical issue is whether people left the workforce of the US because they believe there is no longer a job for them.

Chart I-5, Civilian Labor Force Participation Rate, Percent of Population in Labor Force SA, 2001-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/data/

Chart I-6 of the Bureau of Labor Statistics provides the level of unemployed in the US. The number unemployed rose from the trough of 6.272 million NSA in Oct 2006 to the peak of 16.147 million in Jan 2010, declining to 13.400 million in Jul 2012, 12.696 million in Aug 2012 and 11.741 million in Sep 2012. The level unemployed fell to 11.741 million in Oct 2012, 11.404 million in Nov 2012, 11.844 million in Dec 2012, 13.181 million in Jan 2013, 12.500 million in Feb 2013 and 9.984 million in Dec 2013. The level of unemployment reached 6.286 million in Nov 2017, all numbers not seasonally adjusted.

Chart I-6, US, Unemployed, Thousands, SA, 2001-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/data/

Chart I-7 of the Bureau of Labor Statistics provides the rate of unemployment in the US or unemployed as percent of the labor force. The rate of unemployment of the US rose from 4.7 percent in Jan 2001 to 6.5 percent in Jun 2003, declining to 4.1 percent in Oct 2006. The rate of unemployment jumped to 10.6 percent in Jan 2010 and declined to 7.6 percent in Dec 2012 but increased to 8.5 percent in Jan 2013 and 8.1 percent in Feb 2013, falling back to 7.3 percent in May 2013 and 7.8 percent in Jun 2013, all numbers not seasonally adjusted. The rate of unemployment not seasonally adjusted stabilized at 7.7 percent in Jul 2013 and fell to 6.5 percent in Dec 2013 and 5.4 percent in Dec 2014. The rate of unemployment NSA decreased to 4.8 percent in Dec 2015 and 4.5 percent in Dec 2016, reaching 3.9 percent in Nov 2017.

Chart I-7, US, Unemployment Rate, SA, 2001-2017

Source: Bureau of Labor Statistics

http://www.bls.gov/data/

Chart I-8 of the Bureau of Labor Statistics provides 12-month percentage changes of the level of unemployed. There was a jump of 81.8 percent in Apr 2009 with subsequent decline and negative rates since 2010. On an annual basis, the level of unemployed rose 59.8 percent in 2009 and 26.1 percent in 2008 with increase of 3.9 percent in 2010, decline of 7.3 percent in 2011 and decrease of 9.0 percent in 2012. The annual level of unemployment decreased 8.4 percent in 2013 and fell 16.1 percent in 2014. The annual level of unemployment fell 13.7 percent in 2015 and fell 6.6 percent in 2016. The level of unemployment decreased 11.0 percent in Oct 2017 relative to a year earlier.

Chart I-8, US, Unemployed, 12-month Percentage Change, NSA, 2001-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/data/

Chart I-9 of the Bureau of Labor Statistics provides the number of people in part-time occupations because of economic reasons, that is, because they cannot find full-time employment. The number underemployed in part-time occupations not seasonally adjusted rose from 3.732 million in Jan 2001 to 5.270 million in Jan 2004, falling to 3.787 million in Apr 2006. The number underemployed seasonally adjusted jumped to 9.114 million in Nov 2009, falling to 8.171 million in Dec 2011 but increasing to 8.305 million in Jan 2012 and 8.238 million in Feb 2012 but then falling to 7.943 million in Dec 2012 and increasing to 8.083 million in Jul 2013. The number employed part-time for economic reasons seasonally adjusted reached 4.801 million in Nov 2017. Without seasonal adjustment, the number employed part-time for economic reasons reached 9.354 million in Dec 2009, declining to 8.918 million in Jan 2012 and 8.166 million in Dec 2012 but increasing to 8.324 million in Jul 2013. The number employed part-time for economic reasons NSA stood at 7.990 million in Dec 2013, 6.970 million in Dec 2014 and 6.179 million in Dec 2015. The number employed part-time for economic reasons NSA stood at 5.707 million in Dec 2016. The number employed part-time for economic reasons reached 4.642 million in Nov 2017. The longer the period in part-time jobs the lower are the chances of finding another full-time job.

Chart I-9, US, Part-Time for Economic Reasons, Thousands, SA, 2001-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/data/

Chart I-10 of the Bureau of Labor Statistics repeats the behavior of unemployment. The 12-month percentage change of the level of people at work part-time for economic reasons jumped 84.7 percent in Mar 2009 and declined subsequently. The declines have been insufficient to reduce significantly the number of people who cannot shift from part-time to full-time employment. On an annual basis, the number of part-time for economic reasons increased 33.5 percent in 2008 and 51.7 percent in 2009, declining 0.4 percent in 2010, 3.5 percent in 2011 and 5.1 percent in 2012. The annual number of part-time for economic reasons decreased 2.3 percent in 2013 and fell 9.1 percent in 2014. The annual number of part-time for economic reasons fell 11.7 percent in 2015 and fell 6.7 percent in 2016. The number of part-time for economic reasons decreased 7.6 percent in Dec 2016 relative to a year earlier. The level of part-time for economic reason fell 15.9 percent in Nov 2017 relative to a year earlier.

Chart I-10, US, Part-Time for Economic Reasons NSA 12-Month Percentage Change, 2001-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/data/

Chart I-11 of the Bureau of Labor Statistics provides the same pattern of the number marginally attached to the labor force jumping to significantly higher levels during the global recession and remaining at historically high levels. The number marginally attached to the labor force not seasonally adjusted increased from 1.295 million in Jan 2001 to 1.691 million in Feb 2004. The number of marginally attached to the labor force fell to 1.299 million in Sep 2006 and increased to 2.609 million in Dec 2010 and 2.800 million in Jan 2011. The number marginally attached to the labor force was 2.540 million in Dec 2011, increasing to 2.809 million in Jan 2012, falling to 2.608 million in Feb 2012. The number marginally attached to the labor force fell to 2.352 million in Mar 2012, 2.363 million in Apr 2012, 2.423 million in May 2012, 2.483 million in Jun 2012, 2.529 million in Jul 2012 and 2.561 million in Aug 2012. The number marginally attached to the labor force fell to 2.517 million in Sep 2012, 2.433 million in Oct 2012, 2.505 million in Nov 2012 and 2.427 million in in Dec 2013. The number marginally attached to the labor force reached 2.260 million in Dec 2014 and 1.833 million in Dec 2015. The number marginally attached to the labor force stood at 1.684 million in Dec 2016. The level marginally attached to the labor force reached 1.481 million Nov 2017.

Chart I-11, US, Marginally Attached to the Labor Force, Thousands, NSA, 2001-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/data/

Chart I-12 provides 12-month percentage changes of the marginally attached to the labor force from 2001 to 2017. There was a jump of 56.1 percent in May 2009 during the global recession followed by declines in percentage changes but insufficient negative changes. On an annual basis, the number of marginally attached to the labor force increased in four consecutive years: 15.7 percent in 2008, 37.9 percent in 2009, 11.7 percent in 2010 and 3.5 percent in 2011. The number marginally attached to the labor force fell 2.2 percent on annual basis in 2012 but increased 2.9 percent in the 12 months ending in Dec 2012, fell 13.0 percent in the 12 months ending in Jan 2013, falling 10.7 percent in the 12 months ending in May 2013. The number marginally attached to the labor force increased 4.0 percent in the 12 months ending in Jun 2013 and fell 4.5 percent in the 12 months ending in Jul 2013 and 8.6 percent in the 12 months ending in Aug 2013. The annual number of marginally attached to the labor force fell 6.2 percent in 2013 and fell 6.5 percent in 2014. The annual number of marginally attached to the labor force fell 11.4 percent in 2015. The number marginally attached to the labor force fell 7.2 percent in the 12 months ending in Dec 2013 and fell 6.9 percent in the 12 months ending in Dec 2014. The number marginally attached to the labor force fell 18.9 percent in the 12 months ending in Dec 2015 and decreased 8.1 percent in the 12 months ending in Dec 2016. The level of marginally attached to the labor force decreased 23.3 percent in the 12 months ending in Nov 2017.

Chart I-12, US, Marginally Attached to the Labor Force 12-Month Percentage Change, NSA, 2001-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/data/

Table I-4 consists of data and additional calculations using the BLS household survey, illustrating the possibility that the actual rate of unemployment could be 9.0 percent and the number of people in job stress could be around 21.4 million, which is 12.6 percent of the effective labor force. The first column provides for 2006 the yearly average population (POP), labor force (LF), participation rate or labor force as percent of population (PART %), employment (EMP), employment population ratio (EMP/POP %), unemployment (UEM), the unemployment rate as percent of labor force (UEM/LF Rate %) and the number of people not in the labor force (NLF). All data are unadjusted or not-seasonally-adjusted (NSA). The numbers in column 2006 are averages in millions while the monthly numbers for Nov 2016, Oct 2017 and Nov 2017 are in thousands, not seasonally adjusted. The average yearly participation rate of the population in the labor force was in the range of 66.0 percent minimum to 67.1 percent maximum between 2000 and 2006 with the average of 66.4 percent (http://www.bls.gov/data/). Table I-4b provides the yearly labor force participation rate from 1979 to 2017. The objective of Table I-4 is to assess how many people could have left the labor force because they do not think they can find another job. Row “LF PART 66.2 %” applies the participation rate of 2006, almost equal to the rates for 2000 to 2006, to the noninstitutional civilian population in Nov 2016, Oct 2017 and Nov 2017 to obtain what would be the labor force of the US if the participation rate had not changed. In fact, the participation rate fell to 62.6 percent by Nov 2016 and was 62.7 percent in Oct 2017 and 62.7 percent in Nov 2017, suggesting that many people simply gave up on finding another job. Row “∆ NLF UEM” calculates the number of people not counted in the labor force because they could have given up on finding another job by subtracting from the labor force with participation rate of 66.2 percent (row “LF PART 66.2%”) the labor force estimated in the household survey (row “LF”). Total unemployed (row “Total UEM”) is obtained by adding unemployed in row “∆NLF UEM” to the unemployed of the household survey in row “UEM.” The row “Total UEM%” is the effective total unemployed “Total UEM” as percent of the effective labor force in row “LF PART 66.2%.” The results are that:

  • there are an estimated 8.972 million unemployed in Nov 2017 who are not counted because they left the labor force on their belief they could not find another job (∆NLF UEM), that is, they dropped out of their job searches
  • the total number of unemployed is effectively 15.258 million (Total UEM) and not 6.286 million (UEM) of whom many have been unemployed long term
  • the rate of unemployment is 9.0 percent (Total UEM%) and not 3.9 percent, not seasonally adjusted, or 4.1 percent seasonally adjusted
  • the number of people in job stress is close to 21.4 million by adding the 8.972 million leaving the labor force because they believe they could not find another job, corresponding to 12.6 percent of the effective labor force.

The row “In Job Stress” in Table I-4 provides the number of people in job stress not seasonally adjusted at 21.381 million in Nov 2017, adding the total number of unemployed (“Total UEM”), plus those involuntarily in part-time jobs because they cannot find anything else (“Part Time Economic Reasons”) and the marginally attached to the labor force (“Marginally attached to LF”). The final row of Table I-4 shows that the number of people in job stress is equivalent to 12.6 percent of the labor force in Nov 2017. The employment population ratio “EMP/POP %” dropped from 62.9 percent on average in 2006 to 59.9 percent in Nov 2016, 60.3 percent in Oct 2017 and 60.2 percent in Nov 2017. The number employed in Nov 2017 was 154.180 million (NSA) or 6.865 million more people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population of ages 16 years and over increased from 231.958 million in Jul 2007 to 255.949 million in Nov 2017 or by 23.991 million. The number employed increased 4.7 percent from Jul 2007 to Nov 2017 while the noninstitutional civilian population of ages of 16 years and over, or those available for work, increased 10.3 percent. The ratio of employment to population in Jul 2007 was 63.5 percent (147.315 million employed as percent of population of 231.958 million). The same ratio in Nov 2017 would result in 162.528 million jobs (0.635 multiplied by noninstitutional civilian population of 255.949 million). There are effectively 8.348 million fewer jobs in Nov 2017 than in Jul 2007, or 162.528 million minus 154.180 million. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs.

The argument that anemic population growth causes “secular stagnation” in the US (Hansen 1938, 1939, 1941) is as misplaced currently as in the late 1930s (for early dissent see Simons 1942). There is currently population growth in the ages of 16 to 24 years but not enough job creation and discouragement of job searches for all ages (https://cmpassocregulationblog.blogspot.com/2017/11/recovery-without-hiring-ten-million.html). This is merely another case of theory without reality with dubious policy proposals. The number of hiring relative to the number unemployed measures the chances of becoming employed. The number of hiring in the US economy has declined by 10 million and does not show signs of increasing in an unusual recovery without hiring. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 33 quarters from IIIQ2009 to IIIQ2017. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) and the second estimate of GDP for IIIQ2017 (https://www.bea.gov/newsreleases/national/gdp/2017/pdf/gdp3q17_2nd.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by dividing GDP of $14,745.9 billion in IIQ2010 by GDP of $14,355.6 billion in IIQ2009 {[($14,745.9/$14,355.6) -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (https://cmpassocregulationblog.blogspot.com/2017/12/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/dollar-revaluation-and-increase-of.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.9 percent, 5.4 percent from IQ1983 to IIIQ1986, 5.2 percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987, 4.9 percent from IQ1983 to IIQ1988, 4.8 percent from IQ1983 to IIIQ1988, 4.8 percent from IQ1983 to IVQ1988, 4.8 percent from IQ1983 to IQ1989, 4.7 percent from IQ1983 to IIQ1989, 4.7 percent from IQ1983 to IIIQ1989, 4.5 percent from IQ1983 to IVQ1989. 4.5 percent from IQ1983 to IQ1990, 4.4 percent from IQ1983 to IIQ1990, 4.3 percent from IQ1983 to IIIQ1990, 4.0 percent from IQ1983 to IVQ1990, 3.8 percent from IQ1983 to IQ1991 and at 7.8 percent from IQ1983 to IVQ1983 (https://cmpassocregulationblog.blogspot.com/2017/12/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/dollar-revaluation-and-increase-of.html). The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IIIQ2017 would have accumulated to 33.4 percent. GDP in IIIQ2017 would be $19,999.1 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2829.4 billion than actual $17,169.7 billion. There are about two trillion dollars of GDP less than at trend, explaining the 21.4 million unemployed or underemployed equivalent to actual unemployment/underemployment of 12.6 percent of the effective labor force (Section I and earlier https://cmpassocregulationblog.blogspot.com/2017/11/unchanged-fomc-policy-rate-gradual.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/twenty-one-million-unemployed-or.html). US GDP in IIIQ2017 is 14.1 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $17,169.7 billion in IIIQ2017 or 14.5 percent at the average annual equivalent rate of 1.4 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.1 percent per year from Oct 1919 to Oct 2017. Growth at 3.1 percent per year would raise the NSA index of manufacturing output from 108.2393 in Dec 2007 to 146.1374 in Oct 2017. The actual index NSA in Oct 2017 is 106.1414, which is 27.4 percent below trend. Manufacturing output grew at average 2.1 percent between Dec 1986 and Oct 2017. Using trend growth of 2.1 percent per year, the index would increase to 132.7816 in Oct 2017. The output of manufacturing at 106.1414 in Oct 2017 is 20.1 percent below trend under this alternative calculation.

Chart I-12, US, Marginally Attached to the Labor Force 12-Month Percentage Change, NSA, 2001-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/data/

Table I-4, US, Population, Labor Force and Unemployment, NSA

2006

Nov 2016

Oct 2017

Nov 2017

POP

229

254,540

255,766

255,949

LF

151

159,451

160,465

160,466

PART%

66.2

62.6

62.7

62.7

EMP

144

152,385

154,223

154,180

EMP/POP%

62.9

59.9

60.3

60.2

UEM

7

7,066

6,242

6,286

UEM/LF Rate%

4.6

4.4

3.9

3.9

NLF

77

95,089

95,301

95,483

LF PART 66.2%

168,505

169,317

169,438

NLF UEM

9,054

8,852

8,972

Total UEM

16,120

15,094

15,258

Total UEM%

9.6

8.9

9.0

Part Time Economic Reasons

5,518

4,553

4,642

Marginally Attached to LF

1,932

1,535

1,481

In Job Stress

23,570

21,182

21,381

People in Job Stress as % Labor Force

14.0

12.5

12.6

Pop: population; LF: labor force; PART: participation; EMP: employed; UEM: unemployed; NLF: not in labor force; NLF UEM: additional unemployed; Total UEM is UEM + NLF UEM; Total UEM% is Total UEM as percent of LF PART 66.2%; In Job Stress = Total UEM + Part Time Economic Reasons + Marginally Attached to LF

Note: the first column for 2006 is in average millions; the remaining columns are in thousands; NSA: not seasonally adjusted

The labor force participation rate of 66.2% in 2006 is applied to current population to obtain LF PART 66.2%; NLF UEM is obtained by subtracting the labor force with participation of 66.2 percent from the household survey labor force LF; Total UEM is household data unemployment plus NLF UEM; and total UEM% is total UEM divided by LF PART 66.2%

Source: US Bureau of Labor Statistics

http://www.bls.gov/cps/

In the analysis of Hansen (1939, 3) of secular stagnation, economic progress consists of growth of real income per person driven by growth of productivity. The “constituent elements” of economic progress are “(a) inventions, (b) the discovery and development of new territory and new resources, and (c) the growth of population” (Hansen 1939, 3). Secular stagnation originates in decline of population growth and discouragement of inventions. According to Hansen (1939, 2), US population grew by 16 million in the 1920s but grew by one half or about 8 million in the 1930s with forecasts at the time of Hansen’s writing in 1938 of growth of around 5.3 million in the 1940s. Hansen (1939, 2) characterized demography in the US as “a drastic decline in the rate of population growth. Hansen’s plea was to adapt economic policy to stagnation of population in ensuring full employment. In the analysis of Hansen (1939, 8), population caused half of the growth of US GDP per year. Growth of output per person in the US and Europe was caused by “changes in techniques and to the exploitation of new natural resources.” In this analysis, population caused 60 percent of the growth of capital formation in the US. Declining population growth would reduce growth of capital formation. Residential construction provided an important share of growth of capital formation. Hansen (1939, 12) argues that market power of imperfect competition discourages innovation with prolonged use of obsolete capital equipment. Trade unions would oppose labor-savings innovations. The combination of stagnating and aging population with reduced innovation caused secular stagnation. Hansen (1939, 12) concludes that there is role for public investments to compensate for lack of dynamism of private investment but with tough tax/debt issues.

