CMP Associates Regulation Blog: Twenty Nine Million Unemployed or Underemployed, Stagnating Real Wages and Real Disposable Income, Peaking Valuations of Risk Financial Assets, World Economic Slowdown and Global Recession Risk: Part I

Twenty Nine Million Unemployed or Underemployed, Stagnating Real Wages and Real Disposable Income, Peaking Valuations of Risk Financial Assets, World Economic Slowdown and Global Recession Risk

Carlos M. Pelaez

Executive Summary

I Twenty Nine 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

II Stagnating Real Wages

IIA Stagnating Real Disposable Income and Consumption Expenditures

IIA1 Stagnating Real Disposable Income and Consumption Expenditures

IIA2 Financial Repression

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

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

Executive Summary

ESI Twenty-nine Million Unemployed or Underemployed. 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 11.5 percent and the number of people in job stress could be around 28.6 million, which is 17.6 percent of the 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 Apr 2012, Mar 2013 and Apr 2013 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 (ftp://ftp.bls.gov/pub/special.requests/lf/aa2006/pdf/cpsaat1.pdf). Table I-4b provides the yearly labor force participation rate from 1979 to 2013. 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 Apr 2012 and Mar 2013 and Apr 2013 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 63.4 percent by Mar 2012 and was 63.1 percent in Mar 2013 and 63.1 percent in Apr 2013, 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: (1) there are an estimated 7.567 million unemployed in Apr 2013 who are not counted because they left the labor force on their belief they could not find another job (∆NLF UEM); (2) the total number of unemployed is effectively 18.581 million (Total UEM) and not 11.014 million (UEM) of whom many have been unemployed long term; (3) the rate of unemployment is 11.5 percent (Total UEM%) and not 7.1 percent, not seasonally adjusted, or 7.5 percent seasonally adjusted; and (4) the number of people in job stress is close to 28.6 million by adding the 7.567 million leaving the labor force because they believe they could not find another job. The row “In Job Stress” in Table I-4 provides the number of people in job stress not seasonally adjusted at 28.6 million in Apr 2013, 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 17.6 percent of the labor force in Apr 2013. The employment population ratio “EMP/POP %” dropped from 62.9 percent on average in 2006 to 58.5 percent in Apr 2012, 58.2 percent in Mar 2013 and 58.6 percent in Apr 2013; and the number employed in the US fell from 147.315 million in Jul 2007 to 143.724 million in Apr 2013, by 3.591 million, or decline of 2.4 percent, while the noninstitutional population increased from 231.958 million in Jul 2007 to 245.175 million in Apr 2013, by 13.217 million or increase of 5.7 percent, using not seasonally adjusted data. What really matters for labor input in production and wellbeing is the number of people with jobs or the employment/population ratio, which has declined and does not show signs of increasing. There are several million fewer people working in 2013 than in 2006 and the number employed is not increasing while population increased 13.217 million. 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 17 million and does not show signs of increasing in an unusual recovery without hiring (http://cmpassocregulationblog.blogspot.com/2013/04/recovery-without-hiring-ten-million.html).

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

	2006	Apr 2012	Mar 2013	Apr 2013
POP	229	242,784	244,995	245,175
LF	151	153,905	154,512	154,739
PART%	66.2	63.4	63.1	63.1
EMP	144	141,995	142,698	143,724
EMP/POP%	62.9	58.5	58.2	58.6
UEM	7	11,910	11,815	11,014
UEM/LF Rate%	4.6	7.7	7.6	7.1
NLF	77	88,879	90,483	90,436
LF PART 66.2%		160,723	162,187	162,306
∆NLF UEM		6,618	7,675	7,567
Total UEM		18,528	19,490	18,581
Total UEM%		11.5	12.0	11.5
Part Time Economic Reasons		7,694	7,734	7,709
Marginally Attached to LF		2,363	2,326	2,347
In Job Stress		28,585	29,550	28,637
People in Job Stress as % Labor Force		17.8	18.2	17.6

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/data/

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 s_i of a demographic group in an industry i and unemployment rate y_i of that demographic group (Lazear and Spletzer 2012JHJul22, 5-6):

Y = ∑_is_iy_i (1)

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

∆Y = ∑_i∆s_iy*_i+ ∑_i∆y_is*_i (2)

The first term in (2) captures changes in the demographic and industrial composition of the economy ∆s_i 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 ∆y_i, 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 provides 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 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 63.1 percent in Apr 2013. 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 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 of their chances in finding a job in what Lazear and Spletzer (2012JHJul22) characterize as accentuated cyclical factors.

Table I-4b, US, Labor Force Participation Rate, Percent of Labor Force in Population, NSA, 1979-2013

Year	Jan	Feb	Mar	Apr	May	Oct	Nov	Dec	Annual
1979	62.9	63.0	63.2	62.9	62.9	64.0	63.8	63.8	63.7
1980	63.3	63.2	63.2	63.2	63.5	63.9	63.7	63.4	63.8
1981	63.2	63.2	63.5	63.6	63.9	64.0	63.8	63.4	63.9
1982	63.0	63.2	63.4	63.3	63.9	64.1	64.1	63.8	64.0
1983	63.3	63.2	63.3	63.2	63.4	64.1	64.1	63.8	64.0
1984	63.3	63.4	63.6	63.7	64.3	64.6	64.4	64.3	64.4
1985	64.0	64.0	64.4	64.3	64.6	65.1	64.9	64.6	64.8
1986	64.2	64.4	64.6	64.6	65.0	65.5	65.4	65.0	65.3
1987	64.7	64.8	65.0	64.9	65.6	65.9	65.7	65.5	65.6
1988	65.1	65.2	65.2	65.3	65.5	66.1	66.2	65.9	65.9
1989	65.8	65.6	65.7	65.9	66.2	66.6	66.7	66.3	66.5
1990	66.0	66.0	66.2	66.1	66.5	66.5	66.3	66.1	66.5
1991	65.5	65.7	65.9	66.0	66.0	66.1	66.0	65.8	66.2
1992	65.7	65.8	66.0	66.0	66.4	66.2	66.2	66.1	66.4
1993	65.6	65.8	65.8	65.6	66.3	66.4	66.3	66.2	66.3
1994	66.0	66.2	66.1	66.0	66.5	66.8	66.7	66.5	66.6
1995	66.1	66.2	66.4	66.4	66.4	66.7	66.5	66.2	66.6
1996	65.8	66.1	66.4	66.2	66.7	67.1	67.0	66.7	66.8
1997	66.4	66.5	66.9	66.7	67.0	67.1	67.1	67.0	67.1
1998	66.6	66.7	67.0	66.6	67.0	67.1	67.1	67.0	67.1
1999	66.7	66.8	66.9	66.7	67.0	67.0	67.0	67.0	67.1
2000	66.8	67.0	67.1	67.0	67.0	66.9	66.9	67.0	67.1
2001	66.8	66.8	67.0	66.7	66.6	66.7	66.6	66.6	66.8
2002	66.2	66.6	66.6	66.4	66.5	66.6	66.3	66.2	66.6
2003	66.1	66.2	66.2	66.2	66.2	66.1	66.1	65.8	66.2
2004	65.7	65.7	65.8	65.7	65.8	66.0	66.1	65.8	66.0
2005	65.4	65.6	65.6	65.8	66.0	66.2	66.1	65.9	66.0
2006	65.5	65.7	65.8	65.8	66.0	66.4	66.4	66.3	66.2
2007	65.9	65.8	65.9	65.7	65.8	66.0	66.1	65.9	66.0
2008	65.7	65.5	65.7	65.7	66.0	66.1	65.8	65.7	66.0
2009	65.4	65.5	65.4	65.4	65.5	64.9	64.9	64.4	65.4
2010	64.6	64.6	64.8	64.9	64.8	64.4	64.4	64.1	64.7
2011	63.9	63.9	64.0	63.9	64.1	64.1	63.9	63.8	64.1
2012	63.4	63.6	63.6	63.4	63.8	63.8	63.5	63.4	63.7
2013	63.3	63.2	63.1	63.1

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

Chart 12b, US, Labor Force Participation Rate, Percent of Labor Force in Population, NSA, 1979-2013

Source: Bureau of Labor Statistics

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

Broader perspective is provided by Chart 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 12c, US, Civilian Population, Thousands, NSA, 1948-2013

Sources: US Bureau of Labor Statistics

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

The labor force of the United States in Chart 12d has increased along a trend similar to that of the civilian noninstitutional population in Chart 12c. There is an evident stagnation of the civilian labor force in the final segment of Chart 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 12d, US, Labor Force, Thousands, NSA, 1948-2013

Sources: US Bureau of Labor Statistics

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

ESII Insufficient 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 2011 even with population higher by 35.4 percent and lab Total nonfarm payroll employment seasonally adjusted (SA) increased 165,000 in Apr 2013 and private payroll employment rose 176,000. The average number of nonfarm jobs created in Jan-Apr 2012 was 224,750 while the average number of nonfarm jobs created in Jan-Apr 2013 was 195,750, or decline by 12.9 percent. The average number of private jobs created in the US in Jan-Apr 2012 was 229,000 while the average in Jan-Apr 2013 was 203,250, or decline by 11.2 percent. The US labor force increased from 153.617 million in 2011 to 154.975 million in 2012 by 1.358 million or 113,167 per month. The average increase of nonfarm jobs in the four months from Jan to Mar 2013 was 195,750, which is a rate of job creation inadequate to reduce significantly unemployment and underemployment in the United States because of 113,167 new entrants in the labor force per month with 28.6 million unemployed or underemployed. The difference between the average increase of 203,250 new private nonfarm jobs per month in the US from Jan to Mar 2013 and the 113,167 average monthly increase in the labor force from 2011 to 2012 is 90,083 monthly new jobs net of absorption of new entrants in the labor force. There are 28.6 million in job stress in the US currently. The provision of 90,083 new jobs per month net of absorption of new entrants in the labor force would require 318 months to provide jobs for the unemployed and underemployed (28.637 million divided by 90,083) or 26.5 years (318 divided by 12). The civilian labor force of the US in Apr 2013 not seasonally adjusted stood at 154.739 million with 11.014 million unemployed or effectively 18.581 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 162.306 million. Reduction of one million unemployed at the current rate of job creation without adding more unemployment requires 0.9 years (1 million divided by product of 90,083 by 12, which is 1,080,996). Reduction of the rate of unemployment to 5 percent of the labor force would be equivalent to unemployment of only 7.737 million (0.05 times labor force of 154.739 million) for new net job creation of 3.277 million (11.014 million unemployed minus 7.737 million unemployed at rate of 5 percent) that at the current rate would take 3.0 years (3.277 million divided by 1.080996). Under the calculation in this blog there are 18.581 million unemployed by including those who ceased searching because they believe there is no job for them and effective labor force of 162.306 million. Reduction of the rate of unemployment to 5 percent of the labor force would require creating 11.381 million jobs net of labor force growth that at the current rate would take 9.7 years (18.581 million minus 0.05(162.306 million) or 10.466 million divided by 1.080996, 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 the US fell from 147.315 million in Jul 2007 to 143.724 million in Apr 2013, by 3.591 million, or decline of 2.4 percent, while the noninstitutional population increased from 231.958 million in Jul 2007 to 245.175 million in Apr 2013, by 13.217 million or increase of 5.7 percent, using not seasonally adjusted data. 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. or force higher by 38.1 percent in 2009 relative to 1983 nearly three decades ago and total number of jobs in payrolls rose by 39.5 million in 2010 relative to 1983 or by 43.8 percent. The contraction after 2007 is deeper and followed by a flatter curve of job creation. Economic growth is much lower in the current expansion at 2.1 percent (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html). The average growth rate of 7.8 percent in the first four quarters of cyclical expansion is derived from 7.9 percent from IIIQ1954 to IIQ1955, 9.6 percent from IIIQ1958 to IIQ1959, 6.1 percent from IIIQ1975 to IIQ1986 and 7.7 percent from IQ1983 to IVQ1983. The United States missed this opportunity of high growth in the initial phase of recovery. 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). The average of 7.8 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 3.2 percent obtained by diving GDP of $13,103.5 billion in IIIQ2010 by GDP of $12,701.0 billion in IIQ2009 {[$13.103.5/$12,701.0 -1]100 = 3.2%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html). BEA data show the US economy in standstill with annual growth of 2.4 percent in 2010 decelerating to 1.8 percent annual growth in 2011, 2.2 percent in 2012 (http://www.bea.gov/iTable/index_nipa.cfm) and cumulative 1.7 percent in the four quarters of 2012 {[(1.02)^1/4(1.013)^1/4(1.031)^1/4(1.004)^1/4 – 1]100 = 1.7%} with minor rounding discrepancy using the SSAR of $13,665.4 billion in IVQ2012 relative to the SAAR of $13,441.0 billion in IVQ2011 {[($13665.4/$13441.00-1]100 = 1.7%}. %}. The growth rate in annual equivalent for the four quarters of 2011, the four quarters of 2012 and the first quarter of 2013 is 1.9 percent {[(1.00025 x 1.0062 x 1.0032 x 1.010 x 1.005 x 1.0032 x 1.0077 x 1.001 x 1.0062)^4/9 -1]100 = 1.9%], or {[($13,750.1/$13,181.2)]^4/9-1]100 = 1.9%} dividing the SAAR of IVQ2012 by the SAAR of IVQ2010 in Table I-6 below, obtaining the average for nine quarters and the annual average for one year of four quarters. The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.7 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html).

