The headlines are euphoric: “Big Job Gains and Rising Pay in Latest U.S. Data” (NYT 12/6/2014) and indeed the 321,000 payroll jobs increase, 9-cent increase in average hourly wages and 0.1 hour increase in weekly hours last month exceeded expectations and is reminiscent of the 300-400 thousand monthly job growth and rising wages of the late 90’s tech boom bubble economy glory days. These November payroll (Establishment Survey) numbers are good, the kind of monthly job growth that could eventually dig us out of the Lesser Depression hole if they consistently continue for another couple of years (eyeballing from Figure 2 below). This would get us back to the Emp/Pop ratio of 2007 assuming that major Labor Force population age cohorts (16-24, 25-54, 55 and over) were the same share of the overall population in November 2007 when the Lesser Depression started as they were in November 2014 (see Figure 2 explanation). We would still be far below post-war Emp/Pop ratios without taking demographic changes into account (Figure 1 below) but, with increased productivity and more redistribution of income among the cohorts (more wishful thinking), “sort of” where we were in Nov. 2007. Of course expansions out of every past post-war recession have led to a recovery of demographically adjusted employment losses within at most 4 years (see Figure 2) and this would require 7 years of continuous expansion with the most robust job growth in the last couple of years, but at least we would get back to where we were (on a demographically adjusted basis) 9 years after the start of the Lesser Depression.
Unfortunately, there are many factors that weigh against such a scenario. The population (Household Survey) numbers that include self-employed, unpaid family, domestic, and agricultural workers not included in the establishment survey that covers only wage and salaried employees on the payrolls of nonfarm establishments, shows a miniscule 4,000 increase in employment in November. There are often growth discrepancies between the two surveys but these tend to average out over time, suggesting that the November establishment survey based 321,000 job increase estimate may not be indicative of a longer term trend.
Moreover, as the NYT Editorial “Better News on Jobs but Not Good Enough” (12/6/2014) points out, most of the pay and hours increases went to supervisors and managers. Average pay for production and non-supervisory workers (the vast majority of workers) rose by only 4 cents to $20.74 an hour and weekly hours remained unchanged at 33.8 hours. Fully a quarter of the jobs created in November were in the leisure and hospitality services industries that do not generally pay even close to living wages.
Figures 1 and 2 below are based on the more comprehensive “Current Population Survey” (CPS) household survey of employment. They both starkly illustrate the massive job loss and current lack- luster recovery from the “Lesser Depression”.
Economists measure “Business Cycles” from “peak to peak” or “trough to trough” where a “peak” is that point at which a new “recession” or “contraction” begins, and a “trough” the point at which the “expansion” or “upturn” out of a recession starts. In Figures 1 and 2 post-war recessions are graphed from “peak to peak.” In this sense we are still in the expansion phase of the June 2009 “Great Recession” or “Lesser Depression.” The peak of this cycle will occur when the next contraction begins. June 2009 is the official National Bureau of Economic Research (NBER) designated “trough,” or start of the expansion phase of the Lesser Depression. The NBER Business Cycle committee is the official body that designates the starting and ending points of U.S. recessions (see: http://www.nber.org/cycles.html). In Figures 1 and 2 post-war business cycles are labeled, and centered around, their NBER designated “troughs.”
Figure 1: Percent Decline in Employment to Population Ratio from Start of Recession for Post War Business Cycles (Business Cycles Labeled and Centered Around Official Trough Date at “0” Marker on Horizontal Axis)
Figure 1 shows that there has been little improvement in regaining the employment share that prevailed in November 2007 before the start of the “Lesser Depression” – or June 2009 Recession.
Some commentators have argued that Figure 1 does not present an accurate picture of the relative health of the labor market as it does not take into account the aging of the labor force which has led to a trend reduction in the labor force participation rate relative to past years (see: http://www.nytimes.com/interactive/2013/11/01/business/Job-Picture-May-Be-Better-Than-It-Appears.html?ref=economy&_r=0). Figure 2 below takes labor force aging into account by doing the analysis by population age cohorts (16-24, 25-54, and 55 and over) and holding the shares of the age cohorts constant in the population at November 2014 levels.
As can be seen, labor force aging can explain about 2.5% of the decline in Emp/Pop ratio but is still far greater than any prior post-war recession.
Figure 2: Same as Figure 1, but Using Employment to Population Ratio by Population Age Cohort (16-24, 25-54, 55 and over) and Assuming that these Population Age Cohorts are Fixed at their November, 2014 Population Shares.
Figure 2 shows what a deep hole we are in, just looking at employment and not at the quality of the jobs which is as noted above another major problem, relative to post-war standards even after taking demographic changes into account.
CPEG has long contended that without a comprehensive federal jobs program that could be largely funded by a financial transactions tax, and equally robust trade and industrial policies, it is highly unlikely that we will get to a living wage full employment economy (see for example: http://www.cpegonline.org/workingpapers/CPEGWP2010-1.pdf).
Furthermore, the epochal global warming crisis that we are now facing (see: http://www.nytimes.com/2014/12/01/world/climate-talks.html?_r=0) means that, as Noami Klein has pointed out in her recent book This Changes Everything, the imperative for a massive public policy led structural transformation of our economy is not “just” a matter of basic economic justice, but essential for species survival.
Addendum: This will be the last regular monthly CPEG Jobs report. We have decided to switch to quarterly reports on the state of the U.S. economy to coincide roughly with the quarterly BEA GDP advance estimate release dates. The 2014 Q4 GDP advanced estimate is scheduled to be released January 30 and we hope to post our first CPEG quarterly evaluation of the state of the U.S. economy, with a particular focus on the midwest, shortly after this date.