The current application of Hansen’s (1938, 1939, 1941) proposition argues that secular stagnation occurs because full employment equilibrium can be attained only with negative real interest rates between minus 2 and minus 3 percent. Professor Lawrence H. Summers (2013Nov8) finds that “a set of older ideas that went under the phrase secular stagnation are not profoundly important in understanding Japan’s experience in the 1990s and may not be without relevance to America’s experience today” (emphasis added). Summers (2013Nov8) argues there could be an explanation in “that the short-term real interest rate that was consistent with full employment had fallen to -2% or -3% sometime in the middle of the last decade. Then, even with artificial stimulus to demand coming from all this financial imprudence, you wouldn’t see any excess demand. And even with a relative resumption of normal credit conditions, you’d have a lot of difficulty getting back to full employment.” The US economy could be in a situation where negative real rates of interest with fed funds rates close to zero as determined by the Federal Open Market Committee (FOMC) do not move the economy to full employment or full utilization of productive resources. Summers (2013Oct8) finds need of new thinking on “how we manage an economy in which the zero nominal interest rates is a chronic and systemic inhibitor of economy activity holding our economies back to their potential.”

Former US Treasury Secretary Robert Rubin (2014Jan8) finds three major risks in prolonged unconventional monetary policy of zero interest rates and quantitative easing: (1) incentive of delaying action by political leaders; (2) “financial moral hazard” in inducing excessive exposures pursuing higher yields of risker credit classes; and (3) major risks in exiting unconventional policy. Rubin (2014Jan8) proposes reduction of deficits by structural reforms that could promote recovery by improving confidence of business attained with sound fiscal discipline.

Professor John B. Taylor (2014Jan01, 2014Jan3) provides clear thought on the lack of relevance of Hansen’s contention of secular stagnation to current economic conditions. The application of secular stagnation argues that the economy of the US has attained full-employment equilibrium since around 2000 only with negative real rates of interest of minus 2 to minus 3 percent. At low levels of inflation, the so-called full-employment equilibrium of negative interest rates of minus 2 to minus 3 percent cannot be attained and the economy stagnates. Taylor (2014Jan01) analyzes multiple contradictions with current reality in this application of the theory of secular stagnation:

  • Secular stagnation would predict idle capacity, in particular in residential investment when fed fund rates were fixed at 1 percent from Jun 2003 to Jun 2004. Taylor (2014Jan01) finds unemployment at 4.4 percent with house prices jumping 7 percent from 2002 to 2003 and 14 percent from 2004 to 2005 before dropping from 2006 to 2007. GDP prices doubled from 1.7 percent to 3.4 percent when interest rates were low from 2003 to 2005.
  • Taylor (2014Jan01, 2014Jan3) finds another contradiction in the application of secular stagnation based on low interest rates because of savings glut and lack of investment opportunities. Taylor (2009) shows that there was no savings glut. The savings rate of the US in the past decade is significantly lower than in the 1980s.
  • Taylor (2014Jan01, 2014Jan3) finds another contradiction in the low ratio of investment to GDP currently and reduced investment and hiring by US business firms.
  • Taylor (2014Jan01, 2014Jan3) argues that the financial crisis and global recession were caused by weak implementation of existing regulation and departure from rules-based policies.
  • Taylor (2014Jan01, 2014Jan3) argues that the recovery from the global recession was constrained by a change in the regime of regulation and fiscal/monetary policies.

In revealing research, Edward P. Lazear and James R. Spletzer (2012JHJul22) use the wealth of data in the valuable database and resources of the Bureau of Labor Statistics (http://www.bls.gov/data/) in providing clear thought on the nature of the current labor market of the United States. The critical issue of analysis and policy currently is whether unemployment is structural or cyclical. Structural unemployment could occur because of (1) industrial and demographic shifts and (2) mismatches of skills and job vacancies in industries and locations. Consider the aggregate unemployment rate, Y, expressed in terms of share si of a demographic group in an industry i and unemployment rate yi of that demographic group (Lazear and Spletzer 2012JHJul22, 5-6):

Y = ∑isiyi (1)

This equation can be decomposed for analysis as (Lazear and Spletzer 2012JHJul22, 6):

Y = ∑isiy*i + ∑iyis*i (2)

The first term in (2) captures changes in the demographic and industrial composition of the economy ∆si multiplied by the average rate of unemployment y*i , or structural factors. The second term in (2) captures changes in the unemployment rate specific to a group, or ∆yi, multiplied by the average share of the group s*i, or cyclical factors. There are also mismatches in skills and locations relative to available job vacancies. A simple observation by Lazear and Spletzer (2012JHJul22) casts intuitive doubt on structural factors: the rate of unemployment jumped from 4.4 percent in the spring of 2007 to 10 percent in October 2009. By nature, structural factors should be permanent or occur over relative long periods. The revealing result of the exhaustive research of Lazear and Spletzer (2012JHJul22) is:

“The analysis in this paper and in others that we review do not provide any compelling evidence that there have been changes in the structure of the labor market that are capable of explaining the pattern of persistently high unemployment rates. The evidence points to primarily cyclic factors.”

Table I-4b and Chart I-12-b provide the US labor force participation rate or percentage of the labor force in population. It is not likely that simple demographic trends caused the sharp decline during the global recession and failure to recover earlier levels. The civilian labor force participation rate dropped from the peak of 66.9 percent in Jul 2006 to 62.6 percent in Dec 2013, 62.5 percent in Dec 2014, 62.4 percent in Dec 2015 and 62.4 in Dec 2016. The civilian labor force participation rate reached 62.7 in Nov 2017. The civilian labor force participation rate was 63.7 percent on an annual basis in 1979 and 63.4 percent in Dec 1980 and Dec 1981, reaching even 62.9 percent in both Apr and May 1979. The civilian labor force participation rate jumped with the recovery to 64.8 percent on an annual basis in 1985 and 65.9 percent in Jul 1985. Structural factors cannot explain these sudden changes vividly shown visually in the final segment of Chart I-12b. Seniors would like to delay their retiring especially because of the adversities of financial repression on their savings. Labor force statistics are capturing the disillusion of potential workers with their chances in finding a job in what Lazear and Spletzer (2012JHJul22) characterize as accentuated cyclical factors. The argument that anemic population growth causes “secular stagnation” in the US (Hansen 1938, 1939, 1941) is as misplaced currently as in the late 1930s (for early dissent see Simons 1942). There is currently population growth in the ages of 16 to 24 years but not enough job creation and discouragement of job searches for all ages (https://cmpassocregulationblog.blogspot.com/2017/11/recovery-without-hiring-ten-million.html). “Secular stagnation” would be a process over many years and not from one year to another. This is merely another case of theory without reality with dubious policy proposals.

Table I-4b, US, Labor Force Participation Rate, Percent of Labor Force in Population, NSA, 1979-2017

Year

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Annual

1979

62.9

64.5

64.9

64.5

63.8

64.0

63.8

63.8

63.7

1980

63.5

64.6

65.1

64.5

63.6

63.9

63.7

63.4

63.8

1981

63.9

64.6

65.0

64.6

63.5

64.0

63.8

63.4

63.9

1982

63.9

64.8

65.3

64.9

64.0

64.1

64.1

63.8

64.0

1983

63.4

65.1

65.4

65.1

64.3

64.1

64.1

63.8

64.0

1984

64.3

65.5

65.9

65.2

64.4

64.6

64.4

64.3

64.4

1985

64.6

65.5

65.9

65.4

64.9

65.1

64.9

64.6

64.8

1986

65.0

66.3

66.6

66.1

65.3

65.5

65.4

65.0

65.3

1987

65.6

66.3

66.8

66.5

65.5

65.9

65.7

65.5

65.6

1988

65.5

66.7

67.1

66.8

65.9

66.1

66.2

65.9

65.9

1989

66.2

67.4

67.7

67.2

66.3

66.6

66.7

66.3

66.5

1990

66.5

67.4

67.7

67.1

66.4

66.5

66.3

66.1

66.5

1991

66.0

67.2

67.3

66.6

66.1

66.1

66.0

65.8

66.2

1992

66.4

67.6

67.9

67.2

66.3

66.2

66.2

66.1

66.4

1993

66.3

67.3

67.5

67.0

66.1

66.4

66.3

66.2

66.3

1994

66.5

67.2

67.5

67.2

66.5

66.8

66.7

66.5

66.6

1995

66.4

67.2

67.7

67.1

66.5

66.7

66.5

66.2

66.6

1996

66.7

67.4

67.9

67.2

66.8

67.1

67.0

66.7

66.8

1997

67.0

67.8

68.1

67.6

67.0

67.1

67.1

67.0

67.1

1998

67.0

67.7

67.9

67.3

67.0

67.1

67.1

67.0

67.1

1999

67.0

67.7

67.9

67.3

66.8

67.0

67.0

67.0

67.1

2000

67.0

67.7

67.6

67.2

66.7

66.9

66.9

67.0

67.1

2001

66.6

67.2

67.4

66.8

66.6

66.7

66.6

66.6

66.8

2002

66.5

67.1

67.2

66.8

66.6

66.6

66.3

66.2

66.6

2003

66.2

67.0

66.8

66.3

65.9

66.1

66.1

65.8

66.2

2004

65.8

66.5

66.8

66.2

65.7

66.0

66.1

65.8

66.0

2005

66.0

66.5

66.8

66.5

66.1

66.2

66.1

65.9

66.0

2006

66.0

66.7

66.9

66.5

66.1

66.4

66.4

66.3

66.2

2007

65.8

66.6

66.8

66.1

66.0

66.0

66.1

65.9

66.0

2008

66.0

66.6

66.8

66.4

65.9

66.1

65.8

65.7

66.0

2009

65.5

66.2

66.2

65.6

65.0

64.9

64.9

64.4

65.4

2010

64.8

65.1

65.3

65.0

64.6

64.4

64.4

64.1

64.7

2011

64.1

64.5

64.6

64.3

64.2

64.1

63.9

63.8

64.1

2012

63.8

64.3

64.3

63.7

63.6

63.8

63.5

63.4

63.7

2013

63.5

64.0

64.0

63.4

63.2

62.9

62.9

62.6

63.2

2014

62.9

63.4

63.5

63.0

62.8

63.0

62.8

62.5

62.9

2015

63.0

63.1

63.2

62.7

62.3

62.5

62.5

62.4

62.7

2016

62.7

63.2

63.4

62.9

62.8

62.8

62.6

62.4

62.8

2017

62.8

63.3

63.5

63.0

63.0

62.7

62.7

http://www.bls.gov/cps/

Chart I-12b, US, Labor Force Participation Rate, Percent of Labor Force in Population, NSA, 1979-2017

Source: Bureau of Labor Statistics

http://www.bls.gov/cps/

Broader perspective is in Chart I-12c of the US Bureau of Labor Statistics. The United States civilian noninstitutional population has increased along a consistent trend since 1948 that continued through earlier recessions and the global recession from IVQ2007 to IIQ2009 and the cyclical expansion after IIIQ2009.

Chart I-12c, US, Civilian Noninstitutional Population, Thousands, NSA, 1948-2017

Sources: US Bureau of Labor Statistics

http://www.bls.gov/data/

The labor force of the United States in Chart I-12d has increased along a trend similar to that of the civilian noninstitutional population in Chart I-12c. There is an evident stagnation of the civilian labor force in the final segment of Chart I-12d during the current economic cycle. This stagnation is explained by cyclical factors similar to those analyzed by Lazear and Spletzer (2012JHJul22) that motivated an increasing population to drop out of the labor force instead of structural factors. Large segments of the potential labor force are not observed, constituting unobserved unemployment and of more permanent nature because those afflicted have been seriously discouraged from working by the lack of opportunities.

Chart I-12d, US, Labor Force, Thousands, NSA, 1948-2017

Sources: US Bureau of Labor Statistics

http://www.bls.gov/data/

The rate of labor force participation in the US is in Chart I-12E from 1948 to 2017. There is sudden decline during the global recession after 2007 without recovery explained by cyclical factors (Lazear and Spletzer2012JHJul22) as may many potential workers stopped their searches disillusioned that there could be an opportunity for them in sharply contracted markets.

Chart I-12E, US, Labor Force Participation Rate, Percent of Labor Force in Population, NSA, 1948-2017

Sources: US Bureau of Labor Statistics

http://www.bls.gov/data/

IA3 Long-term and Cyclical Comparison of Employment. There is initial discussion here of long-term employment trends followed by cyclical comparison. Growth and employment creation have been mediocre in the expansion beginning in Jul IIIQ2009 from the contraction between Dec IVQ2007 and Jun IIQ2009 (http://www.nber.org/cycles.html). A series of charts from the database of the Bureau of Labor Statistics (BLS) provides significant insight. Chart I-13 provides the monthly employment level of the US from 1948 to 2017. The number of people employed has trebled. There are multiple contractions throughout the more than six decades but followed by resumption of the strong upward trend. The contraction of employment after 2007 is sharp and followed by a flatter curve of job creation. The United States missed this opportunity of high growth in the initial phase of recovery that historically eliminated unemployment and underemployment created during the contraction. Inferior performance of the US economy and labor markets is the critical current issue of analysis and policy design. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 33 quarters from IIIQ2009 to IIIQ2017. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) and the second estimate of GDP for IIIQ2017 (https://www.bea.gov/newsreleases/national/gdp/2017/pdf/gdp3q17_2nd.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by dividing GDP of $14,745.9 billion in IIQ2010 by GDP of $14,355.6 billion in IIQ2009 {[($14,745.9/$14,355.6) -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (https://cmpassocregulationblog.blogspot.com/2017/12/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/dollar-revaluation-and-increase-of.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.9 percent, 5.4 percent from IQ1983 to IIIQ1986, 5.2 percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987, 4.9 percent from IQ1983 to IIQ1988, 4.8 percent from IQ1983 to IIIQ1988, 4.8 percent from IQ1983 to IVQ1988, 4.8 percent from IQ1983 to IQ1989, 4.7 percent from IQ1983 to IIQ1989, 4.7 percent from IQ1983 to IIIQ1989, 4.5 percent from IQ1983 to IVQ1989. 4.5 percent from IQ1983 to IQ1990, 4.4 percent from IQ1983 to IIQ1990, 4.3 percent from IQ1983 to IIIQ1990, 4.0 percent from IQ1983 to IVQ1990, 3.8 percent from IQ1983 to IQ1991 and at 7.8 percent from IQ1983 to IVQ1983 (https://cmpassocregulationblog.blogspot.com/2017/12/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/dollar-revaluation-and-increase-of.html). The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IIIQ2017 would have accumulated to 33.4 percent. GDP in IIIQ2017 would be $19,999.1 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2829.4 billion than actual $17,169.7 billion. There are about two trillion dollars of GDP less than at trend, explaining the 21.4 million unemployed or underemployed equivalent to actual unemployment/underemployment of 12.6 percent of the effective labor force (Section I and earlier https://cmpassocregulationblog.blogspot.com/2017/11/unchanged-fomc-policy-rate-gradual.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/twenty-one-million-unemployed-or.html). US GDP in IIIQ2017 is 14.1 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $17,169.7 billion in IIIQ2017 or 14.5 percent at the average annual equivalent rate of 1.4 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.1 percent per year from Oct 1919 to Oct 2017. Growth at 3.1 percent per year would raise the NSA index of manufacturing output from 108.2393 in Dec 2007 to 146.1374 in Oct 2017. The actual index NSA in Oct 2017 is 106.1414, which is 27.4 percent below trend. Manufacturing output grew at average 2.1 percent between Dec 1986 and Oct 2017. Using trend growth of 2.1 percent per year, the index would increase to 132.7816 in Oct 2017. The output of manufacturing at 106.1414 in Oct 2017 is 20.1 percent below trend under this alternative calculation.

Chart I-13, US, Employment Level, Thousands, SA, 1948-2017

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The steep and consistent curve of growth of the US labor force is in Chart I-14. The contraction beginning in Dec 2007 flattened the path of the US civilian labor force and with flatter curve during the current expansion.

Chart I-14, US, Civilian Labor Force, SA, 1948-2017, Thousands

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

Chart I-15 provides the labor force participation rate for the period from 1948 to 2017. The labor force participation rate is influenced by numerous factors such as the age of the population. There is no comparable episode in the postwar economy to the sharp collapse of the labor force participation rate in Chart I-15 during the contraction and subsequent expansion after 2007. Aging can reduce the labor force participation rate as many people retire but many may have decided to work longer because their wealth and savings have been significantly reduced. There is an important effect of many people just exiting the labor force because they believe there is no job available for them.

Chart I-15, US, Civilian Labor Force Participation Rate, SA, 1948-2017, %

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The number of unemployed in the US jumped seasonally adjusted from 5.8 million in May 1979 to 12.1 million in Dec 1982, by 6.3 million, or 108.6 percent. The jump not seasonally adjusted was from 5.4 million in May 1979 to 12.5 million in Jan 1983, by 7.1 million or 131.5 percent. The number of unemployed seasonally adjusted jumped from 6.7 million in Mar 2007 to 15.4 million in Oct 2009, by 8.7 million, or 129.9 percent. The number of unemployed not seasonally adjusted jumped from 6.5 million in Apr 2007 to 16.1 million in Jan 2010, by 9.6 million or 147.7 percent. These are the two episodes with steepest increase in the level of unemployment in Chart I-16.