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

Month	1981	1982	1983	2008	2009	2010	Private
Jan	95	-327	225	14	-794	-13	-17
Feb	67	-6	-78	-85	-695	-40	-26
Mar	104	-129	173	-79	-830	154	111
Apr	74	-281	276	-215	-704	229	170
May	10	-45	277	-186	-352	521	102
Jun	196	-243	378	-169	-472	-130	94
Jul	112	-343	418	-216	-351	-86	103
Aug	-36	-158	-308	-270	-210	-37	129
Sep	-87	-181	1114	-459	-233	-43	113
Oct	-100	-277	271	-472	-170	228	188
Nov	-209	-124	352	-775	-21	144	154
Dec	-278	-14	356	-705	-220	95	114
			1984			2011	Private
Jan			447			69	80
Feb			479			196	243
Mar			275			205	223
Apr			363			304	303
May			308			115	183
Jun			379			209	177
Jul			312			78	206
Aug			241			132	129
Sep			311			225	256
Oct			286			166	174
Nov			349			174	197
Dec			127			230	249
			1985			2012	Private
Jan			266			311	323
Feb			124			271	265
Mar			346			205	208
Apr			195			112	120
May			274			125	152
Jun			145			87	78
Jul			189			153	177
Aug			193			165	131
Sep			204			138	118
Oct			187			160	217
Nov			209			247	256
Dec			168			219	224
			1985			2013	Private
Jan			123			148	164
Feb			107			332	319
Mar			93			138	154
Apr			188			165	176
May			125
Jun			-93
Jul			318
Aug			113
Sep			346
Oct			187
Nov			186
Dec			204

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

ESIII Stagnating Real Wages. Average hourly earnings of all US employees in the US in constant dollars of 1982-1984 from the dataset of the US Bureau of Labor Statistics (BLS) are provided in Table II-4. Average hourly earnings fell 0.5 percent after adjusting for inflation in the 12 months ending in Mar 2012 and gained 0.6 percent in the 12 months ending in Apr 2011 but then lost 0.6 percent in the 12 months ending in May 2012 with a gain of 0.3 percent in the 12 months ending in Jun 2012 and 1.0 percent in Jul 2012 followed by 0.1 percent in Aug 2012 and 0.7 percent in Sep 2012. Average hourly earnings adjusted by inflation fell 1.2 percent in the 12 months ending in Oct 2012. Average hourly earnings adjusted by inflation increased 0.1 percent in the 12 months ending in Nov 2012 and 1.1 percent in the 12 months ending in Dec 2012 but fell 0.2 percent in the 12 months ending in Jan 2013 and stagnated with gain of 0.1 percent in the 12 months ending in Feb 2013. Average hourly earnings adjusted for inflation increased 0.4 percent in the 12 months ending in Mar 2013. Table II-4 confirms the trend of deterioration of purchasing power of average hourly earnings in 2011 and into 2012 with 12-month percentage declines in three of the first four months of 2012 (-1.1 percent in Jan, -1.1 percent in Feb and -0.5 percent in Mar), declines of 0.6 percent in May and 1.2 percent in Oct and increase in five (0.6 percent in Apr, 0.3 percent in Jun, 1.0 percent in Jul, 0.7 percent in Sep and 1.1 percent in Dec) and stagnation in two (0.1 percent in Aug and 0.1 percent in Nov). Average hourly earnings adjusted for inflation fell 0.2 percent in the 12 months ending in Jan 2013, stagnated with gain of 0.1 percent in the 12 months ending in Feb 2013 and gained 0.4 percent in the 12 months ending Mar 2013. Annual data are revealing: -0.7 percent in 2008 during carry trades into commodity futures in a global recession, 3.2 percent in 2009 with reversal of carry trades, no change in 2010 and 2012 and decline by 1.1 percent in 2011. Annual average hourly earnings of all employees in the United States adjusted for inflation increased 1.4 percent from 2007 to 2012 at the yearly average rate of 0.3 percent (from $10.11 in 2007 to $10.25 in 2012 in dollars of 1982-1984 using data in http://www.bls.gov/data/). Those who still work bring back home a paycheck that buys fewer goods than a year earlier and savings in bank deposits do not pay anything because of financial repression (Section IIA2 and earlier http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html).

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

Year	Jan	Feb	Mar	Apr	May	Nov	Dec
2006			10.05	10.11	9.92	10.15	10.21
2007	10.23	10.22	10.14	10.18	10.02	10.05	10.17
2008	10.11	10.12	10.11	10.00	9.91	10.37	10.47
2009	10.48	10.50	10.47	10.40	10.32	10.40	10.38
2010	10.41	10.43	10.35	10.35	10.38	10.38	10.40
2011	10.53	10.41	10.26	10.22	10.22	10.25	10.30
2012	10.41	10.30	10.21	10.28	10.16	10.26	10.41
∆% 12 M 2012	-1.1	-1.1	-0.5	0.6	-0.6	0.1	1.1
2013	10.39	10.31	10.25
∆% 12 M 2013	-0.2	0.1	0.4

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

Chart II-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 $10.36 in 2009 and 2010 to $10.25 in 2011 and 2012 or loss of 1.1 percent (data in http://www.bls.gov/data/).

Chart II-2, US, Average Hourly Earnings of All Employees in Constant Dollars of 1982-1984, SA 2006-2013

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

Chart II-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 then 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 and 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 2013.

Chart II-3, Average Hourly Earnings of All Employees NSA 12-Month Percent Change, 1982-1984 Dollars, NSA 2007-2013

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

Average weekly earnings of all US employees in the US in constant dollars of 1982-1984 from the dataset of the US Bureau of Labor Statistics (BLS) are provided in Table II-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, increased 0.9 percent in the 12 months ending in Oct 2011, fell 1.0 percent in the 12 months ending in Nov 2011 and 0.3 in the 12 months ending in Dec 2011, declining 0.3 percent in the 12 months ending in Jan 2012 and 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, increasing 0.1 percent. Average weekly earnings in constant dollars increased 1.7 percent in Apr 2012 relative to Apr 2011 but fell 1.4 percent in May 2012 relative to May 2011, increasing 0.3 percent in the 12 months ending in Jun and 2.1 percent in Jul 2012. Real weekly earnings increased 0.4 percent in the 12 months ending in Aug 2012 and 2.1 percent in the 12 months ending in Sep 2012. Real weekly earnings fell 2.9 percent in the 12 months ending in Oct 2012 and increased 0.1 percent in the 12 months ending in Nov 2012 and 2.5 percent in the 12 months ending in Dec 2012. Real weekly earnings fell 1.6 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 0.4 percent in the 12 months ending in Mar 2013. Table II-5 confirms the trend of deterioration of purchasing power of average weekly earnings in 2011 and into 2012 with oscillations according to carry trades causing world inflation waves (http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html). On an annual basis, average weekly earnings in constant 1982-1984 dollars increased from $349.78 in 2007 to $353.66 in 2012, by 1.1 percent or at the average rate of 0.2 percent per year (data in http://www.bls.gov/data/). Annual average weekly earnings in constant dollars of $353.50 in 2010 were virtually unchanged at $353.66 in 2012. 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 (http://cmpassocregulationblog.blogspot.com/2013/04/recovery-without-hiring-ten-million.html).

Table II-5, US, Average Weekly Earnings of All Employees in Constant Dollars of 1982-1984, NSA 2007-2013

Year	Jan	Feb	Mar	Apr	Nov	Dec
2006			343.71	349.95	349.12	353.37
2007	348.72	349.40	347.76	353.41	346.85	356.11
2008	345.92	346.21	351.70	344.13	358.83	357.17
2009	354.10	360.31	355.81	349.33	356.59	351.95
2010	350.71	350.51	349.76	351.99	355.12	355.61
2011	360.29	353.81	349.90	350.62	351.44	354.41
2012	359.06	352.12	350.19	356.68	351.91	363.13
∆% 12 M 2012	-0.3	-0.5	0.1	1.7	0.1	2.5
2013	353.17	352.66	351.59
∆% 12 M 2013	-1.6	0.2	0.4

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

Chart II-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 and 2013.

Chart II-4, US, Average Weekly Earnings of All Employees in Constant Dollars of 1982-1984, SA 2006-2013

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

Chart II-5, US, Average Weekly Earnings of All Employees NSA in Constant Dollars of 1982-1984 12-Month Percent Change, NSA 2007-2013

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

ESIV Stagnating Real Disposable Income Per Capita. Chart IIA-3 provides personal income in the US between 1980 and 1989. These data are not adjusted for inflation that was still high in the 1980s in the exit from the Great Inflation of the 1960s and 1970s. Personal income grew steadily during the 1980s after recovery from two recessions from Jan IQ1980 to Jul IIIQ1980 and from Jul IIIQ1981 to Nov IVQ1982 (http://www.nber.org/cycles.html) with combined drop of GDP by 4.8 percent.

Chart IIA-3, US, Personal Income, Billion Dollars, Quarterly Seasonally Adjusted at Annual Rates, 1980-1989

Source: US Bureau of Economic Analysis

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

A different evolution of personal income is shown in Chart IB-4. Personal income also fell during the recession from Dec IVQ2007 to Jun IIQ2009 (http://www.nber.org/cycles.html). Growth of personal income during the expansion has been tepid even with the new revisions. In IVQ2012, nominal disposable personal income grew at the SAAR of 8.1 percent and real disposable personal income at 6.2 percent (http://www.bea.gov/iTable/index_nipa.cfm), which the BEA explains as: “Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf pages 1-2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf). The Bureau of Economic Analysis explains as (http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf 2-3): “The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base.”

The increase was provided in the “fiscal cliff” law H.R. 8 American Taxpayer Relief Act of 2012 (http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf).

In IQ2013, personal income fell at the SAAR of minus 3.2 percent; real personal income excluding current transfer receipts at minus 5.8 percent; and real disposable personal income at minus 5.3 percent (Table 5 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf). The BEA explains as follows (page 3 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf):

“The February and January changes in disposable personal income (DPI) mainly reflected the effect of special factors in January, such as the expiration of the “payroll tax holiday” and the acceleration of bonuses and personal dividends to November and to December in anticipation of changes in individual tax rates.”

Chart IIA-4, US, Personal Income, Current Billions of Dollars, Quarterly Seasonally Adjusted at Annual Rates, 2007-2013

Source: US Bureau of Economic Analysis

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

Real or inflation-adjusted disposable personal income is provided in Chart IIA-5 from 1980 to 1989. Real disposable income after allowing for taxes and inflation grew steadily at high rates during the entire decade.

Chart IIA-5, US, Real Disposable Income, Billions of Chained 2005 Dollars, Quarterly Seasonally Adjusted at Annual Rates 1980-1989

Source: US Bureau of Economic Analysis

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

Chart IIA-6, US, Real Disposable Income, Billions of Chained 2005 Dollars, Seasonally Adjusted at Annual Rates, 2007-2013

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

Chart IIA-7 provides percentage quarterly changes in real disposable income from the preceding period at seasonally adjusted annual rates from 1980 to 1989. Rates of changes were high during the decade with few negative changes.

Chart IIA-7, US, Real Disposable Income Percentage Change from Preceding Period at Quarterly Seasonally-Adjusted Annual Rates, 1980-1989

Source: US Bureau of Economic Analysis

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

Chart IIA-8 provides percentage quarterly changes in real disposable income from the preceding period at seasonally-adjusted annual rates from 2007 to 2012. There has been a period of positive rates followed by decline of rates and then negative and low rates in 2011. Recovery in 2012 has not reproduced the dynamism of the brief early phase of expansion. In IVQ2012, nominal disposable personal income grew at the SAAR of 7.9 percent and real disposable personal income at 6.2 percent, which the BEA explains as: Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf). In IQ2013, personal income fell at the SAAR of minus 3.2 percent; real personal income excluding current transfer receipts at minus 5.8 percent; and real disposable personal income at minus 5.3 percent (Table 5 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf). The BEA explains as follows (page 3 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf):

Chart, IIA-8, US, Real Disposable Income, Percentage Change from Preceding Period at Seasonally-Adjusted Annual Rates, 2007-2013

Source: US Bureau of Economic Analysis

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

In the latest available report, the Bureau of Economic Analysis (BEA) estimates US personal income in Mar 2013 at the seasonally adjusted annual rate of $13,630.4 billion, as shown in Table IIA-3 above (see Table 1 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf). The major portion of personal income is compensation of employees of $8,763.9 billion, or 64.3 percent of the total. Wage and salary disbursements are $7,039.2 billion, of which $5,831.7 billion by private industries and supplements to wages and salaries of $1,724.7 billion (employer contributions to pension and insurance funds are $1,195.3 billion and contributions to social insurance are $529.4 billion). In Dec 1985, US personal income was $3,596.4 billion at SAAR (http://www.bea.gov/iTable/index_nipa.cfm). Compensation of employees was $2,498.5 billion, or 69.5 percent of the total. Wage and salary disbursement were $2.056.3 billion of which $1671.0 billion by private industries. Supplements to wages and salaries were $442.2 billion with employer contributions to pension and insurance funds of $289.4 billion and $152.9 billion to government social insurance. Chart IIA-9 provides US wage and salary disbursement by private industries in the 1980s. Growth was robust after the interruption of the recessions.

Chart IIA-9, US, Wage and Salary Disbursement, Private Industries, Quarterly, Seasonally Adjusted at Annual Rates Billions of Dollars, 1980-1989

Source: US Bureau of Economic Analysis

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

Chart IIA-10 shows US wage and salary disbursement of private industries from 2007 to 2012. There is a drop during the contraction followed by initial recovery in 2010 and then the current much weaker relative performance in 2011, 2012 and 2013.

Chart IIA-10, US, Wage and Salary Disbursement, Private Industries, Quarterly, Seasonally Adjusted at Annual Rates, Billions of Dollars 2007-2013

Source: US Bureau of Economic Analysis

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

Chart IIA-11 provides finer detail with monthly wage and salary disbursement of private industries from 2007 to 2013. There is decline during the contraction and a period of mild recovery followed by stagnation and recent recovery that is weaker than in earlier expansion periods of the business cycle. There is decline of 0.6 percent in Jan 2013 because of the higher contributions to government social insurance followed by recovery of 0.7 percent in Feb 2013 and 0.2 percent in Mar 2013.

Chart IIA-11, US, Wage and Salary Disbursement, Private Industries, Monthly, Seasonally Adjusted at Annual Rates, Billions of Dollars 2007-2013

Source: US Bureau of Economic Analysis

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

Chart IIA-12 provides monthly real disposable personal income per capita from 1980 to 1989. This is the ultimate measure of wellbeing in receiving income by obtaining the value per inhabitant. The measure cannot adjust for the distribution of income. Real disposable personal income per capita grew rapidly during the expansion after 1983 and continued growing during the rest of the decade.