Chart I-16, US, Unemployed, SA, 1948-2017, Thousands

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

Chart I-17 provides the rate of unemployment of the US from 1948 to 2017. The peak of the series is 10.8 percent in both Nov and Dec 1982. The second highest rates are 10.0 percent in Oct 2009 and 9.9 percent in both Nov and Dec 2009 SA. The unadjusted rate of unemployment NSA reached 3.9 percent in Nov 2017.

Chart I-17, US, Unemployment Rate, SA, 1948-2017

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The number unemployed 27 weeks or more in Chart I-18 jumped to peak levels in the current cycle. There is insufficient decline to return to earlier levels.

Chart I-18, US, Unemployed for 27 Weeks or More, SA, 1948-2017, Thousands

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The employment-population ratio in Chart I-19 is an important indicator of wellbeing in labor markets, measuring the number of people with jobs. The US employment-population ratio fell from 63.5 in Dec 2006 to 58.6 in Jul 2011 and stands at 59.6 NSA in Dec 2016. The employment population ration reached 60.2 NSA in Nov 2017. There is no comparable decline followed by stabilization during a cyclical expansion in Chart I-19.

Chart I-19, US, Employment-Population Ratio, 1948-2017

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The number employed part-time for economic reasons in Chart I-20 increased in the recessions and declined during the expansions. In the current cycle, the number employed part-time for economic reasons increased sharply and has not returned to normal levels. Lower growth of economic activity in the expansion after IIIQ2009 failed to reduce the number desiring to work full time but finding only part-time occupations. The lack of full-time jobs is evidently cyclical and not secular.

Chart I-20, US, Part-Time for Economic Reasons, NSA, 1955-2017, Thousands

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

Table I-5 provides percentage change of real GDP in the United States in the 1930s, 1980s and 2000s. The recession in 1981-1982 is quite similar on its own to the 2007-2009 recession. In contrast, during the Great Depression in the four years of 1930 to 1933, GDP in constant dollars fell 26.4 percent cumulatively and fell 45.3 percent in current dollars (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 150-2, Pelaez and Pelaez, Globalization and the State, Vol. II (2009b), 205-7 and revisions in http://bea.gov/iTable/index_nipa.cfm). Data are available for the 1930s only on a yearly basis. US GDP fell 4.7 percent in the two recessions (1) from IQ1980 to IIIQ1980 and (2) from III1981 to IVQ1982 and 4.2 percent cumulatively in the recession from IVQ2007 to IIQ2009. It is instructive to compare the first years of the expansions in the 1980s and the current expansion. GDP grew at 4.6 percent in 1983, 7.3 percent in 1984, 4.2 percent in 1985, 3.5 percent in 1986, 3.5 percent in 1987, 4.2 percent in 1988 and 3.7 percent in 1989. In contrast, GDP grew 2.5 percent in 2010, 1.6 percent in 2011, 2.2 percent in 2012, 1.7 percent in 2013, 2.6 percent in 2014 and 2.9 percent in 2015. GDP grew 1.5 percent in 2016. Actual annual equivalent GDP growth in the twenty-two quarters from IQ2012 to II2017 is 2.2 percent and 2.2 percent in the four quarters ending in IIQ2017. GDP grew at 4.2 percent in 1985, 3.5 percent in 1986, 3.5 percent in 1987, 4.2 percent in 1988 and 3.7 percent in 1989. The forecasts of the central tendency of participants of the Federal Open Market Committee (FOMC) are in the range of 2.0 to 2.5 percent in 2017 (https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20170614.pdf) with less reliable forecast of 1.7 to 2.3 percent in 2018 (https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20170614.pdf). Growth of GDP in the expansion from IIIQ2009 to IIIQ2017 has been at average 2.2 percent in annual equivalent.

Table I-5, US, Percentage Change of GDP in the 1930s, 1980s and 2000s, ∆%

Year

GDP ∆%

Year

GDP ∆%

Year

GDP ∆%

1930

-8.5

1980

-0.2

2000

4.1

1931

-6.4

1981

2.6

2001

1.0

1932

-12.9

1982

-1.9

2002

1.8

1933

-1.3

1983

4.6

2003

2.8

1934

10.8

1984

7.3

2004

3.8

1935

8.9

1985

4.2

2005

3.3

1936

12.9

1986

3.5

2006

2.7

1937

5.1

1987

3.5

2007

1.8

1938

-3.3

1988

4.2

2008

-0.3

1939

8.0

1989

3.7

2009

-2.8

1940

8.8

1990

1.9

2010

2.5

1941

17.7

1991

-0.1

2011

1.6

1942

18.9

1992

3.6

2012

2.2

1943

17.0

1993

2.7

2013

1.7

1944

8.0

1994

4.0

2014

2.6

1945

-1.0

1995

2.7

2015

2.9

1946

-11.6

1996

3.8

2016

1.5

Source: US Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm

Characteristics of the four cyclical contractions are in Table I-6 with the first column showing the number of quarters of contraction; the second column the cumulative percentage contraction; and the final column the average quarterly rate of contraction. There were two contractions from IQ1980 to IIIQ1980 and from IIIQ1981 to IVQ1982 separated by three quarters of expansion. The drop of output combining the declines in these two contractions is 4.7 percent, which is almost equal to the decline of 4.2 percent in the contraction from IVQ2007 to IIQ2009. In contrast, during the Great Depression in the four years of 1930 to 1933, GDP in constant dollars fell 26.4 percent cumulatively and fell 45.3 percent in current dollars (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 150-2, Pelaez and Pelaez, Globalization and the State, Vol. II (2009b), 205-7 and revisions in http://bea.gov/iTable/index_nipa.cfm). The comparison of the global recession after 2007 with the Great Depression is entirely misleading.

Table I-6, US, Number of Quarters, GDP Cumulative Percentage Contraction and Average Percentage Annual Equivalent Rate in Cyclical Contractions

Number of Quarters

Cumulative Percentage Contraction

Average Percentage Rate

IIQ1953 to IIQ1954

3

-2.4

-0.8

IIIQ1957 to IIQ1958

3

-3.0

-1.0

IVQ1973 to IQ1975

5

-3.1

-0.6

IQ1980 to IIIQ1980

2

-2.2

-1.1

IIIQ1981 to IVQ1982

4

-2.5

-0.64

IVQ2007 to IIQ2009

6

-4.2

-0.72

Sources: Source: Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm

Table I-7 shows the mediocre average annual equivalent growth rate of 2.2 percent of the US economy in the thirty-two quarters of the current cyclical expansion from IIIQ2009 to IIQ2017. In sharp contrast, the average growth rate of GDP was:

  • 5.7 percent in the first thirteen quarters of expansion from IQ1983 to IQ1986
  • 5.4 percent in the first fifteen quarters of expansion from IQ1983 to IIIQ1986
  • 5.2 percent in the first sixteen quarters of expansion from IQ1983 to IVQ1986
  • 5.0 percent in the first seventeen quarters of expansion from IQ1983 to IQ1987
  • 5.0 percent in the first eighteen quarters of expansion from IQ1983 to IIQ1987
  • 4.9 percent in the first nineteen quarters of expansion from IQ1983 to IIIQ1987
  • 5.0 percent in the first twenty quarters of expansion from IQ1983 to IVQ1987
  • 4.9 percent in the first twenty-first quarters of expansion from IQ1983 to IQ1988
  • 4.9 percent in the first twenty-two quarters of expansion from IQ1983 to IIQ1988
  • 4.8 percent in the first twenty-three quarters of expansion from IQ1983 to IIIQ1988
  • 4.8 percent in the first twenty-four quarters of expansion from IQ1983 to IVQ1988
  • 4.8 percent in the first twenty-five quarters of expansion from IQ1983 to IQ1989
  • 4.7 percent in the first twenty-six quarters of expansion from IQ1983 to IIQ1989
  • 4.7 percent in the first twenty-seven quarters of expansion from IQ1983 to IIIQ1989
  • 4.5 percent in the first twenty-eight quarters of expansion from IQ1983 to IVQ1989
  • 4.5 percent in the first twenty-nine quarters of expansion from IQ1983 to IQ1990
  • 4.4 percent in the first thirty quarters of expansion from IQ1983 to IIQ1990
  • 4.3 percent in the first thirty-one quarters of expansion from IQ1983 to IIIQ1990
  • 4.0 percent in the first thirty-two quarters of expansion from IQ1983 to IVQ1990

The line “average first four quarters in four expansions” provides the average growth rate of 7.7 percent with 7.8 percent from IIIQ1954 to IIQ1955, 9.2 percent from IIIQ1958 to IIQ1959, 6.1 percent from IIIQ1975 to IIQ1976 and 7.8 percent from IQ1983 to IVQ1983. The United States missed this opportunity of high growth in the initial phase of recovery.  BEA data show the US economy in standstill relative to historical experience with annual growth of 2.5 percent in 2010 decelerating to 1.6 percent annual growth in 2011, 2.2 percent in 2012, 1.7 percent in 2013, 2.6 percent in 2014, 2.9 percent in 2015 and 1.5 percent in 2016 (http://www.bea.gov/iTable/index_nipa.cfm).  The expansion from IQ1983 to IQ1986 was at the average annual growth rate of 5.7 percent, 5.2 percent from IQ1983 to IVQ1986, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987, 4.9 percent from IQ1983 to IQ1988, 4.9 percent from IQ1983 to IIQ1988, 4.8 percent from IQ1983 to IIIQ1988. 4.8 percent from IQ1983 to IVQ1988, 4.8 percent from IQ1983 to IQ1989, 4.7 percent from IQ1983 to IIQ1989, 4.7 percent from IQ1983 to IIIQ1989. 4.5 percent from IQ1983 to IVQ1989, 4.5 percent from IQ1983 to IQ1990, 4.4 percent from IQ1983 to IIQ1990, 4.3 percent from IQ1983 to IIIQ1990. 4.0 percent from IQ1983 to IVQ1990 and at 7.8 percent from IQ1983 to IVQ1983. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). GDP grew 2.7 percent in the first four quarters of the expansion from IIIQ2009 to IIQ2010. GDP growth in the twenty-two quarters from 2012 to 2017 accumulated to 12.1 percent. This growth is equivalent to 2.1 percent per year, obtained by dividing GDP in IIQ2017 of $17,030.0 billion by GDP in IVQ2011 of $15,190.3 billion and compounding by 4/22: {[($17,030.0/$15,190.3)4/22 -1]100 = 2.1 percent}.

Table I-7, US, Number of Quarters, Cumulative Growth and Average Annual Equivalent Growth Rate in Cyclical Expansions

Number
of
Quarters

Cumulative Growth

∆%

Average Annual Equivalent Growth Rate

IIIQ 1954 to IQ1957

11

12.8

4.5

First Four Quarters IIIQ1954 to IIQ1955

4

7.8

IIQ1958 to IIQ1959

5

10.0

7.9

First Four Quarters

IIIQ1958 to IIQ1959

4

9.2

IIQ1975 to IVQ1976

8

8.3

4.1

First Four Quarters IIIQ1975 to IIQ1976

4

6.1

IQ1983-IQ1986

IQ1983-IIIQ1986

IQ1983-IVQ1986

IQ1983-IQ1987

IQ1983-IIQ1987

IQ1983 to IIIQ1987

IQ1983 to IVQ1987

IQ1983 to IQ1988

IQ1983 to IIQ1988

IQ1983 to IIIQ1988

IQ1983 to IVQ1988

IQ1983 to IQ1989

IQ1983 to IIQ1989

IQ1983 to IIIQ1989

IQ1983 to IVQ1989

IQ1983 to IQ1990

IQ1983 to IIQ1990

IQ1983 to IIIQ1990

IQ1983 to IVQ1990

13

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

19.9

21.6

22.3

23.1

24.5

25.6

27.7

28.4

30.1

30.9

32.6

34.0

35.0

36.0

36.3

37.8

38.3

38.4

37.2

5.7

5.4

5.2

5.0

5.0

4.9

5.0

4.9

4.9

4.8

4.8

4.8

4.7

4.7

4.5

4.5

4.4

4.3

4.0

First Four Quarters IQ1983 to IVQ1983

4

7.8

Average First Four Quarters in Four Expansions*

7.7

IIIQ2009 to IIQ2017

32

18.6

2.2

First Four Quarters IIIQ2009 to IIQ2010

2.7

*First Four Quarters: 7.8% IIIQ1954-IIQ1955; 9.2% IIIQ1958-IIQ1959; 6.1% IIIQ1975-IQ1976; 7.8% IQ1983-IVQ1983

Source: Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm

A group of charts from the database of the Bureau of Labor Statistics facilitates the comparison of employment in the 1980s and 2000s. The long-term charts and tables from I-5 to I-7 in the discussion above confirm the view that the comparison of the current expansion should be with that in the 1980s because of similar dimensions. Chart I-21 provides the level of employment in the US between 1979 and 1990. Employment surged after the contraction and grew rapidly during the decade. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The third recession explains the decline of employment in 1990.

Chart I-21, US, Employed, Thousands, 1979-1990

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

Chart I-22 provides the level of employment in the US from 2001 to 2016. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs. Recovery has been anemic compared with the shallow recession of 2001 that was followed by nearly vertical growth in jobs. The number employed in Nov 2017 was 154.180 million (NSA) or 6.865 million more people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population of ages 16 years and over increased from 231.958 million in Jul 2007 to 255.949 million in Nov 2017 or by 23.991 million. The number employed increased 4.7 percent from Jul 2007 to Nov 2017 while the noninstitutional civilian population of ages of 16 years and over, or those available for work, increased 10.3 percent. The ratio of employment to population in Jul 2007 was 63.5 percent (147.315 million employed as percent of population of 231.958 million). The same ratio in Nov 2017 would result in 162.528 million jobs (0.635 multiplied by noninstitutional civilian population of 255.949 million). There are effectively 8.348 million fewer jobs in Nov 2017 than in Jul 2007, or 162.528 million minus 154.180 million. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs.

Chart I-22, US, Employed, Thousands, 2001-2017

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The US civilian labor force in Chart I-23 grew with few interruptions from 1979 to 1990. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The third recession explains the flattening of the curve in 1990.

Chart I-23, US, Civilian Labor Force, Thousands, 1979-1990

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The civilian labor force in Chart I-24 grew steadily on an upward trend in the 2000s until it contracted together with the economy after 2007. There has not been recovery during the expansion but rather decline and marginal turn of the year 2011 into expansion in 2012 followed by stability and oscillation into 2013-2017. There is substantial underperformance relative to trend before the global recession. The civilian labor force consists of people who are available and willing to work and who have searched for employment recently. The labor force of the US NSA grew 9.4 percent from 142.828 million in Jan 2001 to 156.255 million in Jul 2009. The civilian labor force is 2.7 percent higher at 160.466 million in Nov 2017 than in Jul 2009, all numbers not seasonally adjusted. Chart I-3 shows the flattening of the curve of expansion of the labor force and its decline in 2010 and 2011. The ratio of the labor force of 154.871 million in Jul 2007 to the noninstitutional population of 231.958 million in Jul 2007 was 66.8 percent while the ratio of the labor force of 160.466 million in Nov 2017 to the noninstitutional population of 255.949 million in Nov 2017 was 62.7 percent. The labor force of the US in Nov 2017 corresponding to 66.8 percent of participation in the population would be 170.974 million (0.668 x 255.949). The difference between the measured labor force in Nov 2017 of 160.466 million and the labor force in Nov 2017 with participation rate of 66.8 percent (as in Jul 2007) of 170.974 million is 10.508 million. The level of the labor force in the US has stagnated and is 10.508 million lower than what it would have been had the same participation rate been maintained. Millions of people have abandoned their search for employment because they believe there are no jobs available for them. The key issue is whether the decline in participation of the population in the labor force is the result of people giving up on finding another job.

Chart I-24, US, Civilian Labor Force, Thousands, 2001-2017

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The rate of participation of the labor force in population stagnated during the stagflation and conquest of inflation in the late 1970s and early 1980s, as shown in Chart I-25. Recovery was vigorous during the expansion and lasted through the remainder of the decade. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The third recession explains the flattening/decline of the curve in 1990.

Chart I-25, US, Civilian Labor Force Participation Rate, 1979-1990, %

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The rate of participation in the labor force declined after the recession of 2001 followed by stability until 2007, as shown in Chart I-26. The rate of participation in the labor force continued to decline both during the contraction after 2007 and during the expansion after 2009 with marginal expansion at the turn of the year into 2012 followed by trend of decline and stability. Sharp decline occurred during the cycle and not secularly.

Chart I-26, US, Civilian Labor Force Participation Rate, 2001-2017, %

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

Chart I-27 provides the number unemployed during the 1980s. The number unemployed peaked at 12.051 million in Dec 1982 seasonally adjusted and 12.517 in Jan 1983 million not seasonally adjusted, declining to 8.358 million in Dec 1984 seasonally adjusted and 7.978 million in Dec 1984 not seasonally adjusted during the first two years of expansion from the contraction. The number unemployed then fell to 6.667 million in Dec 1989 seasonally adjusted and 6.300 million not seasonally adjusted. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The third recession explains the increase of the curve in 1990 with 7.525 million unemployed NSA and 7.901 million SA.

Chart I-27, US, Unemployed Thousands 1979-1990

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

Chart I-28 provides the number unemployed from 2001 to 2017. Using seasonally adjusted data, the number unemployed rose from 6.727 million in Oct 2006 to 15.352 million in Oct 2009, declining to 13.093 million in Dec 2011, 8.718 million in Dec 2014 and 7.927 million in Dec 2015. The number unemployed SA stood at 7.529 million in Dec 2016. The level of unemployment SA was 6.610 million in Nov 2017. Using data not seasonally adjusted, the number unemployed rose from 6.272 million in Oct 2006 to 16.147 million in Jan 2010, declining to 11.844 million in Dec 2012, increasing to 13.181 million in Jan 2013 and declining to 9.984 million in Dec 2013. The level of unemployment fell from 10.855 million in Jan 2014 to 8.331 million in Dec 2014. The level of unemployment was 7.542 million in Dec 2015 and 7.170 million in Dec 2016. The level of unemployment was 6.286 million in Nov 2017.

Chart I-28, US, Unemployed Thousands 2001-2017

Source: US Bureau of Labor St

atistics

http://www.bls.gov/data/

The rate of unemployment peaked at 10.8 percent in both Nov and Dec 1982 seasonally adjusted, as shown in Chart I-29. The rate of unemployment dropped sharply during the expansion after 1984 and continued to decline during the rest of the decade to 5.4 percent in Dec 1989. Using not seasonally adjusted data, the rate of unemployment peaked at 11.4 percent in Jan 1983, declining to 7.0 percent in Dec 1984 and 5.1 percent in Dec 1989. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The third recession explains the increase of the curve in Dec 1990 with 6.0 percent unemployed NSA and 6.2 percent SA.

Chart I-29, US, Unemployment Rate, 1979-1990, %

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The rate of unemployment in the US seasonally adjusted jumped from 4.4 percent in May 2007 to 10.0 percent in Oct 2009 and 9.9 percent in both Nov and Dec 2009, as shown in Chart I-30. The rate of unemployment fluctuated at around 9.0 percent in 2011, declining to 7.9 percent in Dec 2012 and 6.7 percent in Dec 2013. The rate of unemployed eased to 5.6 percent in Dec 2014 and 5.0 percent in Dec 2015. The rate of unemployment SA stood at 4.7 percent in Dec 2016. The rate of unemployment SA reached 4.1 percent in Nov 2017.

Chart I-30, US, Unemployment Rate, 2001-2017, %

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The employment population ratio seasonally adjusted fell from around 60.1 in Dec 1979 to 57.1 in both Feb and Mar 1983, as shown in Chart I-31. The employment population ratio seasonally adjusted rose back to 59.9 in Dec 1984 and reached 63.0 later in the decade in Dec 1989. Using not seasonally adjusted data, the employment population ratio dropped from 60.4 percent in Oct 1979 to 56.1 percent in Jan 1983, increasing to 59.8 in Dec 1984 and to 62.9 percent in Dec 1989. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The third recession explains the increase of the curve in Dec 1990 with 62.2 NSA and 62.2 percent SA.

Chart I-31, US, Employment Population Ratio, 1979-1990, %

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The US employment-population ratio seasonally adjusted has fallen from 63.4 in Dec 2006 to 58.6 in Dec 2011, 58.7 in Dec 2012, 58.7 in Dec 2013, 59.2 in Dec 2014 and 59.6 in Dec 2015, as shown in Chart I-32. The employment-population ratio reached 59.7 in Dec 2016. The employment population ratio stood at 60.1 in Nov

2017. The employment population-ratio has stagnated during the expansion. Using not seasonally adjusted data, the employment population ratio fell from 63.6 percent in Jul 2006 to 57.6 percent in Jan 2011, 58.5 percent in Dec 2012, 58.5 percent in Dec 2013 and 59.1 in Dec 2014. The employment population ratio reached 59.4 percent in Dec 2015 and 59.6 percent in Dec 2016. The employment population ratio stood at 60.2 in Nov 2017.

Chart I-32, US, Employment Population Ratio, 2001-2017, %

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The number unemployed 27 weeks or more rose in Chart I-33 rose from 492,000 NSA in Oct 1979 to 2.978 million in Mar 1983. The level unemployed 27 weeks or more NSA fell to 566,000 in Aug 1989. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The third recession explains the increase of the curve in Dec 1990 with 774,000 NSA and 831,000 SA.

Chart I-33, US, Number Unemployed for 27 Weeks or More 1979-1990, SA, Thousands

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The number unemployed for 27 weeks or over, seasonally adjusted, increased sharply during the contraction as shown in Chart I-34 from 1.131 million in Nov 2006 to 6.800 million in Apr 2010 seasonally adjusted. The number of unemployed for 27 weeks or over remained at around 6 million during the expansion compared with somewhat above 1 million before the contraction, falling to 1.831 million in Dec 2016 seasonally adjusted and 1.769 million not seasonally adjusted. The level unemployed for 27 weeks or over reached 1.581 million SA in Nov 2017 and 1.529 million NSA.

Chart I-34, US, Number Unemployed for 27 Weeks or More, 2001-2017, SA, Thousands

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The number of persons working part-time for economic reasons because they cannot find full-time work peaked during the contraction at 6.857 million SA in Oct 1982, as shown in Chart I-35. The number of persons at work part-time for economic reasons fell sharply during the expansion to 5.797 million in Dec 1984 and continued to fall throughout the decade to 4.817 million in Dec 1989 SA and 4.709 million NSA. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The third recession explains the increase of the curve in Dec 1990 with 5.615 million NSA and 5.699 million SA.

Chart I-35, US, Part-Time for Economic Reasons, 1979-1990, Thousands

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The number of people working part-time because they cannot find full-time employment, not seasonally adjusted, increased sharply during the contraction from 3.787 million in Apr 2006, not seasonally adjusted, to 9.354 million in Dec 2009, as shown in Chart I-36. The number of people working part-time because of failure to find an alternative occupation stagnated at a very high level during the expansion, declining to 4.642 million not seasonally adjusted in Nov 2017.

Chart I-36, US, Part-Time for Economic Reasons, 2001-2017, Thousands

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The number marginally attached to the labor force in Chart I-37 jumped from 1.252 million in Dec 2006 to 2.800 million in Jan 2011, remaining at a high level of 2.540 million in Dec 2011, 2.809 million in Jan 2012 and 2.614 million in Dec 2012. The number marginally attached to the labor force eased to 2.427 million in Dec 2013, 2.260 million in Dec 2014 and 1.833 million in Dec 2015. The level of marginally attached to the labor force reached 1.684 million in Dec 2016. The number of marginally attached to the labor force stood at 1.481 million in Nov 2017.

Chart I-37, US, Marginally Attached to the Labor Force, 2001-2017

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

IA4 Job Creation. What is striking about the data in Table I-8 is that the numbers of monthly increases in jobs in 1983 and 1984 are several times higher than in 2010 to 2016. The civilian noninstitutional population grew by 45.5 percent from 174.215 million in 1983 to 253.538 million in 2016 and labor force higher by 42.7 percent, growing from 111.550 million in 1983 to 159.187 million in 2016. Total nonfarm payroll employment seasonally adjusted (SA) increased 228,000 in Nov 2017 and private payroll employment increased 221,000. The Bureau of Labor Statistics states (https://www.bls.gov/news.release/empsit.nr0.htm): “Our analysis suggests that the net effect of these hurricanes [Harvey and Irma] was to reduce the estimate of total nonfarm payroll employment for September. There was no discernible effect on the national unemployment rate. No changes were made to either the establishment or household survey estimation procedures for the September figures.” The average monthly number of nonfarm jobs created from Nov 2015 to Nov 2016 was 193,667 using seasonally adjusted data, while the average number of nonfarm jobs created from Nov 2016 to Nov 2017 was 172,583, or decrease by 10.9 percent. The average number of private jobs created in the US from Nov 2015 to Nov 2016 was 175,500, using seasonally adjusted data, while the average from Nov 2016 to Nov 2017 was 168,667, or decrease by 3.9 percent. This blog calculates the effective labor force of the US at 169,438 million in Nov 2017 and 168,505 million in Nov 2016 (Table I-4), for growth of 0.933 million at average 77,750 per month. The difference between the average increase of 168,677 new private nonfarm jobs per month in the US from Nov 2016 to Nov 2017 and the 77,750-average monthly increase in the labor force from Nov 2016 to Nov 2017 is 90,927 monthly new jobs net of absorption of new entrants in the labor force. There are 21.381 million in job stress in the US currently. Creation of 90,927 new jobs per month net of absorption of new entrants in the labor force would require 235 months to provide jobs for the unemployed and underemployed (21.381 million divided by 90,927) or 20 years (235 divided by 12). The civilian labor force of the US in Nov 2017 not seasonally adjusted stood at 160.466 million with 6.286 million unemployed or effectively 15.258 million unemployed in this blog’s calculation by inferring those who are not searching because they believe there is no job for them for effective labor force of 169.438 million. Reduction of one million unemployed at the current rate of job creation without adding more unemployment requires 0.916 years (1 million divided by product of 90,927 by 12, which is 1,091,124). Reduction of the rate of unemployment to 5 percent of the labor force would be equivalent to unemployment of only 8.023 million (0.05 times labor force of 160.466 million). New net job creation would be minus 1.737 million (6.286 million unemployed minus 8.023 million unemployed at rate of 5 percent) that at the current rate would take 0.0 years (-1.737 million divided by 1.091). Under the calculation in this blog, there are 15.258 million unemployed by including those who ceased searching because they believe there is no job for them and effective labor force of 169.438 million. Reduction of the rate of unemployment to 5 percent of the labor force would require creating 6.786 million jobs net of labor force growth that at the current rate would take 6.2 years (15.258 million minus 0.05(169.438 million) = 6.786 million divided by 1.091124 using LF PART 66.2% and Total UEM in Table I-4). These calculations assume that there are no more recessions, defying United States economic history with periodic contractions of economic activity when unemployment increases sharply. The number employed in Nov 2017 was 154.180 million (NSA) or 6.865 million more people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population of ages 16 years and over increased from 231.958 million in Jul 2007 to 255.949 million in Nov 2017 or by 23.991 million. The number employed increased 4.7 percent from Jul 2007 to Nov 2017 while the noninstitutional civilian population of ages of 16 years and over, or those available for work, increased 10.3 percent. The ratio of employment to population in Jul 2007 was 63.5 percent (147.315 million employed as percent of population of 231.958 million). The same ratio in Nov 2017 would result in 162.528 million jobs (0.635 multiplied by noninstitutional civilian population of 255.949 million). There are effectively 8.348 million fewer jobs in Nov 2017 than in Jul 2007, or 162.528 million minus 154.180 million. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs.

There is current interest in past theories of “secular stagnation.” Alvin H. Hansen (1939, 4, 7; see Hansen 1938, 1941; for an early critique see Simons 1942) argues:

“Not until the problem of full employment of our productive resources from the long-run, secular standpoint was upon us, were we compelled to give serious consideration to those factors and forces in our economy which tend to make business recoveries weak and anaemic (sic) and which tend to prolong and deepen the course of depressions. This is the essence of secular stagnation-sick recoveries which die in their infancy and depressions which feed on them-selves and leave a hard and seemingly immovable core of unemployment. Now the rate of population growth must necessarily play an important role in determining the character of the output; in other words, the com-position of the flow of final goods. Thus a rapidly growing population will demand a much larger per capita volume of new residential building construction than will a stationary population. A stationary population with its larger proportion of old people may perhaps demand more personal services; and the composition of consumer demand will have an important influence on the quantity of capital required. The demand for housing calls for large capital outlays, while the demand for personal services can be met without making large investment expenditures. It is therefore not unlikely that a shift from a rapidly growing population to a stationary or declining one may so alter the composition of the final flow of consumption goods that the ratio of capital to output as a whole will tend to decline.”

The argument that anemic population growth causes “secular stagnation” in the US (Hansen 1938, 1939, 1941) is as misplaced currently as in the late 1930s (for early dissent see Simons 1942). There is currently population growth in the ages of 16 to 24 years but not enough job creation and discouragement of job searches for all ages (https://cmpassocregulationblog.blogspot.com/2017/11/recovery-without-hiring-ten-million.html). The proper explanation is not in secular stagnation but in cyclically slow growth. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 33 quarters from IIIQ2009 to IIIQ2017. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) and the second estimate of GDP for IIIQ2017 (https://www.bea.gov/newsreleases/national/gdp/2017/pdf/gdp3q17_2nd.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by dividing GDP of $14,745.9 billion in IIQ2010 by GDP of $14,355.6 billion in IIQ2009 {[($14,745.9/$14,355.6) -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (https://cmpassocregulationblog.blogspot.com/2017/12/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/dollar-revaluation-and-increase-of.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.9 percent, 5.4 percent from IQ1983 to IIIQ1986, 5.2 percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987, 4.9 percent from IQ1983 to IIQ1988, 4.8 percent from IQ1983 to IIIQ1988, 4.8 percent from IQ1983 to IVQ1988, 4.8 percent from IQ1983 to IQ1989, 4.7 percent from IQ1983 to IIQ1989, 4.7 percent from IQ1983 to IIIQ1989, 4.5 percent from IQ1983 to IVQ1989. 4.5 percent from IQ1983 to IQ1990, 4.4 percent from IQ1983 to IIQ1990, 4.3 percent from IQ1983 to IIIQ1990, 4.0 percent from IQ1983 to IVQ1990, 3.8 percent from IQ1983 to IQ1991 and at 7.8 percent from IQ1983 to IVQ1983 (https://cmpassocregulationblog.blogspot.com/2017/12/mediocre-cyclical-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/dollar-revaluation-and-increase-of.html). The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IIIQ2017 would have accumulated to 33.4 percent. GDP in IIIQ2017 would be $19,999.1 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2829.4 billion than actual $17,169.7 billion. There are about two trillion dollars of GDP less than at trend, explaining the 21.4 million unemployed or underemployed equivalent to actual unemployment/underemployment of 12.6 percent of the effective labor force (Section I and earlier https://cmpassocregulationblog.blogspot.com/2017/11/unchanged-fomc-policy-rate-gradual.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/twenty-one-million-unemployed-or.html). US GDP in IIIQ2017 is 14.1 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $17,169.7 billion in IIIQ2017 or 14.5 percent at the average annual equivalent rate of 1.4 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.1 percent per year from Oct 1919 to Oct 2017. Growth at 3.1 percent per year would raise the NSA index of manufacturing output from 108.2393 in Dec 2007 to 146.1374 in Oct 2017. The actual index NSA in Oct 2017 is 106.1414, which is 27.4 percent below trend. Manufacturing output grew at average 2.1 percent between Dec 1986 and Oct 2017. Using trend growth of 2.1 percent per year, the index would increase to 132.7816 in Oct 2017. The output of manufacturing at 106.1414 in Oct 2017 is 20.1 percent below trend under this alternative calculation.

Table I-8, US, Monthly Change in Jobs, Number SA

Month

1981

1982

1983

2008

2009

2010

Private

Jan

94

-326

224

17

-793

23

14

Feb

68

-5

-75

-84

-702

-68

-53

Mar

105

-130

172

-78

-823

164

122

Apr

73

-280

276

-210

-687

243

192

May

10

-45

277

-186

-349

524

97

Jun

197

-243

379

-162

-471

-137

119

Jul

112

-342

418

-213

-329

-68

103

Aug

-36

-158

-308

-267

-213

-36

113

Sep

-87

-181

1115

-450

-220

-52

121

Oct

-99

-277

271

-474

-204

262

212

Nov

-209

-123

353

-766

-2

119

129

Dec

-278

-14

356

-694

-275

87

108

1984

2011

Private

Jan

446

43

51

Feb

481

189

232

Mar

275

225

248

Apr

363

346

354

May

308

77

132

Jun

379

225

190

Jul

313

69

184

Aug

242

110

142

Sep

310

248

282

Oct

286

209

194

Nov

349

141

168

Dec

128

209

226

1985

2012

Private

Jan

266

358

366

Feb

124

237

236

Mar

346

233

237

Apr

196

78

90

May

274

115

135

Jun

146

76

57

Jul

190

143

160

Aug

193

177

174

Sep

203

203

194

Oct

188

146

168

Nov

209

132

152

Dec

167

244

240

1986

2013

Private

Jan

125

211

226

Feb

107

286

267

Mar

94

130

152

Apr

187

197

195

May

127

226

242

Jun

-94

162

179

Jul

318

122

146

Aug

114

261

242

Sep

347

190

184

Oct

186

212

214

Nov

186

258

250

Dec

205

47

73

1987

2014

Private

Jan

172

190

204

Feb

232

151

139

Mar

249

272

261

Apr

338

329

299

May

226

246

252

Jun

172

304

259

Jul

347

202

226

Aug

171

230

238

Sep

228

280

237

Oct

492

227

214

Nov

232

312

302

Dec

294

255

240

1988

2015

Private

Jan

94

234

227

Feb

453

238

222

Mar

276

86

97

Apr

245

262

235

May

229

344

324

Jun

363

206

195

Jul

222

254

239

Aug

124

157

115

Sep

339

100

116

Oct

268

321

314

Nov

339

272

260

Dec

290

239

217

1989

2016

Private

Jan

262

126

110

Feb

258

237

221

Mar

193

225

189

Apr

173

153

158

May

118

43

17

Jun

116

297

269

Jul

40

291

249

Aug

49

176

143

Sep

250

249

223

Oct

111

124

132

Nov

277

164

178

Dec

96

155

150

1990

2017

Private

Jan

336

216

204

Feb

248

232

222

Mar

215

50

59

Apr

39

207

194

May

152

145

153

Jun

22

210

207

Jul

-31

138

133

Aug

-216

208

184

Sep

-90

38

50

Oct

-160

244

247

Nov

-149

228

221

Dec

-56

Source: US Bureau of Labor Statistics

http://www.bls.gov/

Charts numbered from I-38 to I-41 from the database of the Bureau of Labor Statistics provide a comparison of payroll survey data for the contractions and expansions in the 1980s and after 2007. Chart I-38 provides total nonfarm payroll jobs from 2001 to 2017. The sharp decline in total nonfarm jobs during the contraction after 2007 has been followed by initial stagnation and then inadequate growth in 2012 and 2013-2017 while population growth continued.

Chart I-38, US, Total Nonfarm Payroll Jobs SA 2001-2017

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

Chart I-39 provides total nonfarm jobs SA from 1979 to 1990. Recovery is strong throughout the decade with the economy growing at trend over the entire economic cycle. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The third recession explains the decline of the curve in 1990.

Chart I-39, US, Total Nonfarm Payroll Jobs SA 1979-1990

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

Most job creation in the US is by the private sector. Chart I-40 shows the sharp destruction of private payroll jobs during the contraction after 2007. There has been growth after 2010 but insufficient to recover higher levels of employment prevailing before the contraction. At current rates, recovery of employment may spread over several years in contrast with past expansions of the business cycle in the US.