Chart IIA-12, US, Real Disposable Per Capita Income, Monthly, Seasonally Adjusted at Annual Rates, Billions of Dollars 1980-1989

Source: US Bureau of Economic Analysis

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

Chart IIA-13 provides monthly real disposable personal per capita income from 2007 to 2013. There was initial recovery from the drop during the global recession followed by stagnation. Real per capita disposable income increased 1.1 percent from $32,602 in chained dollars of 2005 in Oct 2012 to $32,967 in Nov 2012 and 2.7 percent to $33,846 in Dec 2012 for cumulative increase of 3.8 percent from Oct 2012 to Dec 2012. Real per capita disposable income fell 4.1 percent from $33,846 in Dec 2012 to $32,467 in Jan 2013, increasing marginally 0.7 percent to $32,686 in Feb 2013 for cumulative change of 0.3 percent from Oct 2012 (data at http://www.bea.gov/iTable/index_nipa.cfm). This increase is shown in a jump in the final segment in Chart IIA-13 with Nov-Dec 2012, decline in Jan 2013 and recovery in Feb 2013. Real per capita disposable income increased 0.2 percent from $32,686 in Feb 2013 in chained dollars of 2005 to $32,767 in Mar 2013 for cumulative gain of 0.5 percent relative to Oct 2012. BEA explains as: “Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf pages 1-2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf). The Bureau of Economic Analysis explains as (http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf 2-3): “The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base.”

The increase was provided in the “fiscal cliff” law H.R. 8 American Taxpayer Relief Act of 2012 (http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf).

The BEA explains as follows (page 3 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf):

Chart IIA-13, US, Real Disposable Per Capita Income, Monthly, Seasonally Adjusted at Annual Rates, Billions of Dollars 2007-2013

Source: US Bureau of Economic Analysis

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

ESV Financial Repression. McKinnon (1973) and Shaw (1974) argue that legal restrictions on financial institutions can be detrimental to economic development. “Financial repression” is the term used in the economic literature for these restrictions (see Pelaez and Pelaez, Globalization and the State, Vol. II (2008b), 81-6). Interest rate ceilings on deposits and loans have been commonly used. Prohibition of payment of interest on demand deposits and ceilings on interest rates on time deposits were imposed by the Banking Act of 1933. These measures were justified by arguments that the banking panic of the 1930s was caused by competitive rates on bank deposits that led banks to engage in high-risk loans (Friedman, 1970, 18; see Pelaez and Pelaez, Regulation of Banks and Finance (2009b), 74-5). The objective of policy was to prevent unsound loans in banks. Savings and loan institutions complained of unfair competition from commercial banks that led to continuing controls with the objective of directing savings toward residential construction. Friedman (1970, 15) argues that controls were passive during periods when rates implied on demand deposit were zero or lower and when Regulation Q ceilings on time deposits were above market rates on time deposits. The Great Inflation or stagflation of the 1960s and 1970s changed the relevance of Regulation Q.

Most regulatory actions trigger compensatory measures by the private sector that result in outcomes that are different from those intended by regulation (Kydland and Prescott 1977). Banks offered services to their customers and loans at rates lower than market rates to compensate for the prohibition to pay interest on demand deposits (Friedman 1970, 24). The prohibition of interest on demand deposits was eventually lifted in recent times. In the second half of the 1960s, already in the beginning of the Great Inflation (DeLong 1997), market rates rose above the ceilings of Regulation Q because of higher inflation. Nobody desires savings allocated to time or savings deposits that pay less than expected inflation. This is a fact currently with zero interest rates and consumer price inflation of 2.0 percent in the 12 months ending in Feb 2013 (http://www.bls.gov/cpi/) but rising during waves of carry trades from zero interest rates to commodity futures exposures (http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html). Funding problems motivated compensatory measures by banks. Money-center banks developed the large certificate of deposit (CD) to accommodate increasing volumes of loan demand by customers. As Friedman (1970, 25) finds:

“Large negotiable CD’s were particularly hard hit by the interest rate ceiling because they are deposits of financially sophisticated individuals and institutions who have many alternatives. As already noted, they declined from a peak of $24 billion in mid-December, 1968, to less than $12 billion in early October, 1969.”

Banks created different liabilities to compensate for the decline in CDs. As Friedman (1970, 25; 1969) explains:

“The most important single replacement was almost surely ‘liabilities of US banks to foreign branches.’ Prevented from paying a market interest rate on liabilities of home offices in the United States (except to foreign official institutions that are exempt from Regulation Q), the major US banks discovered that they could do so by using the Euro-dollar market. Their European branches could accept time deposits, either on book account or as negotiable CD’s at whatever rate was required to attract them and match them on the asset side of their balance sheet with ‘due from head office.’ The head office could substitute the liability ‘due to foreign branches’ for the liability ‘due on CDs.”

Friedman (1970, 26-7) predicted the future:

“The banks have been forced into costly structural readjustments, the European banking system has been given an unnecessary competitive advantage, and London has been artificially strengthened as a financial center at the expense of New York.”

In short, Depression regulation exported the US financial system to London and offshore centers. What is vividly relevant currently from this experience is the argument by Friedman (1970, 27) that the controls affected the most people with lower incomes and wealth who were forced into accepting controlled-rates on their savings that were lower than those that would be obtained under freer markets. As Friedman (1970, 27) argues:

“These are the people who have the fewest alternative ways to invest their limited assets and are least sophisticated about the alternatives.”

Chart IIA-14 of the Bureau of Economic Analysis (BEA) provides quarterly savings as percent of disposable income or the US savings rate from 1980 to 2012. There was a long-term downward sloping trend from 12 percent in the early 1980s to less than 2 percent in 2005-2006. The savings rate then rose during the contraction and also in the expansion. In 2011 and into 2012 the savings rate declined as consumption is financed with savings in part because of the disincentive or frustration of receiving a few pennies for every $10,000 of deposits in a bank. The savings rate increased in the final segment of Chart IIA-14 in 2012 followed by another decline because of the pain of the opportunity cost of zero remuneration for hard-earned savings. Swelling realization of income in Oct-Dec 2012 in anticipation of tax increases in Jan 2012 caused the jump of the savings rate to 6.5 percent in Dec 2012. The BEA explains as: Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf). The savings rate then collapsed to 2.3 percent in Jan 2013 in part because of the decline of 4.0 percent in real disposable personal income and to 2.7 percent with increase of real disposable income by 0.7 percent in Feb 2013. The savings rate remained at 2.7 percent in Mar 2013 with increase of real disposable income by 0.3 percent. The decline of personal income was caused by increasing contributions to government social insurance (page 1 http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf). The objective of monetary policy is to reduce borrowing rates to induce consumption but it has collateral disincentive of reducing savings and misallocating resources away from their best uses. The zero interest rate of monetary policy is a tax on saving. This tax is highly regressive, meaning that it affects the most people with lower income or wealth and retirees. The long-term decline of savings rates in the US has created a dependence on foreign savings to finance the deficits in the federal budget and the balance of payments.

Chart IIA-14, US, Personal Savings as a Percentage of Disposable Personal Income, Quarterly, 1980-2013

Source: US Bureau of Economic Analysis

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

Chart IIA-15 of the US Bureau of Economic Analysis provides personal savings as percent of personal disposable income, or savings ratio, from Jan 2007 to Mar 2013. The uncertainties caused by the global recession resulted in sharp increase in the savings ratio that peaked at 8.3 percent in May 2008 (http://www.bea.gov/iTable/index_nipa.cfm). The second highest ratio occurred at 6.7 percent in May 2009. There was another rising trend until 5.8 percent in Jun 2010 and then steady downward trend until trough of 3.2 percent in Nov 2011, which was followed by an upward trend with 4.1 percent in Jun 2012 but decline to 3.7 percent in Aug 2012, 3.3 percent in Sep 2012, 3.4 percent in Oct and increase to 4.1 percent in Nov 2012 followed by jump to 6.5 percent in Dec 2012. Swelling realization of income in Oct-Dec 2012 in anticipation of tax increases in Jan 2012 caused the jump of the savings rate to 6.5 percent in Dec 2012. The BEA explains as: Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf). There was a reverse effect in Jan 2013 with decline of the savings rate to 2.3 percent. Real disposable personal income fell 4.0 percent and real disposable per capita income fell from $33,846 in Dec 2012 to $32,467 in Jan 2013 or by 4.1 percent, which is explained by the Bureau of Economic Analysis as follows (page 3 http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf):

“Contributions for government social insurance -- a subtraction in calculating personal income --increased $6.4 billion in February, compared with an increase of $126.8 billion in January. The

January estimate reflected increases in both employer and employee contributions for government social insurance. The January estimate of employee contributions for government social insurance reflected the expiration of the “payroll tax holiday,” that increased the social security contribution rate for employees and self-employed workers by 2.0 percentage points, or $114.1 billion at an annual rate. For additional information, see FAQ on “How did the expiration of the payroll tax holiday affect personal income for January 2013?” at www.bea.gov. The January estimate of employee contributions for government social insurance also reflected an increase in the monthly premiums paid by participants in the supplementary medical insurance program, in the hospital insurance provisions of the Patient Protection and Affordable Care Act, and in the social security taxable wage base; together, these changes added $12.9 billion to January. Employer contributions were boosted $5.9 billion in January, which reflected increases in the social security taxable wage base (from $110,100 to $113,700), in the tax rates paid by employers to state unemployment insurance, and in employer contributions for the federal unemployment tax and for pension guaranty. The total contribution of special factors to the January change in contributions for government social insurance was $132.9billion.”

Consumption was maintained by burning savings because of the drain of decline of real disposable personal income by 4.0 percent and 4.1 percent in per capita terms. The savings rate rose to 2.7 percent in Feb 2013 with increase of real per capita income by 0.7 percent and remained at 2.7 percent in Mar 2013 with further increase of real per capita disposable income by 0.2 percent. Permanent manipulation of the entire spectrum of interest rates with monetary policy measures distorts the compass of resource allocation with inferior outcomes of future growth, employment and prosperity and dubious redistribution of income and wealth worsening the most the personal welfare of people without vast capital and financial relations to manage their savings.

Chart IIA-15, US, Personal Savings as a Percentage of Disposable Income, Monthly 2007-2013

Source: US Bureau of Economic Analysis

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

ESVI Stagnating United States Labor Productivity. The Bureau of Labor Statistics (BLS) of the Department of Labor provides the quarterly report on productivity and costs. The operational definition of productivity used by the BLS is (http://www.bls.gov/news.release/pdf/prod2.pdf 1): “Labor productivity, or output per hour, is calculated by dividing an index of real output by an index of hours worked of all persons, including employees, proprietors, and unpaid family workers.” The BLS has revised the estimates for productivity and unit costs. Table VA-1 provides revised data for nonfarm business sector productivity and unit labor costs for IQ2013 and the final two quarters of 2012 in seasonally adjusted annual equivalent (SAAE) rate and the percentage change from the same quarter a year earlier. Reflecting increases in output of 2.5 percent and of 1.8 percent in hours worked, nonfarm business sector labor productivity increased at a SAAE rate of 0.7 percent in IQ2013, as shown in column 2 “IQ2013 SAEE.” The increase of labor productivity from IQ2012 to IQ2013 was 0.9 percent, reflecting increases in output of 2.5 percent and of hours worked of 1.5 percent, as shown in column 3 “IQ2013 YoY.” Hours worked increased from 1.6 percent in IIIQ2012 in SAAE to 2.4 percent in IVQ2012 and 1.8 percent in IQ2013 while output growth fell from 4.7 percent in IIIQ2011 to 0.7 percent in IVQ2012 and 2.5 percent in IQ2013. The BLS defines unit labor costs as (http://www.bls.gov/news.release/pdf/prod2.pdf 1): “BLS defines unit labor costs as the ratio of hourly compensation to labor productivity; increases in hourly compensation tend to increase unit labor costs and increases in output per hour tend to reduce them.” Unit labor costs increased at the SAAE rate of 0.5 percent in IQ2013 and rose 0.6 percent in IQ2013 relative to IQ2012. Hourly compensation increased at the SAAE rate of 1.2 percent in IQ2013, which deflating by the estimated consumer price increase SAAE rate in IQ2013 results in decrease of real hourly compensation at 0.3 percent. Real hourly compensation decreased 0.1 percent in IQ2013 relative to IQ2012.

Table VA-1, US, Nonfarm Business Sector Productivity and Costs %

	IQ 2013 SAAE	IQ 2013 YoY	IVQ 2012 SAAE	IVQ 2012 YoY	IIIQ 2012 SAAE	IIIQ 2012 YoY
Productivity	0.7	0.9	-1.7	0.6	3.1	1.6
Output	2.5	2.5	0.7	2.5	4.7	3.7
Hours	1.8	1.5	2.4	1.9	1.6	2.1
Hourly Comp.	1.2	1.6	2.7	2.7	1.2	1.7
Real Hourly Comp.	-0.3	-0.1	0.4	0.7	-0.9	0.0
Unit Labor Costs	0.5	0.6	4.4	2.0	-1.9	0.1
Unit Nonlabor Payments	0.7	2.2	-5.3	1.0	9.3	3.6
Implicit Price Deflator	0.6	1.3	0.2	1.6	2.7	1.6

Notes: SAAE: seasonally adjusted annual equivalent; Comp.: compensation; YoY: Quarter on Same Quarter Year Earlier

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

In 2012, productivity increased 0.7 percent in the annual average, as shown in Table VA-2. Increases in productivity were 0.6 percent in 2011, 3.1 percent in 2010 and 2.9 percent in 2008. Savings of labor inputs have characterized the contraction period and the recovery period. Real hourly compensation fell 0.6 percent in 2012 and 0.6 percent in 2011, interrupting increases of 0.4 percent in 2010 and 1.8 percent in 2009. Unit labor costs fell 1.5 percent in 2009 and 1.0 percent in 2010 but increased 2.0 percent in 2011 and 0.7 percent in 2012.

Table VA-2, US, Revised Nonfarm Business Sector Productivity and Costs Annual Average, ∆% Annual Average

	2012 ∆%	2011 ∆%	2010 ∆%	2009 ∆%	2008 ∆%	2007 ∆%
Productivity	0.7	0.6	3.1	2.9	0.6	1.5
Real Hourly Compensation	-0.6	-0.6	0.4	1.8	-0.4	1.1
Unit Labor Costs	0.7	2.0	-1.0	-1.5	2.8	2.4

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

Productivity jumped in the recovery after the recession from Mar IQ2001 to Nov IVQ2001 (http://www.nber.org/cycles.html). Table VA-3 provides quarter on quarter and annual percentage changes in nonfarm business output per hour, or productivity, from 1999 to 2012. The annual average jumped from 3.0 percent in 2001 to 4.5 percent in 2002. Nonfarm business productivity increased at the SAAE rate of 8.9 percent in the first quarter after the recession in IQ2002. Productivity increases decline later in the expansion period. Productivity increases were mediocre during the recession from Dec IVQ2007 to Sep IIIQ2009 (http://www.nber.org/cycles.html) and increased during the first phase of expansion from IIQ2009 to IQ2010, trended lower and collapsed in 2011 and 2012 with sporadic jumps and declines in five out of eight quarters. Productivity increased at 0.7 percent in IQ2013.

Table VA-3, US, Nonfarm Business Output per Hour, Percent Change from Prior Quarter at Annual Rate, 1999-2012

Year	Qtr1	Qtr2	Qtr3	Qtr4	Annual
1999	4.0	0.3	3.4	7.0	3.3
2000	-1.4	9.1	0.1	4.2	3.4
2001	-1.1	7.4	2.2	5.8	3.0
2002	8.9	0.2	3.9	-0.1	4.5
2003	3.5	5.6	9.6	1.4	3.7
2004	0.7	3.4	0.3	1.0	2.7
2005	4.3	-0.9	3.0	-0.1	1.7
2006	2.9	0.2	-2.4	2.8	0.9
2007	-0.2	3.3	4.7	2.0	1.5
2008	-2.5	2.4	-1.0	-3.4	0.6
2009	5.8	6.5	5.2	4.8	2.9
2010	3.1	-0.5	3.2	1.7	3.1
2011	-1.3	0.6	-0.1	2.3	0.6
2012	-0.7	1.7	3.1	-1.7	0.7
2013	0.7

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

Chart VA-1 of the Bureau of Labor Statistics (BLS) provides SAAE rates of nonfarm business productivity from 1999 to 2012. There is a clear pattern in both episodes of economic cycles in 2001 and 2007 of rapid expansion of productivity in the transition from contraction to expansion followed by more subdued productivity expansion. Part of the explanation is the reduction in labor utilization resulting from adjustment of business to the sudden shock of collapse of revenue. Productivity rose briefly in the expansion after 2009 but then collapsed and moved to negative change with some positive changes recently at lower rates.

Chart VA-1, US, Nonfarm Business Output per Hour, Percent Change from Prior Quarter at Annual Rate, 1999-2013

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

Chart VA-6 provides percentage changes in a quarter relative to the same quarter a year earlier for nonfarm business real hourly compensation. Labor compensation eroded sharply during the recession with brief recovery in 2010 and another fall until recently.

Chart VA-6, US, Nonfarm Business Real Hourly Compensation, Percent Change Same Quarter a Year Earlier 1999-2013

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

Rapid increase of US labor productivity in the 1990s is shown in Chart VA-7 with the index of nonfarm business labor productivity from 1947 to 2012. The rate of productivity increase continued in the early part of the 2000s but then softened and fell during the global recession.

Chart VA-7, US, Nonfarm Business Labor Productivity, Output per Hour, 1947-2012, Index 2005=100

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

Unit labor costs increased sharply during the Great Inflation from the late 1960s to 1981 as shown by sharper slope in Chart VA-8. Unit labor costs continued to increase but at a lower rate.

Chart VA-8, US, Nonfarm Business, Unit Labor Costs, 1947-2012, Index 2005=100

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

Real hourly compensation increased at relatively high rates after 1947 to the early 1970s but reached a plateau that lasted until the early 1990s, as shown in Chart VA-9. There were rapid increases until the global recession.

Chart VA-9, US, Nonfarm Business, Real Hourly Compensation, 1947-2012, Index 2005=100

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

ESVII Stagnating United States Private Sector Wages and Salaries. There is different behavior of 12 months percentage rates of private-sector wages and salaries in Chart VA-14. Rates fell in the first part of the decade and then rose into 2007. Rates of change in 12 months of wages and salaries in the private sector fell during the global contraction to barely above 1 percent and have not rebounded sufficiently while inflation has returned in waves.

Chart VA-14, US, ECI, Wages and Salaries, Private Industry, 12 Months Percent Change, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ncs/ect/

Chart VA-15 provides 12-month percentage rates of change of the consumer price index of the US. Inflation has risen sharply into 2011 with 3.0 percent in the 12 months ending in Dec while wage and salary increases in the private sector have risen by 1.6 percent in the 12 months ending in Dec. Wages and salaries rose 1.9 percent in the 12 months ending in Mar while inflation was 2.7 percent in the 12 months ending in Mar. Wage and salaries of the private sector increased 1.8 percent in the 12 months ending in Jun, which is almost equal to inflation of 1.7 percent. Wages and salaries increased 1.7 percent in the 12 months ending in Sep 2012 while inflation was 2.0 percent. Wages and salaries increased 1.7 percent in Dec 2012 while inflation was 1.7 percent. Wages and salaries increased 1.6 percent in the 12 months ending in Mar 2013 while inflation was 1.5 percent.

Chart VA-15, US, Consumer Price Index, 12-Month Percentage Change, NSA, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/ncs/ect/

ESVIII Global Financial and Economic Risk. The International Monetary Fund (IMF) provides an international safety net for prevention and resolution of international financial crises. The IMF’s Financial Sector Assessment Program (FSAP) provides analysis of the economic and financial sectors of countries (see Pelaez and Pelaez, International Financial Architecture (2005), 101-62, Globalization and the State, Vol. II (2008), 114-23). Relating economic and financial sectors is a challenging task both for theory and measurement. The IMF (2012WEOOct) provides surveillance of the world economy with its Global Economic Outlook (WEO) (http://www.imf.org/external/pubs/ft/weo/2012/02/index.htm), of the world financial system with its Global Financial Stability Report (GFSR) (IMF 2012GFSROct) (http://www.imf.org/external/pubs/ft/gfsr/2012/02/index.htm) and of fiscal affairs with the Fiscal Monitor (IMF 2012FMOct) (http://www.imf.org/external/pubs/ft/fm/2012/02/fmindex.htm). There appears to be a moment of transition in global economic and financial variables that may prove of difficult analysis and measurement. It is useful to consider a summary of global economic and financial risks, which are analyzed in detail in the comments of this blog in Section VI Valuation of Risk Financial Assets, Table VI-4.

Economic risks include the following:

China’s Economic Growth. China is lowering its growth target to 7.5 percent per year. China’s GDP growth decelerated significantly from annual equivalent 9.9 percent in IIQ2011 to 7.4 percent in IVQ2011 and 6.6 percent in IQ2012, rebounding to 7.8 percent in IIQ2012, 8.7 percent in IIIQ2012 and 8.2 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 6.6 percent. (See Subsection VC and earlier at http://cmpassocregulationblog.blogspot.com/2013/01/recovery-without-hiring-world-inflation.html and earlier at http://cmpassocregulationblog.blogspot.com/2012/10/world-inflation-waves-stagnating-united_21.html).
United States Economic Growth, Labor Markets and Budget/Debt Quagmire. The US is growing slowly with 28.6 million in job stress, fewer 10 million full-time jobs, high youth unemployment, historically low hiring and declining real wages.
Economic Growth and Labor Markets in Advanced Economies. Advanced economies are growing slowly. There is still high unemployment in advanced economies.
World Inflation Waves. Inflation continues in repetitive waves globally (http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html and earlier http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html ).

A list of financial uncertainties includes:

Euro Area Survival Risk. The resilience of the euro to fiscal and financial doubts on larger member countries is still an unknown risk.
Foreign Exchange Wars. Exchange rate struggles continue as zero interest rates in advanced economies induce devaluation of their currencies.
Valuation of Risk Financial Assets. Valuations of risk financial assets have reached extremely high levels in markets with lower volumes.
Duration Trap of the Zero Bound. The yield of the US 10-year Treasury rose from 2.031 percent on Mar 9, 2012, to 2.294 percent on Mar 16, 2012. Considering a 10-year Treasury with coupon of 2.625 percent and maturity in exactly 10 years, the price would fall from 105.3512 corresponding to yield of 2.031 percent to 102.9428 corresponding to yield of 2.294 percent, for loss in a week of 2.3 percent but far more in a position with leverage of 10:1. Min Zeng, writing on “Treasurys fall, ending brutal quarter,” published on Mar 30, 2012, in the Wall Street Journal (http://professional.wsj.com/article/SB10001424052702303816504577313400029412564.html?mod=WSJ_hps_sections_markets), informs that Treasury bonds maturing in more than 20 years lost 5.52 percent in the first quarter of 2012.
Credibility and Commitment of Central Bank Policy. There is a credibility issue of the commitment of monetary policy (Sargent and Silber 2012Mar20).
Carry Trades. Commodity prices driven by zero interest rates have resumed their increasing path with fluctuations caused by intermittent risk aversion

Matt Jarzemsky, writing on Dow industrials set record,” on Mar 5, 2013, published in the Wall Street Journal (http://professional.wsj.com/article/SB10001424127887324156204578275560657416332.html), analyzes that the DJIA broke the closing high of 14164.53 set on Oct 9, 2007, and subsequently also broke the intraday high of 14,198.10 reached on Oct 11, 2007. The DJIA closed at 14973.96

on Fri May 3, 2013, which is higher by 5.7 percent than the value of 14,164.53 reached on Oct 9, 2007 and higher by 5.5 percent than the value of 14,198.10 reached on Oct 11, 2007. Values of risk financial are approaching or exceeding historical highs.

Jon Hilsenrath, writing on “Jobs upturn isn’t enough to satisfy Fed,” on Mar 8, 2013, published in the Wall Street Journal (http://professional.wsj.com/article/SB10001424127887324582804578348293647760204.html), finds that much stronger labor market conditions are required for the Fed to end quantitative easing. Unconventional monetary policy with zero interest rates and quantitative easing is quite difficult to unwind because of the adverse effects of raising interest rates on valuations of risk financial assets and home prices, including the very own valuation of the securities held outright in the Fed balance sheet. Gradual unwinding of 1 percent fed funds rates from Jun 2003 to Jun 2004 by seventeen consecutive increases of 25 percentage points from Jun 2004 to Jun 2006 to reach 5.25 percent caused default of subprime mortgages and adjustable-rate mortgages linked to the overnight fed funds rate. The zero interest rate has penalized liquidity and increased risks by inducing carry trades from zero interest rates to speculative positions in risk financial assets. There is no exit from zero interest rates without provoking another financial crash.

The carry trade from zero interest rates to leveraged positions in risk financial assets had proved strongest for commodity exposures but US equities have regained leadership. The DJIA has increased 54.6 percent since the trough of the sovereign debt crisis in Europe on Jul 2, 2010 to May 3, 2013, S&P 500 has gained 57.9 percent and DAX 43.2 percent. Before the current round of risk aversion, almost all assets in the column “∆% Trough to 5/3/13” had double digit gains relative to the trough around Jul 2, 2010 followed by negative performance but now some valuations of equity indexes show varying behavior: China’s Shanghai Composite is 7.4 percent below the trough; Japan’s Nikkei Average is 55.2 percent above the trough; DJ Asia Pacific TSM is 25.0 percent above the trough; Dow Global is 28.6 percent above the trough; STOXX 50 of 50 blue-chip European equities (http://www.stoxx.com/indices/index_information.html?symbol=sx5E) is 20.5 percent above the trough; and NYSE Financial Index is 35.2 percent above the trough. DJ UBS Commodities is 7.4 percent above the trough. DAX index of German equities (http://www.bloomberg.com/quote/DAX:IND) is 43.2 percent above the trough. Japan’s Nikkei Average is 55.2 percent above the trough on Aug 31, 2010 and 20.2 percent above the peak on Apr 5, 2010. The Nikkei Average closed at 13694.04

on Fri May 3, 2013 (http://professional.wsj.com/mdc/public/page/marketsdata.html?mod=WSJ_PRO_hps_marketdata), which is 33.5 percent higher than 10,254.43 on Mar 11, 2011, on the date of the Tōhoku or Great East Japan Earthquake/tsunami. Global risk aversion erased the earlier gains of the Nikkei. The dollar depreciated by 10.0 percent relative to the euro and even higher before the new bout of sovereign risk issues in Europe. The column “∆% week to 5/3/13” in Table VI-4 shows increase of 1.3 percent for China’s Shanghai Composite in the week. DJ Asia Pacific decreased 0.2 percent. NYSE Financial increased 2.2 percent in the week. DJ UBS Commodities increased 0.9 percent. Dow Global increased 1.8 percent in the week of May 3, 2013. The DJIA increased 1.8 percent and S&P 500 increased 2.0 percent. DAX of Germany increased 3.9 percent. STOXX 50 increased 1.8 percent. The USD depreciated 0.7 percent. There are still high uncertainties on European sovereign risks and banking soundness, US and world growth slowdown and China’s growth tradeoffs. Sovereign problems in the “periphery” of Europe and fears of slower growth in Asia and the US cause risk aversion with trading caution instead of more aggressive risk exposures. There is a fundamental change in Table VI-4 from the relatively upward trend with oscillations since the sovereign risk event of Apr-Jul 2010. Performance is best assessed in the column “∆% Peak to 5/3/13” that provides the percentage change from the peak in Apr 2010 before the sovereign risk event to May 3, 2013. Most risk financial assets had gained not only relative to the trough as shown in column “∆% Trough to 5/3/13” but also relative to the peak in column “∆% Peak to 5/3/13.” There are now several equity indexes above the peak in Table VI-4: DJIA 33.6 percent, S&P 500 32.6 percent, DAX 28.3 percent, Dow Global 4.9 percent, DJ Asia Pacific 9.4 percent, NYSE Financial Index (http://www.nyse.com/about/listed/nykid.shtml) 7.7 percent, Nikkei Average 20.2 percent and STOXX 2.0 percent. There is only one equity index below the peak: Shanghai Composite by 30.3 percent. DJ UBS Commodities Index is now 8.2 percent below the peak. The US dollar strengthened 13.3 percent relative to the peak. The factors of risk aversion have adversely affected the performance of risk financial assets. The performance relative to the peak in Apr 2010 is more important than the performance relative to the trough around early Jul 2010 because improvement could signal that conditions have returned to normal levels before European sovereign doubts in Apr 2010. Kate Linebaugh, writing on “Falling revenue dings stocks,” on Oct 20, 2012, published in the Wall Street Journal (http://professional.wsj.com/article/SB10000872396390444592704578066933466076070.html?mod=WSJPRO_hpp_LEFTTopStories), identifies a key financial vulnerability: falling revenues across markets for United States reporting companies. Global economic slowdown is reducing corporate sales and squeezing corporate strategies. Linebaugh quotes data from Thomson Reuters that 100 companies of the S&P 500 index have reported declining revenue only 1 percent higher in Jun-Sep 2012 relative to Jun-Sep 2011 but about 60 percent of the companies are reporting lower sales than expected by analysts with expectation that revenue for the S&P 500 will be lower in Jun-Sep 2012 for the entities represented in the index. Results of US companies are likely repeated worldwide. It may be quite painful to exit QE→∞ or use of the balance sheet of the central together with zero interest rates forever. The basic valuation equation that is also used in capital budgeting postulates that the value of stocks or of an investment project is given by:

Where R_τ is expected revenue in the time horizon from τ =1 to T; C_τ denotes costs; and ρ is an appropriate rate of discount. In words, the value today of a stock or investment project is the net revenue, or revenue less costs, in the investment period from τ =1 to T discounted to the present by an appropriate rate of discount. In the current weak economy, revenues have been increasing more slowly than anticipated in investment plans. An increase in interest rates would affect discount rates used in calculations of present value, resulting in frustration of investment decisions. If V represents value of the stock or investment project, as ρ → ∞, meaning that interest rates increase without bound, then V → 0, or

declines. Equally, decline in expected revenue from the stock or project, R_τ, causes decline in valuation. An intriguing issue is the difference in performance of valuations of risk financial assets and economic growth and employment. Paul A. Samuelson (http://www.nobelprize.org/nobel_prizes/economics/laureates/1970/samuelson-bio.html).