Chart I-40, US, Total Private Payroll Jobs SA 2001-2017

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

In contrast, growth of private payroll jobs in the US recovered vigorously during the expansion in 1983 through 1985, as shown in Chart I-41. Rapid growth of creation of private jobs continued throughout the 1980s. The National Bureau of Economic Research (NBER) dates a contraction of the US from IQ1990 (Jul) to IQ1991 (Mar) (http://www.nber.org/cycles.html). The expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP contracted 1.3 percent from the pre-recession peak of $8983.9 billion of chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (http://www.bea.gov/iTable/index_nipa.cfm). The third recession explains the decline of the curve in 1990.

Chart I-41, US, Total Private Payroll Jobs SA 1979-1990

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

Types of jobs created, and not only the pace of job creation, may be important. Aspects of growth of payroll jobs from Nov 2016 to Nov 2017, not seasonally adjusted (NSA), are in Table I-9. Total nonfarm employment increased by 2,114,000 (row A, column Change), consisting of growth of total private employment by 2,087,000 (row B, column Change) and increase by 27,000 of government employment (row C, column Change). Monthly average growth of private payroll employment has been 173,917, which is mediocre relative to 22 to 30 million in job stress, while total nonfarm employment has grown on average by only 176,167 per month, which does not significantly reduce job stress with 77,750 new entrants per month in the labor force. These monthly rates of job creation net of the demands of new entrants in the labor force perpetuate unemployment and underemployment. Manufacturing employment increased 181,000, at the monthly rate of 15,083 while private service providing employment grew by 1,653,000, at the monthly average rate of 137,750. An important feature in Table I-9 is that jobs in professional and business services increased 551,000 with temporary help services increasing 126,000. This episode of jobless recovery is characterized by part-time jobs and creation of jobs that are inferior to those that have been lost. Monetary and fiscal stimuli fail to increase consumption and investment in a fractured job market. The segment leisure and hospitality added 272,000 jobs in 12 months. An important characteristic is that the loss of government jobs has stabilized in federal government with change of 0 jobs while states decreased 33,000 jobs and local government added 60,000 jobs. Local government provides the bulk of government jobs, 14.771 million, while federal government provides 2.797 million and states’ government 5.237 million.

Table I-9, US, Employees in Nonfarm Payrolls Not Seasonally Adjusted, in Thousands

Nov 2016

Nov 2017

Change

A Total Nonfarm

146,393

148,507

2,114

B Total Private

123,615

125,702

2,087

B1 Goods Producing

19,870

20,304

434

B1a

Manufacturing

12,328

12,509

181

B2 Private service providing

103,745

105,398

1,653

B2a Wholesale Trade

5,900

5,962

62

B2b Retail Trade

16,244

16,281

37

B2c Transportation & Warehousing

5,119

5,223

104

B2d Financial Activities

8,337

8,484

147

B2e Professional and Business Services

20,564

21,115

551

B2e1 Temporary help services

3,103

3,229

126

B2f Health Care & Social Assistance

19,292

19,669

377

B2g Leisure & Hospitality

15,466

15,738

272

C Government

22,778

22,805

27

C1 Federal

2,797

2,797

0

C2 State

5,270

5,237

-33

C3 Local

14,711

14,771

60

Note: A = B+C, B = B1 + B2, C=C1 + C2 + C3

Source: US Bureau of Labor Statistics

http://www.bls.gov/

Greater detail on the types of jobs created is provided in Table I-10 with data for Oct 2017 and

Nov 2017. Strong seasonal effects are shown by the significant difference between seasonally adjusted (SA) and not-seasonally-adjusted (NSA) data. The purpose of adjusting for seasonality is to isolate nonseasonal effects. The 228,000 SA total nonfarm jobs created in Nov 2017 relative to Oct 2017 actually correspond to increase of 532 thousand jobs NSA, as shown in row A. Most of this difference in Jan 2017 is due to the necessary benchmark and seasonal adjustments in the beginning of every year. The 221,000 total private payroll jobs SA created in Nov 2017 relative to Oct 2017 actually correspond to increase of 420 thousand jobs NSA. The analysis of NSA job creation in the prior Table I-9 does show improvement over the 12 months ending in Nov 2017 that is not clouded by seasonal variations but is inadequate number of jobs created. In fact, the 12-month rate of job creation without seasonal adjustment is stronger indication of marginal improvement in the US job market but that is insufficient in even making a dent in about 30 million people unemployed or underemployed. Benchmark and seasonal adjustments affect comparability of data over time.

Table I-10, US, Employees on Nonfarm Payrolls and Selected Industry Detail, Thousands, SA and NSA

Oct 2017

Nov 2017

Oct 2017

Nov 2017

A Total Nonfarm

147,013

147,241

228

147,975

148,507

532

B Total Private

124,679

124,900

221

125,282

125,702

420

B1 Goods Producing

20,137

20,199

62

20,352

20,304

-48

B1a Constr.

6931

6955

24

7126

7060

-66

B Mfg

12,483

12,514

31

12,495

12.509

14

B2 Private Service Providing

104,542

104,701

159

104,930

105,938

1008

B2a Wholesale Trade

5945

5948

3

5955

5962

7

B2b Retail Trade

15,826

15,845

19

15,829

16,281

452

B2c Couriers     & Mess.

674

676

2

663

733

70

B2d Health-care & Social Assistance

19,576

19,616

40

19,610

19,669

59

B2De Profess. & Business Services

20,882

20,928

46

21,070

21,115

45

B2De1 Temp Help Services

3,077

3,095

18

3,194

3,229

35

B2f Leisure & Hospit.

16,004

16,018

14

15,955

15,738

-217

Notes: ∆: Absolute Change; Constr.: Construction; Mess.: Messengers; Temp: Temporary; Hospit.: Hospitality. SA aggregates do not add because of seasonal adjustment.

Source: US Bureau of Labor Statistics

http://www.bls.gov/

Manufacturing jobs not seasonally adjusted increased 181,000 from Nov 2016 to
Nov 2017 or at the average monthly rate of 15,083.
Industrial production increased 0.9 percent in Oct 2017 and increased 0.4 percent in Sep 2017 after decreasing 0.9 percent in Aug 2017, with all data seasonally adjusted. The Board of Governors of the Federal Reserve System conducted the annual revision of industrial production released on Mar 31, 2017 (https://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm):

“The Federal Reserve has revised its index of industrial production (IP) and the related measures of capacity and capacity utilization.[1] On net, the revisions were small, and the contour of total IP is little changed. Total IP is still reported to have moved up about 22 percent from the end of the recession in mid-2009 through late 2014, to have declined in 2015, and to have moved sideways in 2016. The most notable difference between the current and the previous estimates is that total IP is now reported to have decreased about 2 3/4 percent in 2015, whereas it previously showed a decline of about 1 3/4 percent.[2] The incorporation of detailed data for manufacturing from the U.S. Census Bureau's 2015 Annual Survey of Manufactures (ASM) accounts for the majority of the differences between the current and the previously published estimates.

Capacity for total industry is now reported to have expanded about 1 percent in 2015, a lower rate of increase than was reported earlier. Capacity was little changed in 2016 and is expected to increase 1 percent in 2017. Compared with prior reports, the rates of change in 2016 and 2017 are now a little smaller. In the fourth quarter of 2016, capacity utilization for total industry stood at 75.8 percent, a rate 0.4 percentage point higher than previously published but still 4.1 percentage points below its long-run (1972–2016) average. Relative to earlier estimates, the utilization rates in recent years are now a little higher.” Manufacturing decreased 22.3 from the peak in Jun 2007 to the trough in Apr 2009 and increased 15.5 percent from the trough in Apr 2009 to Dec 2016. Manufacturing grew 21.4 percent from the trough in Apr 2009 to Oct 2017. Manufacturing in Oct 2017 is lower by 5.7 percent relative to the peak in Jun 2007. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IIIQ2017 would have accumulated to 33.4 percent. GDP in IIIQ2017 would be $19,999.1 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2829.4 billion than actual $17,169.7 billion. There are about two trillion dollars of GDP less than at trend, explaining the 21.4 million unemployed or underemployed equivalent to actual unemployment/underemployment of 12.6 percent of the effective labor force (Section I and earlier https://cmpassocregulationblog.blogspot.com/2017/11/unchanged-fomc-policy-rate-gradual.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/twenty-one-million-unemployed-or.html). US GDP in IIIQ2017 is 14.1 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $17,169.7 billion in IIIQ2017 or 14.5 percent at the average annual equivalent rate of 1.4 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.1 percent per year from Oct 1919 to Oct 2017. Growth at 3.1 percent per year would raise the NSA index of manufacturing output from 108.2393 in Dec 2007 to 146.1374 in Oct 2017. The actual index NSA in Oct 2017 is 106.1414, which is 27.4 percent below trend. Manufacturing output grew at average 2.1 percent between Dec 1986 and Oct 2017. Using trend growth of 2.1 percent per year, the index would increase to 132.7816 in Oct 2017. The output of manufacturing at 106.1414 in Oct 2017 is 20.1 percent below trend under this alternative calculation.

Table I-13 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 87.1 percent in IIQ2017. Most of US national income is in the form of services. In Nov 2017, there were 148.507 million nonfarm jobs NSA in the US, according to estimates of the establishment survey of the Bureau of Labor Statistics (BLS) (http://www.bls.gov/news.release/empsit.nr0.htm Table B-1). Total private jobs of 125.702 million NSA in Nov 2017 accounted for 84.6 percent of total nonfarm jobs of 148.507 million, of which 12.509 million, or 10.0 percent of total private jobs and 8.4 percent of total nonfarm jobs, were in manufacturing. Private service-providing jobs were 105.398 million NSA in Nov 2017, or 71.0 percent of total nonfarm jobs and 83.8 percent of total private-sector jobs. Manufacturing has share of 10.1 percent in US national income in IIQ2017 and durable goods 6.0 percent, as shown in Table I-13. Most income in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.

Table I-13, US, National Income without Capital Consumption Adjustment by Industry, Seasonally Adjusted Annual Rates, Billions of Dollars, % of Total

SAAR IIQ2017

% Total

SAAR IIIQ2018

% Total

National Income WCCA

16,398.1

100.0

16,601.7

100.0

Domestic Industries

16,195.7

98.8

16,388.6

99.7

Private Industries

14,275.0

87.1

14,455.1

87.1

Agriculture

125.5

0.8

Mining

155.4

0.9

Utilities

196.5

1.2

Construction

817.1

5.0

Manufacturing

1657.0

10.1

Durable Goods

977.3

6.0

Nondurable Goods

679.7

4.1

Wholesale Trade

933.0

5.7

Retail Trade

1141.6

7.0

Transportation & WH

521.5

3.2

Information

618.9

3.8

Finance, Insurance, RE

2881.9

17.6

Professional & Business Services

2352.4

14.3

Education, Health Care

1671.8

10.2

Arts, Entertainment

720.7

4.4

Other Services

481.5

2.9

Government

1920.7

11.7

1933.5

11.7

Rest of the World

202.4

1.2

213.1

1.2

Notes: SSAR: Seasonally-Adjusted Annual Rate; WCCA: Without Capital Consumption Adjustment by Industry; WH: Warehousing; RE, includes rental and leasing: Real Estate; Art, Entertainment includes recreation, accommodation and food services; BS: business services

Source: US Bureau of Economic Analysis

http://www.bea.gov/iTable/index_nipa.cfm

Chart I-42 provides output of durable manufacturing from 1972 to 2016. Output fell sharply during the global recession, recovering at relatively high pace. Output is lower than extrapolation of trend.

Chart I-42, US, Output of Durable Manufacturing, 1972-2017

Source: Board of Governors of the Federal Reserve

http://www.federalreserve.gov/releases/g17/Current/default.htm

The NBER dates recessions in the US from peaks to troughs as: IQ80 to IIIQ80, IIIQ81 to IV82 and IVQ07 to IIQ09 (http://www.nber.org/cycles/cyclesmain.html). Table I-12 provides total annual level nonfarm employment in the US for the 1980s and the 2000s, which is different from 12-month comparisons. Nonfarm jobs rose by 4.859 million from 1982 to 1984, or 5.4 percent, and continued rapid growth in the rest of the decade. In contrast, nonfarm jobs are down by 7.638 million in 2010 relative to 2007 and fell by 952,000 in 2010 relative to 2009 even after six quarters of GDP growth. Monetary and fiscal stimuli have failed in increasing growth to rates required for mitigating job stress. The initial growth impulse reflects a flatter growth curve in the current expansion. Nonfarm jobs declined from 137.999 million in 2007 to 136.381 million in 2013, by 1.618 million or 1.2 percent. Nonfarm jobs increased from 137.999 million in 2007 to 144,306 million in 2016, by 6.308 million or 4.6 percent. The US noninstitutional population or in condition to work increased from 231.867 million in 2007 to 253.538 million in 2016, by 21,671 million or 9.3 percent. The ratio of nonfarm jobs of 137.999 million in 2007 to the noninstitutional population of 231.867 was 59.5. Nonfarm jobs in 2016 corresponding to the ratio of 59.5 of nonfarm jobs/noninstitutional population would be 150.855 million (0.595x253.538). The difference between actual nonfarm jobs of 144.306 million in 2016 and nonfarm jobs of 150.855 million that are equivalent to 59.5 percent of the noninstitutional population as in 2007 is 6.549 million fewer jobs. The proper explanation for this loss of work opportunities is not in secular stagnation but in cyclically slow growth. The NBER dates recessions in the US from peaks to troughs as: IQ80 to IIIQ80, IIIQ81 to IV82 and IVQ07 to IIQ09 (http://www.nber.org/cycles/cyclesmain.html). The proper explanation for this loss of work opportunities is not in secular stagnation but in cyclically slow growth. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IIIQ2017 would have accumulated to 33.4 percent. GDP in IIIQ2017 would be $19,999.1 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2829.4 billion than actual $17,169.7 billion. There are about two trillion dollars of GDP less than at trend, explaining the 21.4 million unemployed or underemployed equivalent to actual unemployment/underemployment of 12.6 percent of the effective labor force (Section I and earlier https://cmpassocregulationblog.blogspot.com/2017/11/unchanged-fomc-policy-rate-gradual.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/twenty-one-million-unemployed-or.html). US GDP in IIIQ2017 is 14.1 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $17,169.7 billion in IIIQ2017 or 14.5 percent at the average annual equivalent rate of 1.4 percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane (2016May02) measures GDP growth in the US at average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current expansion. Cochrane (2016May02) proposes drastic changes in regulation and legal obstacles to private economic activity. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. There is classic research on analyzing deviations of output from trend (see for example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term trend is growth of manufacturing at average 3.1 percent per year from Oct 1919 to Oct 2017. Growth at 3.1 percent per year would raise the NSA index of manufacturing output from 108.2393 in Dec 2007 to 146.1374 in Oct 2017. The actual index NSA in Oct 2017 is 106.1414, which is 27.4 percent below trend. Manufacturing output grew at average 2.1 percent between Dec 1986 and Oct 2017. Using trend growth of 2.1 percent per year, the index would increase to 132.7816 in Oct 2017. The output of manufacturing at 106.1414 in Oct 2017 is 20.1 percent below trend under this alternative calculation.

Table I-12, US, Total Nonfarm Employment in Thousands

Year

Total Nonfarm

Year

Total Nonfarm

1980

90,533

2000

132,024

1981

91,297

2001

132,087

1982

89,689

2002

130,649

1983

90,295

2003

130,347

1984

94,548

2004

131,787

1985

97,532

2005

134,051

1986

99,500

2006

136,453

1987

102,116

2007

137,999

1988

105,378

2008

137,242

1989

108,051

2009

131,313

1990

109,527

2010

130,361

1991

108,427

2011

131,932

1992

108,802

2012

134,175

1993

110,935

2013

136,381

1994

114,398

2014

138,958

1995

117,407

2015

141,843

1996

119,836

2016

144,306

Source: US Bureau of Labor Statistics http://www.bls.gov/

Chart I-43 provides annual nonfarm jobs from 2000 to 2016. Cyclically slow growth in the expansion since IIIQ2009 has not been sufficient to recover nonfarm jobs. Because of population growth, there are 6.549 million fewer nonfarm jobs in the US in 2016 than in 2007.

Chart I-40, US, Total Private Payroll Jobs SA 2001-2017

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

Chart I-44 provides annual nonfarm jobs in the US from 1980 to 1996. Much more rapid cyclical growth as in other expansions historically allowed steady and rapid growth of nonfarm job opportunities even with similarly dynamic population growth.

Chart I-41, US, Total Private Payroll Jobs SA 1979-1990

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

The highest average yearly percentage of unemployed to the labor force since 1940 was 14.6 percent in 1940 followed by 9.9 percent in 1941, 8.5 percent in 1975, 9.7 percent in 1982 and 9.6 percent in 1983 (ftp://ftp.bls.gov/pub/special.requests/lf/aa2006/pdf/cpsaat1.pdf). The rate of unemployment remained at high levels in the 1930s, rising from 3.2 percent in 1929 to 22.9 percent in 1932 in one estimate and 23.6 percent in another with real wages increasing by 16.4 percent (Margo 1993, 43; see Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 214-5). There are alternative estimates of 17.2 percent or 9.5 percent for 1940 with real wages increasing by 44 percent. Employment declined sharply during the 1930s. The number of hours worked remained in 1939 at 29 percent below the level of 1929 (Cole and Ohanian 1999). Private hours worked fell in 1939 to 25 percent of the level in 1929. The policy of encouraging collusion through the National Industrial Recovery Act (NIRA), to maintain high prices, together with the National Labor Relations Act (NLRA), to maintain high wages, prevented the US economy from recovering employment levels until Roosevelt abandoned these policies toward the end of the 1930s (for review of the literature analyzing the Great Depression see Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 198-217).