Table VI-4, Stock Indexes, Commodities, Dollar and 10-Year Treasury

	Peak	Trough	∆% to Trough	∆% Peak to 5/3/ /13	∆% Week 5/3/13	∆% Trough to 5/3/ 13
DJIA	4/26/ 10	7/2/10	-13.6	33.6	1.8	54.6
S&P 500	4/23/ 10	7/20/ 10	-16.0	32.6	2.0	57.9
NYSE Finance	4/15/ 10	7/2/10	-20.3	7.7	2.2	35.2
Dow Global	4/15/ 10	7/2/10	-18.4	4.9	1.8	28.6
Asia Pacific	4/15/ 10	7/2/10	-12.5	9.4	-0.2	25.0
Japan Nikkei Aver.	4/05/ 10	8/31/ 10	-22.5	20.2	-1.4	55.2
China Shang.	4/15/ 10	7/02 /10	-24.7	-30.3	1.3	-7.4
STOXX 50	4/15/10	7/2/10	-15.3	2.0	1.8	20.5
DAX	4/26/ 10	5/25/ 10	-10.5	28.3	3.9	43.2
Dollar Euro	11/25 2009	6/7 2010	21.2	13.3	-0.7	-10.0
DJ UBS Comm.	1/6/ 10	7/2/10	-14.5	-8.2	0.9	7.4
10-Year T Note	4/5/ 10	4/6/10	3.986	1.742

T: trough; Dollar: positive sign appreciation relative to euro (less dollars paid per euro), negative sign depreciation relative to euro (more dollars paid per euro)

Source: http://professional.wsj.com/mdc/page/marketsdata.html?mod=WSJ_hps_marketdata

I Thirty 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. 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 use of 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), which is the case of the data for Jan 2013 released on Feb 1, 2013:

“In accordance with annual practice, the establishment survey data released today have been benchmarked to reflect comprehensive counts of payroll jobs. These counts are derived principally from unemployment insurance tax records for March 2012. The benchmark process results in revisions to not seasonally adjusted data from April 2011 forward. Seasonally adjusted data from January 2008 forward are subject to revision. In addition, data for some series prior to 2008, both seasonally adjusted and unadjusted, incorporate minor revisions.

The total nonfarm employment level for March 2012 was revised upward by 422,000 (424,000 on a not seasonally adjusted basis). Table A presents revised total nonfarm employment data on a seasonally adjusted basis for January through December 2012.”

The range of differences in total nonfarm employment in revisions in Table A of the employment situation report for Feb 2013 (page 4 at http://www.bls.gov/news.release/pdf/empsit.pdf) is from 348,000 for Jan 2012 to 647,000 for Dec 2012. 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):

“Effective with data for January 2013, 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 2012 and earlier months. To show the impact of the population adjustment, however, differences in selected December 2012 labor force series based on the old and new population estimates are shown in table B.

The adjustment increased the estimated size of the civilian noninstitutional population in December by 138,000, the civilian labor force by 136,000, employment by 127,000, unemployment by 9,000, and persons not in the labor force by 2,000. The total unemployment rate, employment-population ratio, and labor force participation rate were unaffected.

Data users are cautioned that these annual population adjustments affect the comparability of household data series over time. Table C shows the effect of the introduction of new population estimates on the comparison of selected labor force measures between December 2012 and January 2013. Additional information on the population adjustments and their effect on national labor force estimates are available at www.bls.gov/cps/cps13adj.pdf (emphasis added).”

There are also adjustments of benchmarks and seasonality factors for establishment data that affect comparability over time (page 1 at 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.”

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 on Apr 5, 2013 (http://www.bls.gov/).

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 165,000 in Apr 2013 and private payroll employment rose 176,000. The average number of nonfarm jobs created in Jan-Apr 2012 was 224,750 while the average number of nonfarm jobs created in Jan-Apr 2013 was 195,750, or decline by 12.9 percent. The average number of private jobs created in the US in Jan-Apr 2012 was 229,000 while the average in Jan-Apr 2013 was 203,250, or decline by 11.2 percent. The US labor force increased from 153.617 million in 2011 to 154.975 million in 2012 by 1.358 million or 113,167 per month. The average increase of nonfarm jobs in the four months from Jan to Mar 2013 was 195,750, which is a rate of job creation inadequate to reduce significantly unemployment and underemployment in the United States because of 113,167 new entrants in the labor force per month with 28.6 million unemployed or underemployed. The difference between the average increase of 203,250 new private nonfarm jobs per month in the US from Jan to Mar 2013 and the 113,167 average monthly increase in the labor force from 2011 to 2012 is 90,083 monthly new jobs net of absorption of new entrants in the labor force. There are 28.6 million in job stress in the US currently. The provision of 90,083 new jobs per month net of absorption of new entrants in the labor force would require 318 months to provide jobs for the unemployed and underemployed (28.637 million divided by 90,083) or 26.5 years (318 divided by 12). The civilian labor force of the US in Apr 2013 not seasonally adjusted stood at 154.739 million with 11.014 million unemployed or effectively 18.581 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 162.306 million. Reduction of one million unemployed at the current rate of job creation without adding more unemployment requires 0.9 years (1 million divided by product of 90,083 by 12, which is 1,080,996). Reduction of the rate of unemployment to 5 percent of the labor force would be equivalent to unemployment of only 7.737 million (0.05 times labor force of 154.739 million) for new net job creation of 3.277 million (11.014 million unemployed minus 7.737 million unemployed at rate of 5 percent) that at the current rate would take 3.0 years (3.277 million divided by 1.080996). Under the calculation in this blog there are 18.581 million unemployed by including those who ceased searching because they believe there is no job for them and effective labor force of 162.306 million. Reduction of the rate of unemployment to 5 percent of the labor force would require creating 11.381 million jobs net of labor force growth that at the current rate would take 9.7 years (18.581 million minus 0.05(162.306 million) or 10.466 million divided by 1.080996, 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 the US fell from 147.315 million in Jul 2007 to 143.724 million in Apr 2013, by 3.591 million, or decline of 2.4 percent, while the noninstitutional population increased from 231.958 million in Jul 2007 to 245.175 million in Apr 2013, by 13.217 million or increase of 5.7 percent, using not seasonally adjusted data. 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. Subsection IA4 Job Creation analyzes the types of jobs created, which are lower paying than earlier. Average hourly earnings in Apr 2013 were $23.87 seasonally adjusted (SA), increasing 1.2 percent not seasonally adjusted (NSA) relative to Apr 2012 and increasing 0.2 percent relative to Mar 2013 seasonally adjusted. In Mar 2013, average hourly earnings seasonally adjusted were $23.83, increasing 1.9 percent relative to Feb 2012 not seasonally adjusted and increasing 0.0 percent seasonally adjusted relative to Feb 2013. 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 Apr 2013 because the prices indexes of the BLS for Apr will only be released on May 16, 2013 (http://www.bls.gov/cpi/), which will be covered in this blog’s comment on May 19, 2013, together with world inflation. The second column provides changes in real wages for Mar 2013. Average hourly earnings adjusted for inflation or in constant dollars increased 0.4 percent in Mar 2013 relative to Mar 2012 but have been decreasing during many consecutive months. World inflation waves in bouts of risk aversion (http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-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 falling real wages or wages adjusted for inflation in a recovery without hiring (http://cmpassocregulationblog.blogspot.com/2013/04/recovery-without-hiring-ten-million.html). The following section II Stagnating Real Wages provides more detailed analysis. Average weekly hours of US workers not seasonally adjusted remained virtually unchanged at 34.4. 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 decreased from 7.6 percent in Mar 2013 to 7.5 percent in Apr 2013, 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 28.6 million in Apr 2013 and 29.6 million in Mar 2013. The final row in Table I-1 provides the number in job stress as percent of the actual labor force calculated at 17.6 percent in Apr 2013 and 18.2 percent in Mar 2013. Almost one in every five workers in the US is unemployed or underemployed. The combination of about thirty million people in job stress, falling or stagnating real wages, collapse of hiring (http://cmpassocregulationblog.blogspot.com/2013/04/recovery-without-hiring-ten-million.html), decline of US inflation-adjusted household wealth by 8.4 percent from IVQ2007 to IVQ2012 while it increased 21.3 percent from IVQ1979 to IVQ1985 (http://cmpassocregulationblog.blogspot.com/2013/03/recovery-without-hiring-ten-million.html), household median income adjusted for inflation back to 1996 levels, real per capita disposable income lower in IIIQ2012 by 0.4 percent relative to IVQ2007 (http://www.bea.gov/iTable/index_nipa.cfm IB at http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or.html and earlier http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html) and only 0.9 percent higher in IVQ2012 relative to IVQ2007, federal deficits of $5.092 trillion in four years and debt/GDP of 72.6 percent in 2012 in the unsustainable path to 89.7 percent of GDP (http://cmpassocregulationblog.blogspot.com/2012/11/united-states-unsustainable-fiscal.html) and forty-eight million people in poverty and without health insurance (http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-creation-of.html) constitutes a socio-economic disaster.

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

	Apr 2013	Mar 2013
New Nonfarm Payroll Jobs	165,000	138,000
New Private Payroll Jobs	176,000	154,000
Average Hourly Earnings	Apr 13 $23.87 SA ∆% Apr 13/Apr 12 NSA: 1.2 ∆% Feb 13/Jan 12 SA: 0.2	Mar 13 $23.83 SA ∆% Mar 13/Mar 12 NSA: 1.9 ∆% Mar 13/Feb 13 SA: 0.0
Average Hourly Earnings in Constant Dollars		∆% Mar 2013/Mar 2012: 0.4
Average Weekly Hours	34.4 SA 34.3 NSA	34.6 SA 34.3 NSA
Unemployment Rate Household Survey % of Labor Force SA	7.5	7.6
Number in Job Stress Unemployed and Underemployed Blog Calculation	28.6 million NSA	29.6 million NSA
In Job Stress as % Labor Force	17.6	18.2

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

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 12.032 million in Feb 2012 to 11.742 million in Mar 2013 and 11.659 million in Apr 2013. The rate of unemployment decreased to 7.5 in Apr 2013. An important aspect of unemployment is its persistence for more than 27 weeks with 4.353 million in Apr 2013, corresponding to 37.3 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 a full-time job” (http://www.bls.gov/news.release/pdf/empsit.pdf 2). The number of part-time for economic reasons decreased from 7.988 million in Feb 2013 to 7.916 million in Apr 2013. 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 21.922 million in Apr 2013 is composed of 11.659 million unemployed (of whom 4.353 million, or 37.3 percent, unemployed for 27 weeks or more) compared with 11.742 million unemployed in Mar 2013 (of whom 4.611 million, or 39.2 percent, unemployed for 27 weeks or more), 7.916 million employed part-time for economic reasons in Apr 2013 (who suffered reductions in their work hours or could not find full-time employment) compared with 7.638 million in Mar 2013 and 2.347 million who were marginally attached to the labor force in Apr 2013 (who were not in the labor force but wanted and were available for work) compared with 2.326 million in Feb 2013. The final row in Table I-2 provides the number in job stress as percent of the labor force: 14.1 percent in Apr 2013, which is about equal to 14.0 percent in Mar 2013 and 14.5 percent in Feb 2013.

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

2013	Apr 2013	Mar 2013	Feb 2013
Labor Force Millions	155.238	155.028	155.524
Unemployed Millions	11.659	11.742	12.032
Unemployment Rate (unemployed as % labor force)	7.5	7.6	7.7
Unemployed ≥27 weeks Millions	4.353	4.611	4.797
Unemployed ≥27 weeks %	37.3	39.2	39.9
Part Time for Economic Reasons Millions	7.916	7.638	7.988
Marginally Attached to Labor Force Millions	2.347	2.326	2.588
Job Stress Millions	21.922	21.706	22.608
In Job Stress as % Labor Force	14.1	14.0	14.5

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

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

Table I-3 repeats the data in Table I-2 but including Jan and additional data. What really matters is the number of people with jobs or the total employed. 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 58.6 percent. The employment to population ratio fell from an annual level of 63.1 percent in 2006 to 58.6 percent in 2012 with the lowest level at 58.4 percent in 2011.

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

	Apr 2013	Mar 2013	Feb 2013	Jan 2013
Labor Force	155.238	155.028	155.524	155.654
Unemployed	11.659	11.742	12.032	12.332
UNE Rate %	7.8	7.6	7.7	7.9
Part Time Economic Reasons	7.916	7.638	7.988	7.973
Marginally Attached to Labor Force	2.347	2.326	2.588	2.443
In Job Stress	21.922	21.706	22.608	22.748
In Job Stress % Labor Force	14.1	14.0	14.5	14.6
Employed	143.579	143.286	143.492	143.322
Employment % Population	58.6	58.5	58.6	58.6

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

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

The second approach is considered in the balance of this subsection. 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 2013. 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 Apr 2013 was 143.724 million (NSA) or 3.591 million fewer people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population increased from 231.958 million in Jul 2007 to 245.175 million in Apr 2013 or by 13.217 million.

Chart I-1, US, Employed, Thousands, SA, 2001-2013

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 2013. There was recovery in 2010 and 2011 but not sufficient to recover lost jobs. Many people in the US who had jobs before the global recession are not working now.

Chart I-2, US, Employed, 12-Month Percentage Change NSA, 2001-2013

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 grew from 142.828 million in Jan 2001 to 156.255 million in Jul 2009 but has declined to 154.739 million in Apr 2013, all numbers not seasonally adjusted. Chart 1-3 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 154.739 million in Apr 2013 to the noninstitutional population of 245.175 million in Apr 2013 was 63.1 percent. The labor force of the US in Apr 2013 corresponding to 66.8 percent of participation in the population would be 163.777 million (0.668 x 245.175). The difference between the measured labor force in Apr 2013 of 154.739 million and the labor force in Apr 2013 with participation rate of 66.8 percent as in Jul 2007 of 163.777 million is 9.038 million. The level of the labor force in the US has stagnated and is 9.038 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, 2001-2013

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.

Chart I-4, US, Civilian Labor Force, Thousands, NSA, 12-month Percentage Change, 2001-2013

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 63.1 percent NSA in Apr 2013, 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, 2001-2013

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 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, 11.742 million in Sep 2012, 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 11.014 million in Apr 2013, all numbers not seasonally adjusted.

Chart I-6, US, Unemployed, Thousands, SA, 2001-2013

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 7.1 percent in Apr 2013, all number not seasonally adjusted.

Chart I-7, US, Unemployment Rate, SA, 2001-2013

Source: Bureau of Labor Statistics

Source: US 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, decrease of 9.0 percent in 2012 and decrease of 7.5 percent in Apr 2013 relative to Apr 2012.

Chart I-8, US, Unemployed, 12-month Percentage Change, NSA, 2001-2013

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 9.103 million in Nov 2009, falling to 8.168 million in Dec 2011 but increasing to 8.220 million in Jan 2012 and 8.127 million in Feb 2012 but then falling to 7.918 million in Dec 2012 and decreasing to 7.916 million in Apr 2013. 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 decreasing to 7.709 million in Apr 2013. The longer the period in part-time jobs the worst are the chances of finding another full-time job.

Chart I-9, US, Part-Time for Economic Reasons, Thousands, SA, 2001-2013

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 rate 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 number of part-time for economic reasons increased 0.2 percent in Apr 2013 relative to Apr 2012.

Chart I-10, US, Part-Time for Economic Reasons NSA 12-Month Percentage Change, 2001-2013

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 2009 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, 2.352 million in Mar 2012, 2.363 million in Apr 2012, 2.483 million in May 2012, 2.483 million in Jun 2012, 2.529 million in Jul 2012, 2.561 million in Aug 2012, 2.517 million in Sep 2012, 2.433 million in Oct 2012, 2.505 million in Nov 2012 and 2.614 million in Dec 2012. The number marginally attached to the labor force fell to 2.347 million in Apr 2013.

Chart I-11, US, Marginally-Attached to the Labor Force, Thousands, NSA, 2001-2013

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 2013. 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 0.7 percent in the 12 months ending in Apr 2013.

Chart I-12, US, Marginally-Attached to the Labor Force 12-Month Percentage Change, NSA, 2001-2013

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 11.5 percent and the number of people in job stress could be around 28.6 million, which is 17.6 percent of the 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 Apr 2012, Mar 2013 and Apr 2013 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 (ftp://ftp.bls.gov/pub/special.requests/lf/aa2006/pdf/cpsaat1.pdf). Table I-4b provides the yearly labor force participation rate from 1979 to 2013. 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 Apr 2012 and Mar 2013 and Apr 2013 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 63.4 percent by Mar 2012 and was 63.1 percent in Mar 2013 and 63.1 percent in Apr 2013, 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: (1) there are an estimated 7.567 million unemployed in Apr 2013 who are not counted because they left the labor force on their belief they could not find another job (∆NLF UEM); (2) the total number of unemployed is effectively 18.581 million (Total UEM) and not 11.014 million (UEM) of whom many have been unemployed long term; (3) the rate of unemployment is 11.5 percent (Total UEM%) and not 7.1 percent, not seasonally adjusted, or 7.5 percent seasonally adjusted; and (4) the number of people in job stress is close to 28.6 million by adding the 7.567 million leaving the labor force because they believe they could not find another job. The row “In Job Stress” in Table I-4 provides the number of people in job stress not seasonally adjusted at 28.6 million in Apr 2013, 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 17.6 percent of the labor force in Apr 2013. The employment population ratio “EMP/POP %” dropped from 62.9 percent on average in 2006 to 58.5 percent in Apr 2012, 58.2 percent in Mar 2013 and 58.6 percent in Apr 2013; and the number employed in the US fell from 147.315 million in Jul 2007 to 143.724 million in Apr 2013, by 3.591 million, or decline of 2.4 percent, while the noninstitutional population increased from 231.958 million in Jul 2007 to 245.175 million in Apr 2013, by 13.217 million or increase of 5.7 percent, using not seasonally adjusted data. What really matters for labor input in production and wellbeing is the number of people with jobs or the employment/population ratio, which has declined and does not show signs of increasing. There are several million fewer people working in 2013 than in 2006 and the number employed is not increasing while population increased 13.217 million. 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 17 million and does not show signs of increasing in an unusual recovery without hiring (http://cmpassocregulationblog.blogspot.com/2013/04/recovery-without-hiring-ten-million.html).

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

	2006	Apr 2012	Mar 2013	Apr 2013
POP	229	242,784	244,995	245,175
LF	151	153,905	154,512	154,739
PART%	66.2	63.4	63.1	63.1
EMP	144	141,995	142,698	143,724
EMP/POP%	62.9	58.5	58.2	58.6
UEM	7	11,910	11,815	11,014
UEM/LF Rate%	4.6	7.7	7.6	7.1
NLF	77	88,879	90,483	90,436
LF PART 66.2%		160,723	162,187	162,306
∆NLF UEM		6,618	7,675	7,567
Total UEM		18,528	19,490	18,581
Total UEM%		11.5	12.0	11.5
Part Time Economic Reasons		7,694	7,734	7,709
Marginally Attached to LF		2,363	2,326	2,347
In Job Stress		28,585	29,550	28,637
People in Job Stress as % Labor Force		17.8	18.2	17.6

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

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

Y = ∑_is_iy_i (1)

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

∆Y = ∑_i∆s_iy*_i+ ∑_i∆y_is*_i (2)

Table I-4b, US, Labor Force Participation Rate, Percent of Labor Force in Population, NSA, 1979-2013

Year	Jan	Feb	Mar	Apr	May	Oct	Nov	Dec	Annual
1979	62.9	63.0	63.2	62.9	62.9	64.0	63.8	63.8	63.7
1980	63.3	63.2	63.2	63.2	63.5	63.9	63.7	63.4	63.8
1981	63.2	63.2	63.5	63.6	63.9	64.0	63.8	63.4	63.9
1982	63.0	63.2	63.4	63.3	63.9	64.1	64.1	63.8	64.0
1983	63.3	63.2	63.3	63.2	63.4	64.1	64.1	63.8	64.0
1984	63.3	63.4	63.6	63.7	64.3	64.6	64.4	64.3	64.4
1985	64.0	64.0	64.4	64.3	64.6	65.1	64.9	64.6	64.8
1986	64.2	64.4	64.6	64.6	65.0	65.5	65.4	65.0	65.3
1987	64.7	64.8	65.0	64.9	65.6	65.9	65.7	65.5	65.6
1988	65.1	65.2	65.2	65.3	65.5	66.1	66.2	65.9	65.9
1989	65.8	65.6	65.7	65.9	66.2	66.6	66.7	66.3	66.5
1990	66.0	66.0	66.2	66.1	66.5	66.5	66.3	66.1	66.5
1991	65.5	65.7	65.9	66.0	66.0	66.1	66.0	65.8	66.2
1992	65.7	65.8	66.0	66.0	66.4	66.2	66.2	66.1	66.4
1993	65.6	65.8	65.8	65.6	66.3	66.4	66.3	66.2	66.3
1994	66.0	66.2	66.1	66.0	66.5	66.8	66.7	66.5	66.6
1995	66.1	66.2	66.4	66.4	66.4	66.7	66.5	66.2	66.6
1996	65.8	66.1	66.4	66.2	66.7	67.1	67.0	66.7	66.8
1997	66.4	66.5	66.9	66.7	67.0	67.1	67.1	67.0	67.1
1998	66.6	66.7	67.0	66.6	67.0	67.1	67.1	67.0	67.1
1999	66.7	66.8	66.9	66.7	67.0	67.0	67.0	67.0	67.1
2000	66.8	67.0	67.1	67.0	67.0	66.9	66.9	67.0	67.1
2001	66.8	66.8	67.0	66.7	66.6	66.7	66.6	66.6	66.8
2002	66.2	66.6	66.6	66.4	66.5	66.6	66.3	66.2	66.6
2003	66.1	66.2	66.2	66.2	66.2	66.1	66.1	65.8	66.2
2004	65.7	65.7	65.8	65.7	65.8	66.0	66.1	65.8	66.0
2005	65.4	65.6	65.6	65.8	66.0	66.2	66.1	65.9	66.0
2006	65.5	65.7	65.8	65.8	66.0	66.4	66.4	66.3	66.2
2007	65.9	65.8	65.9	65.7	65.8	66.0	66.1	65.9	66.0
2008	65.7	65.5	65.7	65.7	66.0	66.1	65.8	65.7	66.0
2009	65.4	65.5	65.4	65.4	65.5	64.9	64.9	64.4	65.4
2010	64.6	64.6	64.8	64.9	64.8	64.4	64.4	64.1	64.7
2011	63.9	63.9	64.0	63.9	64.1	64.1	63.9	63.8	64.1
2012	63.4	63.6	63.6	63.4	63.8	63.8	63.5	63.4	63.7
2013	63.3	63.2	63.1	63.1

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

Chart 12b, US, Labor Force Participation Rate, Percent of Labor Force in Population, NSA, 1979-2013

Source: Bureau of Labor Statistics

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

Chart 12c, US, Civilian Population, Thousands, NSA, 1948-2013

Sources: US Bureau of Labor Statistics

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

Chart 12d, US, Labor Force, Thousands, NSA, 1948-2013

Sources: US Bureau of Labor Statistics

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

IIA3 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 2013. 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 after 2007 is deeper and followed by a flatter curve of job creation. Economic growth is much lower in the current expansion at 2.1 percent (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html). The average growth rate of 7.8 percent in the first four quarters of cyclical expansion is derived from 7.9 percent from IIIQ1954 to IIQ1955, 9.6 percent from IIIQ1958 to IIQ1959, 6.1 percent from IIIQ1975 to IIQ1986 and 7.7 percent from IQ1983 to IVQ1983. The United States missed this opportunity of high growth in the initial phase of recovery. 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). The average of 7.8 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 3.2 percent obtained by diving GDP of $13,103.5 billion in IIIQ2010 by GDP of $12,701.0 billion in IIQ2009 {[$13.103.5/$12,701.0 -1]100 = 3.2%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html).

Chart I-13, US, Employment Level, Thousands, SA, 1948-2013

Source: US Bureau of Labor Statistics

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

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

Chart I-14, US, Civilian Labor Force, SA, 1948-2013, Thousands

Source: US Bureau of Labor Statistics

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

Chart I-15 for the period from 1948 to 2013. 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 as 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, 1948-2013, %

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 2006 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, 1948-2013, 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 2012. 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.

Chart I-17, US, Unemployment Rate, SA, 1948-2013

Source: US Bureau of Labor Statistics

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

Chart I-18 provides the number unemployed for 27 weeks and over from 1948 to 2013. The number unemployed for 27 weeks and over jumped from 510,000 in Dec 1978 to 2.9 million in Jun 1983, by 2.4 million, or 480 percent. The number of unemployed 27 weeks or over jumped from 1.1 million in May 2007 to 6.6 million in Jun 2010, by 5.5 million, or 500 percent.

Chart I-18, US, Unemployed for 27 Weeks or More, 1948-2013, 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 58.6 NSA in Apr 2013. There is no comparable decline during an expansion in Chart I-19.

Chart I-19, US, Employment-Population Ratio, 1948-2013

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.

Chart I-20, US, Part-Time for Economic Reasons, SA, 1955-2013, 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 26.7 percent cumulatively and fell 45.6 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). Data are available for the 1930s only on a yearly basis. US GDP fell 4.8 percent in the two recessions (1) from IQ1980 to IIIQ1980 and (2) from III1981 to IVQ1981 to IVQ1982 and 4.7 percent cumulatively in the recession from IVQ2007 to IIQ2009. It is instructive to compare the first three years of the expansions in the 1980s and the current expansion. GDP grew at 4.5 percent in 1983, 7.2 percent in 1984 and 4.1 percent in 1985 while GDP grew, 2.4 percent in 2010, 1.8 percent in 2011 and 2.2 percent in 2012. Actual cumulative GDP growth in the four quarters of 2012 is 1.7 percent. GDP grew at 4.1 percent in 1985 and 3.5 percent in 1986 while the forecasts of participants of the Federal Open Market Committee (FOMC) are in the range of 2.3 to 2.8 percent in 2013 (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20130320.pdf).