The Bureau of Labor Statistics (BLS) makes yearly revisions of its establishment survey (Harris 2011BA):

“With the release of data for January 2011, the Bureau of Labor Statistics (BLS) introduced its annual revision of national estimates of employment, hours, and earnings from the Current Employment Statistics (CES) monthly survey of nonfarm establishments.  Each year, the CES survey realigns its sample-based estimates to incorporate universe counts of employment—a process known as benchmarking.  Comprehensive counts of employment, or benchmarks, are derived primarily from unemployment insurance (UI) tax reports that nearly all employers are required to file with State Workforce Agencies.”

The number of not seasonally adjusted total private jobs in the US in Dec 2010 is 108.464 million, declining to 106.079 million in Jan 2011, or by 2.385 million, because of the adjustment of a different benchmark and not actual job losses. The not seasonally adjusted number of total private jobs in Dec 1984 is 80.250 million, declining to 78.704 million in Jan 1985, or by 1.546 million for the similar adjustment. Table I-13 attempts to measure job losses and gains in the recessions and expansions of 1981-1985 and 2007-2011. The final ten rows provide job creation from May 1983 to May 1984 and from May 2010 to May 2011, that is, at equivalent stages of the recovery from two comparable strong recessions. The row “Change ∆%” for May 1983 to May 1984 shows an increase of total nonfarm jobs by 4.9 percent and of 5.9 percent for total private jobs. The row “Change ∆%” for May 2010 to May 2011 shows an increase of total nonfarm jobs by 0.7 percent and of 1.7 percent for total private jobs. The last two rows of Table 7 provide a calculation of the number of jobs that would have been created from May 2010 to May 2011 if the rate of job creation had been the same as from May 1983 to May 1984. If total nonfarm jobs had grown between May 2010 and May 2011 by 4.9 percent, as between May 1983 and May 1984, 6.409 million jobs would have been created in the past 12 months for a difference of 5.457 million more total nonfarm jobs relative to 0.952 million jobs actually created. If total private jobs had grown between May 2010 and May 2011 by 5.9 percent as between May 1983 and May 1984, 6.337 million private jobs would have been created for a difference of 4.539 million more total private jobs relative to 1.798 million jobs actually created.

Table I-13, US, Total Nonfarm and Total Private Jobs Destroyed and Subsequently Created in Two Recessions IIIQ1981-IVQ1982 and IVQ2007-IIQ2009, Thousands and Percent

Total Nonfarm Jobs

Total Private Jobs

06/1981 #

92,288

75,969

11/1982 #

89,482

73,260

Change #

-2,806

-2,709

Change ∆%

-3.0

-3.6

12/1982 #

89,383

73,185

05/1984 #

94,471

78,049

Change #

5,088

4,864

Change ∆%

5.7

6.6

11/2007 #

139,090

116,291

05/2009 #

131,626

108,601

Change %

-7,464

-7,690

Change ∆%

-5.4

-6.6

12/2009 #

130,178

107,338

05/2011 #

131,753

108,494

Change #

1,575

1,156

Change ∆%

1.2

1.1

05/1983 #

90,005

73,667

05/1984 #

94,471

78,049

Change #

4,466

4,382

Change ∆%

4.9

5.9

05/2010 #

130,801

107,405

05/2011 #

131,753

109,203

Change #

952

1,798

Change ∆%

0.7

1.7

Change # by ∆% as in 05/1984 to 05/1985

6,409*

6,337**

Difference in Jobs that Would Have Been Created

5,457 =
6,409-952

4,539 =
6,337-1,798

*[(130,801x1.049)-130,801] = 6,409 thousand

**[(107,405)x1.059 – 107,405] = 6,337 thousand

Source: US Bureau of Labor Statistics http://www.bls.gov/data/

IB Stagnating Real Wages. The wage bill is the product of average weekly hours times the earnings per hour. Table IB-1 provides the estimates by the Bureau of Labor Statistics (BLS) of earnings per hour seasonally adjusted, increasing from $25.91/hour in Nov 2016 to $26.55/hour in Nov 2017, or by 2.5 percent. There has been disappointment about the pace of wage increases because of rising food and energy costs that inhibit consumption and thus sales and similar concern about growth of consumption that accounts for about 68.9 percent of GDP (Table I-10 at https://cmpassocregulationblog.blogspot.com/2017/12/mediocre-cyclical-united-states.html). Growth of consumption by decreasing savings by means of controlling interest rates in what is called financial repression may not be lasting and sound for personal finances (See Pelaez and Pelaez, Globalization and the State, Vol. II (2008c), 81-6, Pelaez (1975), Section II and earlier https://cmpassocregulationblog.blogspot.com/2017/11/unchanged-fomc-policy-rate-gradual.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/twenty-one-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/09/twenty-two-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/08/data-dependent-monetary-policy-with.html and earlier https://cmpassocregulationblog.blogspot.com/2017/07/rising-yields-twenty-two-million.html and earlier https://cmpassocregulationblog.blogspot.com/2017/06/twenty-two-million-unemployed-or.html https://cmpassocregulationblog.blogspot.com/2017/05/twenty-two-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/04/twenty-three-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2017/03/rising-valuations-of-risk-financial.html and earlier https://cmpassocregulationblog.blogspot.com/2017/02/twenty-six-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/rising-yields-and-dollar-revaluation.html and earlier (http://cmpassocregulationblog.blogspot.com/2016/12/mediocre-cyclical-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2016/12/rising-yields-and-dollar-revaluation.html and earlier http://cmpassocregulationblog.blogspot.com/2016/11/the-case-for-increase-in-federal-funds.html and earlier http://cmpassocregulationblog.blogspot.com/2016/09/interest-rates-and-valuations-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2016/08/global-competitive-easing-or.html http://cmpassocregulationblog.blogspot.com/2016/07/financial-asset-values-rebound-from.html and earlier http://cmpassocregulationblog.blogspot.com/2016/05/twenty-four-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/04/proceeding-cautiously-in-monetary.html and earlier http://cmpassocregulationblog.blogspot.com/2016/03/twenty-five-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2016/01/closely-monitoring-global-economic-and.html and earlier http://cmpassocregulationblog.blogspot.com/2015/12/dollar-revaluation-and-decreasing.html and earlier http://cmpassocregulationblog.blogspot.com/2015/11/dollar-revaluation-constraining.html and earlier (http://cmpassocregulationblog.blogspot.com/2015/11/live-possibility-of-interest-rates.html and earlier http://cmpassocregulationblog.blogspot.com/2015/10/labor-market-uncertainty-and-interest.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what.html http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-policy-dependent-on-what.html http://cmpassocregulationblog.blogspot.com/2015/08/fluctuating-risk-financial-assets.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/international-valuations-of-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2015/06/higher-volatility-of-asset-prices-at.html and earlier http://cmpassocregulationblog.blogspot.com/2015/05/dollar-devaluation-and-carry-trade.html and earlier http://cmpassocregulationblog.blogspot.com/2015/04/volatility-of-valuations-of-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2015/03/global-competitive-devaluation-rules.html and earlier http://cmpassocregulationblog.blogspot.com/2015/02/job-creation-and-monetary-policy-twenty.html and earlier http://cmpassocregulationblog.blogspot.com/2014/12/valuations-of-risk-financial-assets.html http://cmpassocregulationblog.blogspot.com/2014/11/valuations-of-risk-financial-assets.html http://cmpassocregulationblog.blogspot.com/2014/11/growth-uncertainties-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/09/geopolitical-and-financial-risks.html and earlier http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-instability-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/financial-uncertainty-mediocre-cyclical.html

http://cmpassocregulationblog.blogspot.com/2014/02/mediocre-cyclical-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/collapse-of-united-states-dynamism-of.html http://cmpassocregulationblog.blogspot.com/2013/11/global-financial-risk-mediocre-united.html http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html

http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html

http://cmpassocregulationblog.blogspot.com/2013/06/mediocre-united-states-economic-growth.html

http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html http://cmpassocregulationblog.blogspot.com/2013/03/mediocre-gdp-growth-at-16-to-20-percent.html http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real.html http://cmpassocregulationblog.blogspot.com/2012/06/mediocre-recovery-without-jobs.html http://cmpassocregulationblog.blogspot.com/2012/04/mediocre-growth-with-high-unemployment.html http://cmpassocregulationblog.blogspot.com/2012/04/mediocre-economic-growth-falling-real.html http://cmpassocregulationblog.blogspot.com/2012/03/mediocre-economic-growth-flattening.html http://cmpassocregulationblog.blogspot.com/2012/01/mediocre-economic-growth-financial.html http://cmpassocregulationblog.blogspot.com/2011/12/slow-growth-falling-real-disposable.html http://cmpassocregulationblog.blogspot.com/2011/11/us-growth-standstill-falling-real.html http://cmpassocregulationblog.blogspot.com/2011/10/slow-growth-driven-by-reducing-savings.html). Average hourly earnings seasonally adjusted increased 0.2 percent from $26.50 in Oct 2017 to $26.55 in Nov 2017. Average private weekly earnings increased $27.27 from $888.71 in Nov 2016 to $915.98 in Nov 2017 or 3.1 percent and increased $4.38 from $911.60 in Oct 2017 to $915.98 in Nov 2017 or 0.5 percent. The inflation-adjusted wage bill can only be calculated for Oct, which is the most recent month for which there are estimates of the consumer price index. Earnings per hour (not-seasonally-adjusted (NSA)) rose from $26.04 in Oct 2016 to $26.64 in Oct 2017 or by 2.3 percent (http://www.bls.gov/data/; see Table IB-3 below). Data NSA are more suitable for comparison over a year. Average weekly hours NSA were 34.8 in

Oct 2016 and 34.8 in Oct 2017 (http://www.bls.gov/data/; see Table IB-2 below). The wage bill increased 2.3 percent in the 12 months ending in Oct 2017:

{[(wage bill in Oct 2017)/(wage bill in Oct 2016)]-1}100 =

{[($26.64x34.8)/($26.04x34.8)]-1]}100

= {[($927.07)/($906.19)]-1}100 = 2.3%

CPI inflation was 2.0 percent in the 12 months ending in Oct 2017 (http://www.bls.gov/cpi/) for an inflation-adjusted wage-bill change of 0.3 percent: {[(1.023/1.02)-1]100 = 0.3%} (see Table IB-5 below for Oct 2017 with minor rounding difference). The wage bill for Nov 2017 before inflation adjustment increased 2.4 percent relative to the wage bill for Nov 2016:

{[(wage bill in Nov 2017)/(wage bill in Nov 2016)]-1}100 =

{[($26.49x34.5)/($25.87x34.3)]-1]}100

= {[$913.91)/$887.34]-1}100 = 3.0%}

Average hourly earnings increased 2.4 percent from Nov 2016 to Nov 2017 {[($26.49/$25.87) – 1]100 = 2.4%} while hours worked increased 0.6 percent {[(34.5/34.3) – 1]100 = 0.0%}. The increase of the wage bill is the product of the increase of hourly earnings of 2.4 percent and increase of hours worked of 0.6 percent {[(1.024x1.006) -1]100 = 3.0 %} with small rounding error. Energy and food price increases are similar to a “silent tax” that is highly regressive, harming the most those with lowest incomes. There are concerns that the wage bill would deteriorate in purchasing power because of renewed raw materials shocks in the form of increases in prices of commodities such as the 31.1 percent steady increase in the DJ-UBS Commodity Index from Jul 2, 2010 to Sep 2, 2011. The charts of four commodity price indexes by Bloomberg show steady increase since Jul 2, 2010 that was interrupted briefly only in Nov 2010 with the sovereign issues in Europe triggered by Ireland; in Mar 2011 by the earthquake and tsunami in Japan; and in the beginning of May 2011 by the decline in oil prices and sovereign risk difficulties in Europe (http://www.bloomberg.com/markets/commodities/futures/). Renewed risk aversion because of the sovereign risks in Europe had reduced the rate of increase of the DJ UBS commodity index to 10.2 percent on May 2, 2014, relative to Jul 2, 2010 (see Table VI-4) but there has been a shift in investor preferences into equities. Inflation has been rising in waves with carry trades driven by zero interest rates to commodity futures during periods of risk appetite with interruptions during risk aversion (https://cmpassocregulationblog.blogspot.com/2017/11/dollar-devaluation-and-decline-of.html). Inflation-adjusted wages fall sharply during carry trades from zero interest rates to long positions in commodity futures during periods of risk appetite.

Table IB-1, US, Earnings per Hour and Average Weekly Hours SA

Earnings per Hour

Nov 2016

Sep 2017

Oct 2017

Nov 2017

Total Private

$25.91

$26.53

$26.50

$26.55

Goods Producing

$27.14

$27.76

$27.76

$27.76

Service Providing

$25.62

$26.25

$26.21

$26.26

Average Weekly Earnings

Total Private

$888.71

$912.63

$911.60

$915.98

Goods Producing

$1,091.03

$1,115.95

$1,121.50

$1,124.28

Service Providing

$850.58

$871.50

$872.79

$877.08

Average Weekly Hours

Total Private

34.3

34.4

34.4

34.5

Goods Producing

40.2

40.2

40.4

40.5

Service Providing

33.2

33.2

33.3

33.4

Source: US Bureau of Labor Statistics

http://www.bls.gov/

Average weekly hours in Table IB-2 fell from 34.8 in Dec 2007 at the beginning of the contraction to 33.7 in Jun 2009, which was the last month of the contraction. Average weekly hours rose to 34.4 in Dec 2011 and oscillated to 34.8 in Dec 2012 and 34.7 in Dec 2013. Average weekly hours of all employees decreased to 34.6 in Dec 2014 and 34.5 in Dec 2015. Average weekly hours stood at 34.3 in Dec 2016. Average weekly hours reached 34.5 in Nov 2017. The BLS is revising the data from 2006 to 2009 (http://www.bls.gov/ces/#notices) now available in the release for Jan 2016 and subsequent months.

Table IB-2, US, Average Weekly Hours of All Employees, NSA 2006-2017

Year

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Annual

2006

34.1

34.5

34.7

34.5

34.3

34.7

34.3

34.4

2007

34.3

34.5

34.8

34.5

34.8

34.3

34.3

34.8

34.4

2008

34.2

34.8

34.3

34.5

34.2

34.2

34.4

33.9

34.3

2009

33.6

33.7

33.8

34.3

33.7

33.8

34.2

33.8

33.8

2010

34.4

34.1

34.2

34.7

34.1

34.3

34.2

34.2

34.1

2011

34.6

34.3

34.4

34.4

34.4

34.8

34.3

34.4

34.3

2012

34.2

34.4

34.7

34.5

34.8

34.3

34.3

34.8

34.5

2013

34.3

34.9

34.3

34.5

34.9

34.4

34.4

34.7

34.4

2014

34.4

34.9

34.5

34.6

34.5

34.5

34.9

34.6

34.5

2015

34.4

34.5

34.5

35.1

34.3

34.5

34.8

34.5

34.5

2016

34.6

34.4

34.4

34.4

34.4

34.8

34.3

34.3

34.4

2017

34.3

34.5

34.8

34.5

34.3

34.8

34.5

Source: US Bureau of Labor Statistics

http://www.bls.gov/

Chart IB-1 provides average weekly hours of all employees seasonally adjusted. There was sharp contract during the global recession. Hours returned to levels before the contraction.