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

Year	GDP ∆%	Year	GDP ∆%	Year	GDP ∆%
1930	-8.6	1980	-0.3	2000	4.1
1931	-6.5	1981	2.5	2001	1.1
1932	-13.1	1982	-1.9	2002	1.8
1933	-1.3	1983	4.5	2003	2.5
1934	10.9	1984	7.2	2004	3.5
1935	8.9	1985	4.1	2005	3.1
1936	13.1	1986	3.5	2006	2.7
1937	5.1	1987	3.2	2007	1.9
1938	-3.4	1988	4.1	2008	-0.3
1930	8.1	1989	3.6	2009	-3.1
1940	8.8	1990	1.9	2010	2.4
1941	17.1	1991	-0.2	2011	1.8
1942	18.5	1992	3.4	2012	2.2

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

Characteristics of the four cyclical contractions are provided 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 4.8 percent, which is almost equal to the decline of 4.7 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 26.7 percent cumulatively and fell 45.6 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). The comparison of the global recession after 2007 with the Great Depression is entirely misleading.

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

	Number of Quarters	Cumulative Percentage Contraction	Average Percentage Rate
IIQ1953 to IIQ1954	4	-2.5	-0.64
IIIQ1957 to IIQ1958	3	-3.1	-1.1
IQ1980 to IIIQ1980	2	-2.2	-1.1
IIIQ1981 to IVQ1982	4	-2.6	-0.67
IVQ2007 to IIQ2009	6	-4.7	-0.80

Sources: Business Cycle Reference Dates: National Bureau of Economic Research http://www.nber.org/cycles.html US Bureau of Economic Analysis http://www.bea.gov/iTable/index_nipa.cfm

Table I-7 shows the extraordinary contrast between the mediocre average annual equivalent growth rate of 2.1 percent of the US economy in the fourteen quarters of the current cyclical expansion from IIIQ2009 to IVQ2012 and the average of 5.7 percent in the first thirteen quarters of expansion from IQ1983 to IQ1986 and 5.3 percent in the first fifteen quarters of expansion from IQ1983 to IIIQ1986. The line “average first four quarters in four expansions” provides the average growth rate of 7.8 percent with 7.9 percent from IIIQ1954 to IIQ1955, 9.6 percent from IIIQ1958 to IIQ1959, 6.1 percent from IIIQ1975 to IIQ1986 and 7.7 percent from IQ1983 to IVQ1983. The United States missed this opportunity of high growth in the initial phase of recovery. 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). Table I-7 provides an average of 7.8 percent in the first four quarters of major cyclical expansions while the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 is only 3.2 percent obtained by diving GDP of $13,103.5 billion in IIIQ2010 by GDP of $12,701.0 billion in IIQ2009 {[$13.103.5/$12,701.0 -1]100 = 3.2%], or accumulating the quarter on quarter growth rates. As a result, there are 29.6 million unemployed or underemployed in the United States for an effective unemployment rate of 18.2 percent (http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or.html). BEA data show the US economy in standstill with annual growth of 2.4 percent in 2010 decelerating to 1.8 percent annual growth in 2011, 2.2 percent in 2012 (http://www.bea.gov/iTable/index_nipa.cfm) and cumulative 1.7 percent in the four quarters of 2012 {[(1.02)^1/4(1.013)^1/4(1.031)^1/4(1.004)^1/4 – 1]100 = 1.7%} with minor rounding discrepancy using the SSAR of $13,665.4 billion in IVQ2012 relative to the SAAR of $13,441.0 billion in IVQ2011 {[($13665.4/$13441.00-1]100 = 1.7%}. %}. The growth rate in annual equivalent for the four quarters of 2011, the four quarters of 2012 and the first quarter of 2013 is 1.9 percent {[(1.00025 x 1.0062 x 1.0032 x 1.010 x 1.005 x 1.0032 x 1.0077 x 1.001 x 1.0062)^4/9 -1]100 = 1.9%], or {[($13,750.1/$13,181.2)]^4/9-1]100 = 1.9%} dividing the SAAR of IVQ2012 by the SAAR of IVQ2010 in Table I-6 below, obtaining the average for nine quarters and the annual average for one year of four quarters. The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.7 percent from IQ1983 to IVQ1983.

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	12.6	4.4
First Four Quarters IIIQ1954 to IIQ1955	4	7.9
IIQ1958 to IIQ1959	5	10.2	8.1
First Four Quarters IIIQ1958 to IIQ1959	4	9.6
IIQ1975 to IVQ1976	8	9.5	4.6
First Four Quarters IIIQ1975 to IIQ1976	4	6.1
IQ1983 to IQ1986 IQ1983 to IIIQ1986	13 15	19.6 21.3	5.7 5.3
First Four Quarters IQ1983 to IVQ1983	4	7.7
Average First Four Quarters in Four Expansions*		7.8
IIIQ2009 to IQ2013	15	8.3	2.1
First Four Quarters IIIQ2009 to IIIQ2010		3.2

*First Four Quarters: 7.9% IIIQ1954-IIQ1955; 9.6% IIIQ1958-IIQ1959; 6.1% IIIQ1975-IIQ1976; 7.7% IQ1983-IVQ1983

Sources: Business Cycle Reference Dates: National Bureau of Economic Research http://www.nber.org/cycles.html US 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 facilitate 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 1989. Employment surged after the contraction and grew rapidly during the decade.

Chart I-21, US, Employed, Thousands, 1979-1989

Source: US Bureau of Labor Statistics

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

The number employed in the US fell from 147.315 million in Jul 2007 to 143.724 million in Apr 2013, by 3.591 million, or decline of 2.4 percent, while the noninstitutional population increased from 231.958 million in Jul 2007 to 245.175 million in Apr 2013, by 13.217 million or increase of 5.7 percent, using not seasonally adjusted data. Chart I-22 shows tepid recovery early in 2010 followed by near stagnation and marginal expansion.

Chart I-22, US, Employed, Thousands, 2001-2013

Source: US Bureau of Labor Statistics

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

There was a steady upward trend in growth of the civilian labor force between 1979 and 1989 as shown in Chart I-23. There were fluctuations but strong long-term dynamism over an entire decade.

Chart I-23, US, Civilian Labor Force, Thousands, 1979-1989

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.

Chart I-24, US, Civilian Labor Force, Thousands, 2001-2013

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.

Chart I-25, US, Civilian Labor Force Participation Rate, 1979-1989, %

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 and stagnated 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 the expansion after 2009 with marginal expansion at the turn of the year into 2012 followed by trend of decline and stability.

Chart I-26, US, Civilian Labor Force Participation Rate, 2001-2013, %

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 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.

Chart I-27, US, Unemployed Thousands 1979-1989

Source: US Bureau of Labor Statistics

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

Chart I-28 provides the number unemployed from 2001 to 2013. Using seasonally adjusted data, the number unemployed rose from 6.727 million in Oct 2006 to 15.382 million in Oct 2009, declining to 13.049 million in Dec 2011 and to 11.659 million in Apr 2013. 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 11.014 million in Apr 2013.

Chart I-28, US, Unemployed Thousands 2001-2013

Source: US Bureau of Labor Statistics

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.

Chart I-29, US, Unemployment Rate, 1979-1989, %

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 7.8 percent in Dec 2012 and 7.5 percent in Apr 2013.

Chart I-30, US, Unemployment Rate, 2001-2013, %

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.

Chart I-31, US, Employment Population Ratio, 1979-1989, %

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, 58.6 in Dec 2012 and 58.6 in Apr 2013, as shown in Chart I-32. 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 and 58.6 percent in Apr 2013.

Chart I-32, US, Employment Population Ratio, 2001-2013, %

Source: US Bureau of Labor Statistics

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

The number unemployed for 27 weeks or over peaked at 2.885 million in Jun 1983 as shown in Chart I-33. The number unemployed for 27 weeks or over fell sharply during the expansion to 1.393 million in Dec 1984 and continued to decline throughout the 1980s to 0.635 million in Dec 1989.

Chart I-33, US, Number Unemployed for 27 Weeks or More 1979-1989, 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 6.704 million in Apr 2010. The number of unemployed for 27 weeks remained at around 6 million during the expansion compared with somewhat above 1 million before the contraction, falling to 4.353 million in Apr 2013 seasonally adjusted and 4.488 million not seasonally adjusted.

Chart I-34, US, Number Unemployed for 27 Weeks or More, 2001-2013, 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 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.

Chart I-35, US, Part-Time for Economic Reasons, 1979-1989, 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 7.709 million not seasonally adjusted in Apr 2013.

Chart I-36, US, Part-Time for Economic Reasons, 2001-2013, 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, 2.614 million in Dec 2012 and 2.347 million in Apr 2013.

Chart I-37, US, Marginally Attached to the Labor Force, 2001-2013

Source: US Bureau of Labor Statistics

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

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 2011 even with population higher by 35.4 percent and lab Total nonfarm payroll employment seasonally adjusted (SA) increased 165,000 in Apr 2013 and private payroll employment rose 176,000. The average number of nonfarm jobs created in Jan-Apr 2012 was 224,750 while the average number of nonfarm jobs created in Jan-Apr 2013 was 195,750, or decline by 12.9 percent. The average number of private jobs created in the US in Jan-Apr 2012 was 229,000 while the average in Jan-Apr 2013 was 203,250, or decline by 11.2 percent. The US labor force increased from 153.617 million in 2011 to 154.975 million in 2012 by 1.358 million or 113,167 per month. The average increase of nonfarm jobs in the four months from Jan to Mar 2013 was 195,750, which is a rate of job creation inadequate to reduce significantly unemployment and underemployment in the United States because of 113,167 new entrants in the labor force per month with 28.6 million unemployed or underemployed. The difference between the average increase of 203,250 new private nonfarm jobs per month in the US from Jan to Mar 2013 and the 113,167 average monthly increase in the labor force from 2011 to 2012 is 90,083 monthly new jobs net of absorption of new entrants in the labor force. There are 28.6 million in job stress in the US currently. The provision of 90,083 new jobs per month net of absorption of new entrants in the labor force would require 318 months to provide jobs for the unemployed and underemployed (28.637 million divided by 90,083) or 26.5 years (318 divided by 12). The civilian labor force of the US in Apr 2013 not seasonally adjusted stood at 154.739 million with 11.014 million unemployed or effectively 18.581 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 162.306 million. Reduction of one million unemployed at the current rate of job creation without adding more unemployment requires 0.9 years (1 million divided by product of 90,083 by 12, which is 1,080,996). Reduction of the rate of unemployment to 5 percent of the labor force would be equivalent to unemployment of only 7.737 million (0.05 times labor force of 154.739 million) for new net job creation of 3.277 million (11.014 million unemployed minus 7.737 million unemployed at rate of 5 percent) that at the current rate would take 3.0 years (3.277 million divided by 1.080996). Under the calculation in this blog there are 18.581 million unemployed by including those who ceased searching because they believe there is no job for them and effective labor force of 162.306 million. Reduction of the rate of unemployment to 5 percent of the labor force would require creating 11.381 million jobs net of labor force growth that at the current rate would take 9.7 years (18.581 million minus 0.05(162.306 million) or 10.466 million divided by 1.080996, 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 the US fell from 147.315 million in Jul 2007 to 143.724 million in Apr 2013, by 3.591 million, or decline of 2.4 percent, while the noninstitutional population increased from 231.958 million in Jul 2007 to 245.175 million in Apr 2013, by 13.217 million or increase of 5.7 percent, using not seasonally adjusted data. 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. or force higher by 38.1 percent in 2009 relative to 1983 nearly three decades ago and total number of jobs in payrolls rose by 39.5 million in 2010 relative to 1983 or by 43.8 percent. The contraction after 2007 is deeper and followed by a flatter curve of job creation. Economic growth is much lower in the current expansion at 2.1 percent (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html). The average growth rate of 7.8 percent in the first four quarters of cyclical expansion is derived from 7.9 percent from IIIQ1954 to IIQ1955, 9.6 percent from IIIQ1958 to IIQ1959, 6.1 percent from IIIQ1975 to IIQ1986 and 7.7 percent from IQ1983 to IVQ1983. The United States missed this opportunity of high growth in the initial phase of recovery. 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). The average of 7.8 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 3.2 percent obtained by diving GDP of $13,103.5 billion in IIIQ2010 by GDP of $12,701.0 billion in IIQ2009 {[$13.103.5/$12,701.0 -1]100 = 3.2%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html). BEA data show the US economy in standstill with annual growth of 2.4 percent in 2010 decelerating to 1.8 percent annual growth in 2011, 2.2 percent in 2012 (http://www.bea.gov/iTable/index_nipa.cfm) and cumulative 1.7 percent in the four quarters of 2012 {[(1.02)^1/4(1.013)^1/4(1.031)^1/4(1.004)^1/4 – 1]100 = 1.7%} with minor rounding discrepancy using the SSAR of $13,665.4 billion in IVQ2012 relative to the SAAR of $13,441.0 billion in IVQ2011 {[($13665.4/$13441.00-1]100 = 1.7%}. %}. The growth rate in annual equivalent for the four quarters of 2011, the four quarters of 2012 and the first quarter of 2013 is 1.9 percent {[(1.00025 x 1.0062 x 1.0032 x 1.010 x 1.005 x 1.0032 x 1.0077 x 1.001 x 1.0062)^4/9 -1]100 = 1.9%], or {[($13,750.1/$13,181.2)]^4/9-1]100 = 1.9%} dividing the SAAR of IVQ2012 by the SAAR of IVQ2010 in Table I-6 below, obtaining the average for nine quarters and the annual average for one year of four quarters. The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.7 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html).

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

Month	1981	1982	1983	2008	2009	2010	Private
Jan	95	-327	225	14	-794	-13	-17
Feb	67	-6	-78	-85	-695	-40	-26
Mar	104	-129	173	-79	-830	154	111
Apr	74	-281	276	-215	-704	229	170
May	10	-45	277	-186	-352	521	102
Jun	196	-243	378	-169	-472	-130	94
Jul	112	-343	418	-216	-351	-86	103
Aug	-36	-158	-308	-270	-210	-37	129
Sep	-87	-181	1114	-459	-233	-43	113
Oct	-100	-277	271	-472	-170	228	188
Nov	-209	-124	352	-775	-21	144	154
Dec	-278	-14	356	-705	-220	95	114
			1984			2011	Private
Jan			447			69	80
Feb			479			196	243
Mar			275			205	223
Apr			363			304	303
May			308			115	183
Jun			379			209	177
Jul			312			78	206
Aug			241			132	129
Sep			311			225	256
Oct			286			166	174
Nov			349			174	197
Dec			127			230	249
			1985			2012	Private
Jan			266			311	323
Feb			124			271	265
Mar			346			205	208
Apr			195			112	120
May			274			125	152
Jun			145			87	78
Jul			189			153	177
Aug			193			165	131
Sep			204			138	118
Oct			187			160	217
Nov			209			247	256
Dec			168			219	224
			1985			2013	Private
Jan			123			148	164
Feb			107			332	319
Mar			93			138	154
Apr			188			165	176
May			125
Jun			-93
Jul			318
Aug			113
Sep			346
Oct			187
Nov			186
Dec			204

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

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 2013. 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.