Chart IB-1, US, Average Weekly Hours of All Employees, SA 2006-2017

Source: US Bureau of Labor Statistics

http://www.bls.gov/data/

Calculations of inflation-adjusted average hourly earnings using BLS data are in Table IB-3. The final column of Table IB-3 (“12-Month Real ∆%”) provides inflation-adjusted average hourly earnings of all employees in the US. Average hourly earnings rose above inflation throughout the first nine months of 2007 just before the global recession that began in the final quarter of 2007 when average hourly earnings began to lose to inflation. In contrast, average hourly earnings of all US workers have risen less than inflation in four months in 2010 and in all but the first month in 2011 and the loss accelerated at 1.8 percent in Sep 2011, declining to a real loss of 1.1 percent in Feb 2012 and 0.6 percent in Mar 2012. There was a gain of 0.5 percent in Apr 2012 in inflation-adjusted average hourly earnings but another fall of 0.6 percent in May 2012 followed by increases of 0.3 percent in Jun and 1.0 percent in Jul 2012. Real hourly earnings stagnated in the 12 months ending in Aug 2012 with increase of only 0.1 percent, and increased 0.7 percent in the 12 months ending in Sep 2012. Real hourly earnings fell 1.3 percent in Oct 2012 and gained 1.0 percent in Dec 2012 but declined 0.2 percent in Jan 2013 and stagnated at change of 0.2 percent in Feb 2013. Real hourly earnings increased 0.4 percent in the 12 months ending in Mar 2013 and 0.2 percent in Apr 2013, increasing 0.7 percent in May 2013. In Jun 2013, real hourly earnings increased 1.0 percent relative to Jun 2012. Real hourly earnings fell 0.6 percent in the 12 months ending in Jul 2013 and increased 0.8 percent in the 12 months ending in Aug 2013. Real hourly earnings increased 1.2 percent in the 12 months ending in Oct 2013 and 1.0 percent in Nov 2013. Real hourly earnings increased 0.4 percent in the 12 months ending in Dec 2013. Real hourly earnings increased 0.4 percent in the 12 months ending in Jan 2014 and 1.7 percent in the 12 months ending in Feb 2014. Real hourly earnings increased 1.3 percent in the 12 months ending in Mar 2014. Real hourly earnings changed 0.0 percent in the 12 months ending in Apr 2014. Real hourly earnings stagnated at 0.0 percent in the 12 months ending in May 2014. Real hourly earnings changed 0.0 percent in the 12 months ending in Jun 2014. Real hourly earnings increased 0.1 percent in the 12 months ending in Jul 2014 and increased 0.5 percent in the 12 months ending in Aug 2014. Real hourly earnings fell 0.3 percent in the 12 months ending in Sep 2014 and increased 0.3 percent in the 12 months ending in Oct 2014. Real hourly earnings increased 1.5 percent in the 12 months ending in Nov 2014. Real hourly earnings increased 0.4 percent in the 12 months ending in Dec 2014 and increased 2.3 percent in the 12 months ending in Jan 2015. Real hourly earnings increased 1.9 percent in the 12 months ending in Feb 2015 and 2.3 percent in the 12 months ending in Mar 2015. Real hourly earnings increased 2.4 percent in the 12 months ending in Apr 2015 and increased 2.4 percent in the 12 months ending in May 2015. Real hourly earnings increased 1.3 percent in the 12 months ending in Jun 2015 and increased 1.9 percent in the 12 months ending in Jul 2015. Real hourly earnings increased 2.8 percent in the 12 months ending in Aug 2015 and increased 2.2 percent in the 12 months ending in Sep 2015. Real hourly earnings increased 2.3 percent in the 12 months ending in Oct 2015 and increased 1.9 percent in the 12 months ending in Nov 2015. Real hourly earnings increased 1.8 percent in the 12 months ending in Dec 2015 and increased 1.1 percent in the 12 months ending in Jan 2016. Real hourly earnings increased 0.8 percent in the 12 months ending in Feb 2016 and increased 0.9 percent in the 12 months ending in Mar 2016. Real hourly earnings increased 1.5 percent in the 12 months ending in Apr 2016 and increased 2.2 percent in the 12 months ending in May 2016. Real hourly earnings increased 1.6 percent in the 12 months ending in Jun 2016 and increased 2.0 percent in the 12 months ending in Jul 2016. Real hourly earnings increased 0.8 percent in the 12 months ending in Aug 2016 and increased 1.3 percent in the 12 months ending in Sep 2016. Real hourly earnings increased 2.0 percent in the 12 months ending in Oct 2016 and increased 0.2 percent in the 12 months ending in Nov 2016. Real hourly earnings increased 0.6 percent in the 12 months ending in Dec 2016 and increased 0.8 percent in the 12 months ending in Jan 2017. Real hourly earnings increased 0.1 percent in the 12 months ending in Feb 2017 and increased 0.2 percent in the 12 months ending in Mar 2017. Real hourly earnings increased 1.0 percent in the 12 months ending in Apr 2017 and decreased 0.1 percent in the 12 months ending in May 2017. Real hourly earnings increased 0.9 percent in the 12 months ending in Jun 2017 and increased 1.6 percent in the 12 months ending in Jul 2017. Real hourly earnings increased 0.7 percent in the 12 months ending in Aug 2017 and increased 0.7 percent in the 12 months ending in Sep 2017. Real hourly earnings increased 0.3 percent in the 12 months ending in Oct 2017. Real hourly earnings are oscillating in part because of world inflation waves caused by carry trades from zero interest rates to commodity futures (https://cmpassocregulationblog.blogspot.com/2017/11/dollar-devaluation-and-decline-of.html) and in part because of the collapse of hiring (https://cmpassocregulationblog.blogspot.com/2017/11/recovery-without-hiring-ten-million.html) originating in weak economic growth (https://cmpassocregulationblog.blogspot.com/2017/12/mediocre-cyclical-united-states.html). The BLS is revising the data from 2006 to 2009 (http://www.bls.gov/ces/#notices) now available in the release for Jan 2016 and subsequent releases.

Table IB-3, US, Average Hourly Earnings Nominal and Inflation Adjusted, Dollars and % NSA

AHE ALL

12 Month-
Nominal
∆%

∆% 12 Month CPI

12-Month
Real ∆%

2007

Jan*

$20.69*

4.2*

2.1

2.1*

Feb*

$20.78*

4.1*

2.4

1.7*

Mar

$20.75

3.4

2.8

0.6

Apr

$20.99

3.1

2.6

0.5

May

$20.77

3.5

2.7

0.8

Jun

$20.77

3.6

2.7

0.9

Jul

$20.94

3.3

2.4

0.9

Aug

$20.80

3.3

2.0

1.3

Sep

$21.13

3.8

2.8

1.0

Oct

$21.01

2.4

3.5

-1.1

Nov

$21.07

3.1

4.3

-1.2

Dec

$21.30

3.4

4.1

-0.7

2010

Jan

$22.51

2.1

2.6

-0.5

Feb

$22.57

1.6

2.1

-0.5

Mar

$22.48

1.2

2.3

-1.1

Apr

$22.53

1.8

2.2

-0.4

May

$22.60

2.5

2.0

0.5

Jun

$22.34

1.7

1.1

0.6

Jul

$22.41

1.9

1.2

0.7

Aug

$22.55

1.8

1.1

0.7

Sep

$22.60

1.8

1.1

0.7

Oct

$22.70

1.9

1.2

0.7

Nov

$22.69

1.1

1.1

0.0

Dec

$22.76

1.7

1.5

0.2

2011

Jan

$23.16

2.9

1.6

1.3

Feb

$22.99

1.9

2.1

-0.2

Mar

$22.90

1.9

2.7

-0.8

Apr

$22.96

1.9

3.2

-1.3

May

$23.06

2.0

3.6

-1.5

Jun

$22.81

2.1

3.6

-1.4

Jul

$22.94

2.4

3.6

-1.2

Aug

$22.85

1.3

3.8

-2.4

Sep

$23.05

2.0

3.9

-1.8

Oct

$23.30

2.6

3.5

-0.9

Nov

$23.15

2.0

3.4

-1.4

Dec

$23.22

2.0

3.0

-1.0

2012

Jan

$23.56

1.7

2.9

-1.2

Feb

$23.40

1.8

2.9

-1.1

Mar

$23.39

2.1

2.7

-0.6

Apr

$23.61

2.8

2.3

0.5

May

$23.32

1.1

1.7

-0.6

Jun

$23.27

2.0

1.7

0.3

Jul

$23.48

2.4

1.4

1.0

Aug

$23.26

1.8

1.7

0.1

Sep

$23.67

2.7

2.0

0.7

Oct

$23.52

0.9

2.2

-1.3

Nov

$23.58

1.9

1.8

0.1

Dec

$23.85

2.7

1.7

1.0

2013

Jan

$23.88

1.4

1.6

-0.2

Feb

$23.90

2.1

2.0

0.2

Mar

$23.84

1.9

1.5

0.4

Apr

$23.92

1.3

1.1

0.2

May

$23.80

2.1

1.4

0.7

Jun

$23.92

2.8

1.8

1.0

Jul

$23.81

1.4

2.0

-0.6

Aug

$23.80

2.3

1.5

0.8

Sep

$24.16

2.1

1.2

0.9

Oct

$24.04

2.2

1.0

1.2

Nov

$24.11

2.2

1.2

1.0

Dec

$24.30

1.9

1.5

0.4

2014

Jan

$24.35

2.0

1.6

0.4

Feb

$24.58

2.8

1.1

1.7

Mar

$24.50

2.8

1.5

1.3

Apr

$24.40

2.0

2.0

0.0

May

$24.30

2.1

2.1

0.0

Jun

$24.42

2.1

2.1

0.0

Jul

$24.31

2.1

2.0

0.1

Aug

$24.32

2.2

1.7

0.5

Sep

$24.50

1.4

1.7

-0.3

Oct

$24.52

2.0

1.7

0.3

Nov

$24.78

2.8

1.3

1.5

Dec

$24.59

1.2

0.8

0.4

2015

Jan

$24.88

2.2

-0.1

2.3

Feb

$25.05

1.9

0.0

1.9

Mar

$25.04

2.2

-0.1

2.3

Apr

$24.94

2.2

-0.2

2.4

May

$24.88

2.4

0.0

2.4

Jun

$24.77

1.4

0.1

1.3

Jul

$24.83

2.1

0.2

1.9

Aug

$25.04

3.0

0.2

2.8

Sep

$25.05

2.2

0.0

2.2

Oct

$25.14

2.5

0.2

2.3

Nov

$25.38

2.4

0.5

1.9

Dec

$25.21

2.5

0.7

1.8

2016

Jan

$25.50

2.5

1.4

1.1

Feb

$25.49

1.8

1.0

0.8

Mar

$25.49

1.8

0.9

0.9

Apr

$25.60

2.6

1.1

1.5

May

$25.68

3.2

1.0

2.2

Jun

$25.42

2.6

1.0

1.6

Jul

$25.53

2.8

0.8

2.0

Aug

$25.52

1.9

1.1

0.8

Sep

$25.74

2.8

1.5

1.3

Oct

$26.04

3.6

1.6

2.0

Nov

$25.87

1.9

1.7

0.2

Dec

$25.90

2.7

2.1

0.6

2017

Jan

$26.34

3.3

2.5

0.8

Feb

$26.20

2.8

2.7

0.1

Mar

$26.15

2.6

2.4

0.2

Apr

$26.43

3.2

2.2

1.0

May

$26.15

1.8

1.9

-0.1

Jun

$26.05

2.5

1.6

0.9

Jul

$26.37

3.3

1.7

1.6

Aug

$26.19

2.6

1.9

0.7

Sep

$26.48

2.9

2.2

0.7

Oct

$26.64

2.3

2.0

0.3

Nov

$26.49

2.4

Note: AHE ALL: average hourly earnings of all employees; CPI: consumer price index; Real: adjusted by CPI inflation; NA: not available

*AHE of production and nonsupervisory employees because of unavailability of data for all employees for Jan-Feb 2006

Source: US Bureau of Labor Statistics

http://www.bls.gov/

Calculations of inflation-adjusted average hourly earnings by the BLS are in Table IB-4. Average hourly earnings rose above inflation throughout the first nine months of 2007 just before the global recession that began in the final quarter of 2007 when average hourly earnings began to lose to inflation. In contrast, average hourly earnings of all US workers have risen less than inflation in five months in 2010 and in all but the first month in 2011 and the loss accelerated at 1.8 percent in Sep 2011, declining to a real loss of 1.1 percent in Feb 2012 and 0.5 percent in Mar 2012. There was a gain of 0.5 percent in Apr 2012 in inflation-adjusted average hourly earnings but another fall of 0.6 percent in May 2012 followed by increases of 0.3 percent in Jun and 1.0 percent in Jul 2012. Real hourly earnings stagnated in the 12 months ending in Aug 2012 with increase of only 0.1 percent, and increased 0.7 percent in the 12 months ending in Sep 2012. Real hourly earnings fell 1.2 percent in Oct 2012 and gained 1.0 percent in Dec 2012 but declined 0.2 percent in Jan 2013 and stagnated at change of 0.1 percent in Feb 2013. Real hourly earnings increased 0.4 percent in the 12 months ending in Mar 2013 and 0.3 percent in Apr 2013, increasing 0.7 percent in May 2013. In Jun 2013, real hourly earnings increased 1.0 percent relative to Jun 2012. Real hourly earnings fell 0.6 percent in the 12 months ending in Jul 2013 and increased 0.8 percent in the 12 months ending in Aug 2013. Real hourly earnings increased 1.2 percent in the 12 months ending in Oct 2013 and 1.0 percent in Nov 2013. Real hourly earnings increased 0.4 percent in the 12 months ending in Dec 2013. Real hourly earnings increased 0.4 percent in the 12 months ending in Jan 2014 and 1.7 percent in the 12 months ending in Feb 2014. Real hourly earnings increased 1.3 percent in the 12 months ending in Mar 2014. Real hourly changed 0.0 percent in the 12 months ending in Apr 2014. Real hourly decreased 0.1 percent in the 12 months ending in May 2014. Real hourly earnings increased 0.1 percent in the 12 months ending in Jun 2014. Real hourly earnings increased 0.1 percent in the 12 months ending in Jul 2014 and increased 0.4 percent in the 12 months ending in Aug 2014. Real hourly earnings fell 0.3 percent in the 12 months ending in Sep 2014 and increased 0.4 percent in the 12 months ending in Oct 2014. Real hourly earnings increased 1.5 percent in the 12 months ending in Nov 2014 and 0.4 percent in the 12 months ending in Dec 2014. Real hourly earnings increased 2.3 percent in the 12 months ending in Jan 2015 and increased 1.9 percent in the 12 months ending in Feb 2015. Real hourly earnings increased 2.2 percent in the 12 months ending in Mar 2015 and increased 2.4 percent in the 12 months ending in Apr 2015. Real hourly earnings increased 2.4 percent in the 12 months ending in May 2015 and 1.3 percent in the 12 months ending in Jun 2015. Real hourly earnings increased 2.0 percent in the 12 months ending in Jul 2015 and increased 2.8 percent in the 12 months ending in Aug 2015. Real hourly earnings increased 2.3 percent in the 12 months ending in Sep 2015. Real hourly earnings increased 2.3 percent in the 12 months ending in Oct 2015 and increased 1.9 percent in the 12 months ending in Nov 2015. Average hourly earnings increased 1.8 percent in the 12 months ending in Dec 2015 and increased 1.0 percent in the 12 months ending in Jan 2016. Real hourly earnings increased 0.7 percent in the 12 months ending in Feb 2016 and increased 0.9 percent in the 12 months ending in Mar 2016. Real hourly earnings increased 1.5 percent in the 12 months ending in Apr 2016 and increased 2.2 percent in the 12 months ending in May 2016. Real hourly earnings increased 1.6 percent in the 12 months ending in Jun 2016 and increased 2.0 percent in the 12 months ending in Jul 2016. Real hourly earnings increased 0.9 percent in the 12 months ending in Aug 2016 and increased 1.2 percent in the 12 months ending in Sep 2016. Real hourly earnings increased 1.9 percent in the 12 months ending in Oct 2016 and increased 0.3 percent in the 12 months ending in Nov 2016. Real hourly earnings increased 0.7 percent in the 12 months ending in Dec 2016 and increased 0.8 percent in the 12 months ending in Jan 2017.

Real hourly earnings increased 0.1 percent in the 12 months ending in Feb 2017 and increased 0.3 percent in the 12 months ending in Mar 2017. Real hourly earnings increased 1.0 percent in the 12 months ending in Apr 2017 and changed 0.0 percent in the 12 months ending in May 2017. Real hourly earnings increased 0.8 percent in the 12 months ending in Jun 2017 and increased 1.5 percent in the 12 months ending in Jul 2017. Real hourly earnings increased 0.7 percent in the 12 months ending in Aug 2017 and increased 0.7 percent in the 12 months ending in Sep 2017. Real hourly earnings increased 0.3 percent in the 12 months ending in Oct 2017. Real hourly earnings of US workers are crawling in a fractured labor market. The economic welfare or wellbeing of United States workers deteriorated in a recovery without hiring (https://cmpassocregulationblog.blogspot.com/2017/11/recovery-without-hiring-ten-million.html), stagnating/declining real wages and 21.4 million unemployed or underemployed (Section I and earlier https://cmpassocregulationblog.blogspot.com/2017/11/unchanged-fomc-policy-rate-gradual.html) because of mediocre economic growth (https://cmpassocregulationblog.blogspot.com/2017/12/mediocre-cyclical-united-states.html). The BLS is revising the data from 2006 to 2009 (http://www.bls.gov/ces/#notices) now available in the release for Jan 2016 and subsequent releases.

Table IB-4, US, Average Hourly Earnings of All Employees NSA in Constant Dollars of 1982-1984

Year

Jun

Jul

Aug

Sep

Oct

Dec

2006

9.88

9.97

9.87

10.03

10.16

10.21

2007

9.97

10.05

10.00

10.13

10.06

10.14

2008

9.82

9.75

9.81

9.91

10.03

10.45

2009

10.18

10.22

10.27

10.28

10.30

10.36

2010

10.25

10.28

10.33

10.35

10.38

10.38

2011

10.11

10.15

10.09

10.16

10.29

10.29

2012

10.14

10.25

10.10

10.23

10.17

10.39

∆%12M

0.3

1.0

0.1

0.7

-1.2

1.0

2013

10.24

10.19

10.18

10.32

10.29

10.43

∆%12M

1.0

-0.6

0.8

0.9

1.2

0.4

2014

10.25

10.20

10.22

10.29

10.33

10.47

∆%12M

0.1

0.1

0.4

-0.3

0.4

0.4

2015

10.38

10.40

10.51

10.53

10.57

10.66

∆%12M

1.3

2.0

2.8

2.3

2.3

1.8

2016

10.55

10.61

10.60

10.66

10.77

10.73

∆%12M

1.6

2.0

0.9

1.2

1.9

0.7

2017

10.63

10.77

10.67

10.73

10.80

∆%12M

0.8

1.5

0.7

0.7

0.3

Source: US Bureau of Labor Statistics

http://www.bls.gov/

Chart IB-2 of the US Bureau of Labor Statistics plots average hourly earnings of all US employees in constant 1982-1984 dollars with evident decline from annual earnings of $10.33 in 2009 and $10.35 in 2010 to $10.24 in 2011 and $10.23 in 2012 or loss of 1.0 percent (data in http://www.bls.gov/data/). Annual real hourly earnings increased 0.6 percent in 2013 relative to 2012 and increased 0.5 percent in 2014 relative to 2013. Annual real hourly earnings increased 2.1 percent in 2015 relative to 2014. Annual real hourly earnings increased 1.2 percent in 2016 relative to 2015. Annual real hourly earnings increased 5.9 percent from 2007 to 2016 at the rate of 0.6 percent per year. Annual real hourly earnings increased 3.5 percent from 2009 to 2016 at the rate of 0.5 percent per year and increased 6.8 percent from 2008 to 2016 at the rate of 0.8 percent per year. Real hourly earnings of US workers are crawling in a fractured labor market. The economic welfare or wellbeing of United States workers deteriorated in a recovery without hiring (https://cmpassocregulationblog.blogspot.com/2017/11/recovery-without-hiring-ten-million.html), stagnating/declining real wages and 21.4 million unemployed or underemployed (Section I and earlier https://cmpassocregulationblog.blogspot.com/2017/11/unchanged-fomc-policy-rate-gradual.html) because of mediocre economic growth (https://cmpassocregulationblog.blogspot.com/2017/12/mediocre-cyclical-united-states.html). The BLS is revising the data from 2006 to 2009 (http://www.bls.gov/ces/#notices) now available for the release of Jan 2016 and subsequent releases.

Chart IB-2, US, Average Hourly Earnings of All Employees in Constant Dollars of 1982-1984, SA 2006-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/

Chart IB-3 provides 12-month percentage changes of average hourly earnings of all employees in constant dollars of 1982-1984, that is, adjusted for inflation. There was sharp contraction of inflation-adjusted average hourly earnings of US employees during parts of 2007 and 2008. Rates of change in 12 months became positive in parts of 2009 and 2010 but then became negative again in 2011 and into 2012 with temporary increase in Apr 2012 that was reversed in May with another gain in Jun and Jul 2012 followed by stagnation in Aug 2012. There was marginal gain in Sep 2012 with sharp decline in Oct 2012, stagnation in Nov 2012, increase in Dec 2012 and renewed decrease in Jan 2013 with near stagnation in Feb 2013 followed by mild increase in Mar-Apr 2013. Hourly earnings adjusted for inflation increased in Jun 2013 and fell in Jul 2013, increasing in Aug-Dec 2013 and Jan-Mar 2014. Average hourly earnings stagnated in Apr-May 2014 and rebounded mildly in Jul 2014, increasing in Aug 2014 and Sep 2014. Average hourly earnings adjusted for inflation increased in Oct-Dec 2014, Jan-Dec 2015, Jan-Dec 2016 and Jan-Apr 2017, stabilizing in May 2017 and increasing in Jun-Oct 2017.

Chart IB-3, Average Hourly Earnings of All Employees NSA 12-Month Percent Change, 1982-1984 Dollars, NSA 2007-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/

Average weekly earnings of the dataset of the US Bureau of Labor Statistics (BLS) are in Table IB-5. Average weekly earnings fell 3.2 percent after adjusting for inflation in the 12 months ending in Aug 2011, decreased 0.9 percent in the 12 months ending in Sep 2011 and increased 0.6 percent in the 12 months ending in Oct 2011. Average weekly earnings fell 1.0 percent in the 12 months ending in Nov 2011 and fell 0.3 percent in the 12 months ending in Dec 2011. Average weekly earnings declined 0.3 percent in the 12 months ending in Jan 2012 and fell 0.5 percent in the 12 months ending in Feb 2012. Average weekly earnings in constant dollars were virtually flat in Mar 2012 relative to Mar 2011, decreasing 0.2 percent. Average weekly earnings in constant dollars increased 1.7 percent in Apr 2012 relative to Apr 2011 but fell 1.7 percent in May 2012 relative to May 2011, increasing 0.6 percent in the 12 months ending in Jun 2012 and 1.8 percent in the 12 months ending in Jul 2012. Real weekly earnings increased 0.4 percent in the 12 months ending in Aug 2012 and 1.9 percent in the 12 months ending in Sep 2012. Real weekly earnings fell 2.6 percent in the 12 months ending in Oct 2012 and increased 0.1 percent in the 12 months ending in Nov 2012 and 2.1 percent in the 12 months ending in Dec 2012. Real weekly earnings fell 1.7 percent in the 12 months ending in Jan 2013 and virtually stagnated with gain of 0.2 percent in the 12 months ending in Feb 2013, increasing 0.7 percent in the 12 months ending in Mar 2013. Real weekly earnings fell 0.6 percent in the 12 months ending in Apr 2013 and increased 1.0 percent in the 12 months ending in May 2013. Average weekly earnings increased 2.5 percent in the 12 months ending in Jun 2013 and fell 1.7 percent in the 12 months ending in Jul 2013. Real weekly earnings increased 0.8 percent in the 12 months ending in Aug 2013, 1.2 percent in the 12 months ending in Sep 2013 and 1.5 percent in the 12 months ending in Oct 2013. Average weekly earnings increased 1.3 percent in the 12 months ending in Nov 2013 and increased 0.1 percent in the 12 months ending in Dec 2013. Average weekly earnings increased 0.4 percent in the 12 months ending in Jan 2014 and 2.3 percent in the 12 months ending in Feb 2014. Average weekly earnings increased 2.4 percent in the 12 months ending in Mar 2014 and 0.3 percent in the 12 months ending in Apr 2014. Average weekly earnings in constant dollars increased 0.3 percent in the 12 months ending in May 2014 and changed 0.0 percent in the 12 months ending in Jun 2014. Real average weekly earnings increased 0.7 percent in the 12 months ending in Jul 2014 and 0.8 percent in the 12 months ending in Aug 2014. Real weekly earnings decreased 1.4 percent in the 12 months ending in Sep 2014 and increased 0.6 percent in the 12 months ending in Oct 2014. Average weekly earnings increased 2.9 percent in the 12 months ending in Nov 2014 and increased 0.1 percent in the 12 months ending in Dec 2014. Average weekly earnings increased 2.9 percent in the 12 months ending in Jan 2015 and increased 2.5 percent in the 12 months ending in Feb 2015. Average weekly earnings adjusted for inflation increased 2.3 percent in the 12 months ending in Mar 2015 and increased 2.4 percent in the 12 months ending in Apr 2015. Average weekly earnings adjusted for inflation increased 2.4 percent in the 12 months ending in May 2015 and increased 0.1 percent in the 12 months ending in Jun 2015. Average weekly earnings increased 2.0 percent in the 12 months ending in Jul 2015 and 4.2 percent in the 12 months ending in Aug 2015. Average weekly earnings adjusted for inflation increased 1.7 percent in the 12 months ending in Sep 2015 and increased 2.4 percent in the 12 months ending in Oct 2015. Average weekly earnings adjusted for inflation increased 1.6 percent in the 12 months ending in Nov 2015 and increased 1.5 percent in the 12 months ending in Dec 2015. Average weekly earnings increased 1.1 percent in the 12 months ending in Jan 2016. Average weekly earnings contracted 0.7 percent in the 12 months ending in Feb 2015 and contracted 0.5 percent in the 12 months ending in Mar 2016. Average weekly earnings increased 1.2 percent in the 12 months ending in Apr 2016 and increased 2.8 percent in the 12 months ending in May 2016. Average weekly earnings increased 1.3 percent in the 12 months ending in Jun 2016 and increased 1.7 percent in the 12 months ending in Jul 2016. Average weekly earnings decreased 1.2 percent in the 12 months ending in Aug 2016 and increased 1.6 percent in the 12 months ending in Sep 2016. Average weekly earnings increased 2.8 percent in the 12 months ending in Oct 2016 and decreased 1.2 percent in the 12 months ending in Nov 2016. Average weekly earnings increased 0.1 percent in the 12 months ending in Dec 2016 and increased 1.4 percent in the 12 months ending in Jan 2017. Average weekly earnings changed 0.0 percent in the 12 months ending in Feb 2017. Average weekly earnings decreased 0.1 percent in the 12 months ending in Mar 2017 and increased 1.9 percent in the 12 months ending in Apr 2017. Average weekly earnings decreased 0.9 percent in the 12 months ending in May 2017 and increased 1.1 percent in the 12 months ending in Jun 2017. Average weekly earnings increased 2.7 percent in the 12 months ending in Jul 2017 and increased 1.0 percent in the 12 months ending in Aug 2017. Average hourly earnings increased 0.3 percent in the 12 months ending in Sep 2017 and increased 0.3 percent in the 12 months ending in Nov 2017. Table I-5 confirms the trend of deterioration of purchasing power of average weekly earnings in 2011 and into 2013 with oscillations according to carry trades causing world inflation waves (ttps://cmpassocregulationblog.blogspot.com/2017/10/world-inflation-waves-long-term-and.html). On an annual basis, average weekly earnings in constant 1982-1984 dollars increased from $347.17 in 2007 to $354.15 in 2013, by 2.0 percent or at the average rate of 0.3 percent per year (data in http://www.bls.gov/data/). Annual average weekly earnings in constant dollars of $352.95 in 2010 fell 0.4 percent to $351.67 in 2011. Annual average weekly earnings increased from $347.17 in 2007 to $356.90 in 2014 or by 2.8 at the average rate of 0.4 percent. Annual average weekly earnings in constant dollars increased from $347.17 in 2007 to $364.62 in 2015 by 5.0 percent at the average rate of 0.6 percent per year. Annual average weekly earnings in constant dollar increased from $347.17 in 2007 to $367.30 in 2016 by 5.8 percent at the average rate of 0.6 percent per year. Those who still work bring back home a paycheck that buys fewer high-quality goods than a year earlier.  The fractured US job market does not provide an opportunity for advancement as in past booms following recessions because of poor job creation with 21.4 million unemployed or underemployed (Section I and earlier https://cmpassocregulationblog.blogspot.com/2017/11/unchanged-fomc-policy-rate-gradual.html) because of mediocre economic growth (https://cmpassocregulationblog.blogspot.com/2017/12/mediocre-cyclical-united-states.html).The BLS is revising the data from 2006 to 2009 (http://www.bls.gov/ces/#notices) now available for the release of Jan 2016 and subsequent releases.

Table IB-5, US, Average Weekly Earnings of All Employees in Constant Dollars of 1982-1984, NSA 2007-2017

Year

Aug

Sep

Oct

Dec

2006

340.60

344.02

352.68

351.16

2007

345.14

352.69

344.91

352.91

2008

338.41

338.90

342.99

354.11

2009

352.16

346.41

348.20

350.29

2010

358.43

352.80

356.00

355.14

2011

346.97

349.47

358.11

353.95

2012

348.33

355.96

348.76

361.49

∆%12M

0.4

1.9

-2.6

2.1

2013

351.08

360.10

354.10

361.82

∆%12M

0.8

1.2

1.5

0.1

2014

353.78

355.10

356.29

362.34

∆%12M

0.8

-1.4

0.6

0.1

2015

368.80

361.10

364.67

367.72

∆%12M

4.2

1.7

2.4

1.5

2016

364.50

366.76

374.88

367.96

∆%12M

-1.2

1.6

2.8

0.1

2017

368.02

367.99

375.84

∆%12M

1.0

0.3

0.3

Source: US Bureau of Labor Statistics http://www.bls.gov/

Chart IB-4 provides average weekly earnings of all employees in constant dollars of 1982-1984. The same pattern emerges of sharp decline during the contraction, followed by recovery in the expansion and continuing fall with oscillations caused by carry trades from zero interest rates into commodity futures from 2010 to 2011 and into 2012-2017. The increase in the final segment is mostly because of collapse of commodity prices in reversals of carry trade exposures followed by reversal of carry trades and new decreases/stability. The BLS is revising the data from 2006 to 2009 (http://www.bls.gov/ces/#notices) available for the release of Jan 2016 and subsequent releases.

Chart IB-4, US, Average Weekly Earnings of All Employees in Constant Dollars of 1982-1984, SA 2006-2017

Source: US Bureau of Labor Statistics http://www.bls.gov/

Chart IB-5 provides 12-month percentage changes of average weekly earnings of all employees in the US in constant dollars of 1982-1984. The BLS is revising the data from 2006 to 2009 (http://www.bls.gov/ces/#notices) available for the release of Jan 2016 and subsequent releases. There is the same pattern of contraction during the global recession in 2008 and then again weakness in the recovery without hiring and inflation waves. (https://cmpassocregulationblog.blogspot.com/2017/11/dollar-devaluation-and-decline-of.html and earlier https://cmpassocregulationblog.blogspot.com/2017/10/world-inflation-waves-long-term-and.html and earlier https://cmpassocregulationblog.blogspot.com/2017/09/dollar-devaluation-world-inflation.html (https://cmpassocregulationblog.blogspot.com/2017/08/fluctuating-valuations-of-risk.html and earlier (https://cmpassocregulationblog.blogspot.com/2017/07/dollar-devaluation-and-valuation-of.html and earlier https://cmpassocregulationblog.blogspot.com/2017/06/fomc-interest-rate-increase-planned.html and earlier https://cmpassocregulationblog.blogspot.com/2017/05/dollar-devaluation-world-inflation.html https://cmpassocregulationblog.blogspot.com/2017/04/world-inflation-waves-united-states.html and earlier https://cmpassocregulationblog.blogspot.com/2017/03/fomc-increases-interest-rates-world.html and earlier https://cmpassocregulationblog.blogspot.com/2017/02/world-inflation-waves-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2017/01/world-inflation-waves-united-states.html and earlier (http://cmpassocregulationblog.blogspot.com/2016/12/of-course-economic-outlook-is-highly.html and earlier http://cmpassocregulationblog.blogspot.com/2016/11/interest-rate-increase-could-well.html and earlier http://cmpassocregulationblog.blogspot.com/2016/10/dollar-revaluation-world-inflation.html and earlier http://cmpassocregulationblog.blogspot.com/2016/09/interest-rates-and-volatility-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2016/08/interest-rate-policy-uncertainty-and.html and earlier http://cmpassocregulationblog.blogspot.com/2016/07/oscillating-valuations-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2016/06/fomc-projections-world-inflation-waves.html and earlier http://cmpassocregulationblog.blogspot.com/2016/05/most-fomc-participants-judged-that-if.html and earlier http://cmpassocregulationblog.blogspot.com/2016/04/contracting-united-states-industrial.html and earlier http://cmpassocregulationblog.blogspot.com/2016/03/monetary-policy-and-competitive.html and earlier http://cmpassocregulationblog.blogspot.com/2016/02/squeeze-of-economic-activity-by-carry.html and earlier http://cmpassocregulationblog.blogspot.com/2016/01/uncertainty-of-valuations-of-risk.html and earlier http://cmpassocregulationblog.blogspot.com/2015/12/liftoff-of-interest-rates-with-monetary.html and earlier http://cmpassocregulationblog.blogspot.com/2015/11/interest-rate-liftoff-followed-by.html and earlier http://cmpassocregulationblog.blogspot.com/2015/10/interest-rate-policy-quagmire-world.html and earlier http://cmpassocregulationblog.blogspot.com/2015/09/interest-rate-increase-on-hold-because.html http://cmpassocregulationblog.blogspot.com/2015/08/global-decline-of-values-of-financial.html and earlier http://cmpassocregulationblog.blogspot.com/2015/07/fluctuating-risk-financial-assets.html http://cmpassocregulationblog.blogspot.com/2015/06/fluctuating-financial-asset-valuations.html http://cmpassocregulationblog.blogspot.com/2015/05/interest-rate-policy-and-dollar.html http://cmpassocregulationblog.blogspot.com/2015/04/global-portfolio-reallocations-squeeze.html http://cmpassocregulationblog.blogspot.com/2015/03/dollar-revaluation-and-financial-risk.html http://cmpassocregulationblog.blogspot.com/2015/03/irrational-exuberance-mediocre-cyclical.html http://cmpassocregulationblog.blogspot.com/2015/01/competitive-currency-conflicts-world.html http://cmpassocregulationblog.blogspot.com/2014/12/patience-on-interest-rate-increases.html http://cmpassocregulationblog.blogspot.com/2014/11/squeeze-of-economic-activity-by-carry.html http://cmpassocregulationblog.blogspot.com/2014/10/financial-oscillations-world-inflation.html http://cmpassocregulationblog.blogspot.com/2014/09/world-inflation-waves-squeeze-of.html http://cmpassocregulationblog.blogspot.com/2014/08/monetary-policy-world-inflation-waves.html http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html http://cmpassocregulationblog.blogspot.com/2014/06/valuation-risks-world-inflation-waves.html http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.html http://cmpassocregulationblog.blogspot.com/2014/04/imf-view-world-inflation-waves-squeeze.html http://cmpassocregulationblog.blogspot.com/2014/03/interest-rate-risks-world-inflation.html http://cmpassocregulationblog.blogspot.com/2014/01/world-inflation-waves-interest-rate.html http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html

http://cmpassocregulationblog.blogspot.com/2013/11/risks-of-zero-interest-rates-world.html http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and.html

http://cmpassocregulationblog.blogspot.com/2013/06/paring-quantitative-easing-policy-and.html http://cmpassocregulationblog.blogspot.com/2013/05/word-inflation-waves-squeeze-of.html http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html http://cmpassocregulationblog.blogspot.com/2013/04/recovery-without-hiring-ten-million.html http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html http://cmpassocregulationblog.blogspot.com/2013/02/world-inflation-waves-united-states.html http://cmpassocregulationblog.blogspot.com/2012/12/recovery-without-hiring-forecast-growth.html http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation.html http://cmpassocregulationblog.blogspot.com/2012_09_01_archive.html http://cmpassocregulationblog.blogspot.com/2012/07/world-inflation-waves-financial.html http://cmpassocregulationblog.blogspot.com/2012/06/destruction-of-three-trillion-dollars.html http://cmpassocregulationblog.blogspot.com/2012/05/world-inflation-waves-monetary-policy.html http://cmpassocregulationblog.blogspot.com/2012/06/recovery-without-hiring-continuance-of.html http://cmpassocregulationblog.blogspot.com/2012/04/fractured-labor-market-with-hiring.html http://cmpassocregulationblog.blogspot.com/2012/03/global-financial-and-economic-risk.html http://cmpassocregulationblog.blogspot.com/2012/02/world-inflation-waves-united-states.html http://cmpassocregulationblog.blogspot.com/2012/01/world-inflation-waves-united-states.html http://cmpassocregulationblog.blogspot.com/2012/01/recovery-without-hiring-united-states.html

http://cmpassocregulationblog.blogspot.com/2012/09/recovery-without-hiring-world-inflation.html http://cmpassocregulationblog.blogspot.com/2012_09_01_archive.html http://cmpassocregulationblog.blogspot.com/2012/07/world-inflation-waves-financial.html http://cmpassocregulationblog.blogspot.com/2012/05/world-inflation-waves-monetary-policy.html http://cmpassocregulationblog.blogspot.com/2012/06/recovery-without-hiring-continuance-of.html http://cmpassocregulationblog.blogspot.com/2012/04/fractured-labor-market-with-hiring.html http://cmpassocregulationblog.blogspot.com/2012/03/global-financial-and-economic-risk.html http://cmpassocregulationblog.blogspot.com/2012/02/world-inflation-waves-united-states.html http://cmpassocregulationblog.blogspot.com/2012/01/world-inflation-waves-united-states.html http://cmpassocregulationblog.blogspot.com/2012/01/recovery-without-hiring-united-states.html).

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017.

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