Chart I-38, US, Total Nonfarm Payroll Jobs SA 2001-2013

Source: US Bureau of Labor Statistics

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

hart I-39 provides total nonfarm jobs SA from 1979 to 1989. Recovery and strong throughout the decade with the economy growing at trend.

Chart I-39, US, Total Nonfarm Payroll Jobs SA 1979-1989

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 2001-2013

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.

Chart I-41, US, Total Private Payroll Jobs SA 1979-1989

Source: US Bureau of Labor Statistics

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

IA4 Creation of Jobs. Types of jobs created, and not only the pace of job creation, may be important. Aspects of growth of payroll jobs from Apr 2012 to Apr 2013, not seasonally adjusted (NSA), are provided in Table I-9. Total nonfarm employment increased by 2,094,000 (row A, column Change), consisting of growth of total private employment by 2,181,000 (row B, column Change) and decrease by 87,000 of government employment (row C, column Change). Monthly average growth of private payroll employment has been 181,750, which is mediocre relative to 24 to 30 million in job stress, while total nonfarm employment has grown on average by only 174,500 per month, which barely keeps with 113,167 new entrants per month in the labor force. These monthly rates of job creation are insufficient to meet the demands of new entrants in the labor force and thus perpetuate unemployment and underemployment. Manufacturing employment increased by 80,000, at the monthly rate of 6,667 while private service providing employment grew by 1,930,000, at the monthly rate of 160,833. An important feature in Table I-9 is that jobs in professional and business services increased by 604,000 with temporary help services increasing by 185,000. 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 in a fractured job market. The segment leisure and hospitality added 373,000 jobs in 12 months. An important characteristic is that the loss of government jobs has stabilized in local government after heavy losses, 19,000 jobs lost in the past twelve months (row C3 Local) but 4,000 jobs lost in state (row C2 State), while there is a higher number of employees in local government, 14.3 million relative to 5.2 million in state jobs and 2.8 million in federal jobs.

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

	Apr 2012	Apr 2013	Change
A Total Nonfarm	133,400	135,494	2,094
B Total Private	111,051	113,232	2,181
B1 Goods Producing	18,178	18,429	251
B1a Manufacturing	11,850	11,930	80
B2 Private service providing	92,873	94,803	1,930
B2a Wholesale Trade	5,638	5,727	89
B2b Retail Trade	14,674	14,922	248
B2c Transportation & Warehousing	4,342	4,425	83
B2d Financial Activities	7,740	7,840	100
B2e Professional and Business Services	17,805	18,409	604
B2e1 Temporary help services	2,414	2,599	185
B2f Health Care & Social Assistance	16,903	17,263	360
B2g Leisure & Hospitality	13,620	13,993	373
C Government	22,349	22,262	-87
C1 Federal	2,827	2,763	-64
C2 State	5,212	5,208	-4
C3 Local	14,310	14,291	-19

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

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

Greater detail on the types of jobs created is provided in Table I-10 with data for Mar and Apr 2013. 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 165,000 SA total nonfarm jobs created in Apr 2013 relative to Mar 2013 actually correspond to increase of 932,000 jobs NSA, as shown in row A. The 176,000 total private payroll jobs SA created in Apr 2013 relative to Mar 2013 actually correspond to increase of 937,000 jobs NSA. The analysis of NSA job creation in the prior Table I-9 does show improvement over the 12 months ending in Apr 2013 that is not clouded by seasonal variations but significant reduction in 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

	Mar 2013 SA	Apr 2013 SA	∆	Mar 2013 NSA	Apr 2013 NSA	∆
A Total Nonfarm	135,309	135,474	165	134,562	135,494	932
B Total Private	113,454	113,630	176	112,295	113,232	937
B1 Goods Producing	18,653	18,644	-9	18,256	18,429	173
B1a Constr.	5,796	5,790	-6	5,485	5,645	160
B Mfg	11,990	11,990	0	11,915	11,930	15
B2 Private Service Providing	94,801	94,986	185	94,039	94,803	764
B2a Wholesale Trade	5,737	5,741	4	5,705	5,727	22
B2b Retail Trade	15,048	15,077	29	14,814	14,922	108
B2c Couriers & Mess.	532	530	-2	522	510	-12
B2d Health-care & Social Assistance	17,231	17,257	26	17,230	17,263	33
B2De Profess. & Business Services	18,355	18,428	73	18,169	18,409	240
B2De1 Temp Help Services	2,634	2,665	31	2,539	2,599	60
B2f Leisure & Hospit.	14,033	14,076	43	13,670	13,993	323

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/data/

Manufacturing jobs were unchanged in Apr 2013 relative to Mar 2013, seasonally adjusted and increased 15,000 in Apr 2013 relative to Mar 2013, not seasonally adjusted, as shown in Table I-10 (and earlier at http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or.html). Manufacturing jobs not seasonally adjusted increased 80,000 from Apr 2012 to Apr 2013 or at the average monthly rate of 6,667. There are effects of the weaker economy and international trade together with the yearly adjustment of labor statistics. In the six months ending in Mar 2013, United States national industrial production accumulated increase of 2.6 percent at the annual equivalent rate of 5.3 percent, which is higher than 3.5 percent growth in 12 months. Business equipment decreased 1.1 percent in Oct, increased 2.4 percent in Nov, increased 0.4 percent in Dec, fell 1.4 percent in Jan, increased 1.9 percent in Feb 2013 and 0.1 percent in Mar, growing 5.1 percent in the 12 months ending in Feb 2013 and at the annual equivalent rate of 4.6 percent in the six months ending in Mar 2013. Capacity utilization of total industry is analyzed by the Fed in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm) “ The rate of capacity utilization for total industry moved up in March to 78.5 percent, a rate that is 1.2 percentage points above its level of a year earlier but 1.7 percentage points below its long-run (1972--2012) average.” United States industry is apparently decelerating with some strength at the margin.

Manufacturing decreased 0.1 percent in Mar 2013 seasonally adjusted, increasing 2.1 percent not seasonally adjusted in 12 months, and increased 2.3 percent in the six months ending in Mar 2013 or at the annual equivalent rate of 4.7 percent. Manufacturing fell by 22.1 from the peak in Jun 2007 to the trough in Apr 2009 and increased 16.7 percent from the trough in Apr 2009 to Dec 2012. Manufacturing fell 7.0 percent from the peak in Jun 2007 to Mar 2013 and increased 19.4 from the trough in Apr 2008 to Mar 2013.

Table I-11 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 86.3 percent in US national income in IVQ2012 and 86.4 percent in IIIQ2012. Most of US national income is in the form of services. In Mar 2013, there were 134.485 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 113.232 million NSA in Apr 2013 accounted for 83.6 percent of total nonfarm jobs of 134.494 million, of which 11.930 million, or 10.5 percent of total private jobs and 8.8 percent of total nonfarm jobs, were in manufacturing. Private service-producing jobs were 94.803 million NSA in Apr 2013, or 70.0 percent of total nonfarm jobs and 83.7 percent of total private-sector jobs. Manufacturing has share of 11.1 percent in US national income in IVQ2011 and 11.1 percent in IIIQ2012, 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-11, US, National Income without Capital Consumption Adjustment by Industry, Seasonally Adjusted Annual Rates, Billions of Dollars, % of Total

	SAAR IIIQ2012	% Total	SAAR IVQ2012	% Total
National Income WCCA	13,976.7	100.0	14,122.2	100.0
Domestic Industries	13,733.6	98.3	13,855.6	98.1
Private Industries	12,075.0	86.4	12,192.5	86.3
Agriculture	138.6	1.0	138.9	1.0
Mining	205.3	1.5	214.7	1.5
Utilities	216.6	1.6	209.5	1.5
Construction	589.3	4.2	603.5	4.3
Manufacturing	1548.9	11.1	1563.1	11.1
Durable Goods	892.8	6.4	893.8	6.3
Nondurable Goods	656.1	4.7	669.3	4.7
Wholesale Trade	837.8	6.0	857.8	6.1
Retail Trade	957.4	6.9	972.8	6.9
Transportation & WH	415.5	3.0	415.8	2.9
Information	504.4	3.6	490.5	3.5
Finance, Insurance, RE	2330.6	16.7	2352.0	16.7
Professional, BS	2003.4	14.3	2029.0	14.4
Education, Health Care	1385.6	9.9	1395.5	9.9
Arts, Entertainment	539.4	3.9	544.4	3.9
Other Services	402.3	2.9	405.1	2.9
Government	1658.6	11.9	1663.0	11.8
Rest of the World	243.1	1.7	266.6	1.9

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

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 months comparisons. Nonfarm jobs rose by 4.853 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 7.728 million in 2010 relative to 2007 and fell by 959,000 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 137.645 million in 2007 to 133.739 million in 2012, by 3.906 million or 2.8 percent.

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

Year	Total Nonfarm	Year	Total Nonfarm
1980	90,528	2000	131,881
1981	91,289	2001	131,919
1982	89,677	2002	130,450
1983	90,280	2003	130,100
1984	94,530	2004	131,509
1985	97,511	2005	133,747
1986	99,474	2006	136,125
1987	102,088	2007	137,645
1988	105,345	2008	136,852
1989	108,014	2009	130,876
1990	109,487	2010	129,917
1991	108,377	2011	131,497
1992	108,745	2012	133,739

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

II Stagnating Real Wages. The wage bill is the product of average weekly hours times the earnings per hour. Table II-1 provides the estimates by the Bureau of Labor Statistics (BLS) of earnings per hour seasonally adjusted, increasing from $23.42/hour in Apr 2012 to $23.87/hour in Apr 2013, or by 1.9 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 71 percent of GDP (Table I-10 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.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 IIA2 and earlier

{[(wage bill in Mar 2013)/(wage bill in Mar 2012)]-1}100 =

{[($23.86x34.3)/($23.42x34.3)]-1]}100

= {[($818.39/$803.31)]-1}100 = 1.9%

CPI inflation was 1.5 percent in the 12 months ending in Mar 2013 (http://www.bls.gov/cpi/) for an inflation-adjusted wage-bill change of 0.4 percent :{[(1.019/1.015)-1]100} (see Table II-5 below for Feb 2013). The wage bill for Apr 2013 before inflation adjustment changed 0.0 percent relative to the wage bill for Apr 2012:

{[(wage bill in Apr 2013)/(wage bill in Apr 2012)]-1}100 =

{[($23.93x34.3)/($23.65x34.7)]-1]}100

= {[($820.80/$820.66)]-1}100 = 0.0%

Average hourly earnings increased 1.8 percent from Apr 2012 to Apr 2013 {[($23.93/23.65) – 1]100 = 1.2%} while hours worked decreased 1.2 percent {[(34.3/34.7) – 1]100 = -1.2%}. The increase of the wage bill is the product of the increase of hourly earnings of 1.2 percent and of hours worked of -1.2 percent {[(1.012x0.988) -1]100 = 0.0%}.

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 14.1 percent on Dec 7, 2012, 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 (http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-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 II-1, US, Earnings per Hour and Average Weekly Hours SA

Earnings per Hour	Apr 2012	Feb 2013	Mar 2013	Apr 2013
Total Private	$23.42	$23.82	$23.83	$23.87
Goods Producing	$24.67	$24.94	$24.96	$24.97
Service Providing	$23.12	$23.55	$23.56	$23.61
Average Weekly Earnings
Total Private	$807.99	$821.79	$824.52	$821.13
Goods Producing	$994.20	$1,010.07	$1008.38	$1,003.79
Service Providing	$772.21	$784.22	$786.90	$786.21
Average Weekly Hours
Total Private	34.5	34.5	34.6	34.4
Goods Producing	40.3	40.5	40.4	40.2
Service Providing	33.4	33.3	33.4	33.3

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

Average weekly hours fell from 35.0 in Dec 2007 at the beginning of the contraction to 33.8 in Jun 2009, which was the last month of the contraction. Average weekly hours rose to 34.4 in Dec 2011 and oscillated to 34.9 in Dec 2012 and 34.3 in Apr 2013.

Table II-2, US, Average Weekly Hours of All Employees, NSA 2006-2013

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
2006			34.2	34.6	34.3	34.6	34.9	34.6	34.5	34.9	34.4	34.6
2007	34.1	34.2	34.3	34.7	34.4	34.7	34.9	34.7	35.0	34.5	34.5	35.0
2008	34.2	34.2	34.8	34.4	34.4	34.9	34.5	34.6	34.4	34.4	34.6	34.1
2009	33.8	34.3	34.0	33.6	33.7	33.8	33.8	34.3	33.7	33.8	34.3	33.9
2010	33.7	33.6	33.8	34.0	34.4	34.1	34.2	34.7	34.1	34.3	34.2	34.2
2011	34.2	34.0	34.1	34.3	34.6	34.4	34.4	34.4	34.4	34.9	34.3	34.4
2012	34.5	34.2	34.3	34.7	34.3	34.4	34.8	34.5	34.9	34.3	34.3	34.9
2013	34.0	34.2	34.3	34.3

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

Chart II-1 provides average weekly hours monthly from Mar 2006 to Mar 2013. Average weekly hours remained relatively stable in the period before the contraction and fell sharply during the contraction as business could not support lower production with the same labor input. Average weekly hours rose rapidly during the expansion but have stabilized at a level below that prevailing before the contraction.

Chart II-1, US, Average Weekly Hours of All Employees, SA 2006-2013

Source: US Bureau of Labor Statistics

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

Calculations using BLS data of inflation-adjusted average hourly earnings are shown in Table II-3. The final column of Table II-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 lost 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 0.6 percent in Apr 2012 in inflation-adjusted average hourly earnings but another fall of 0.5 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 1.1 percent in Dec 2012 but declined 0.2 percent in Jan 2012 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. Real hourly earnings are oscillating in part because of world inflation waves caused by carry trades from zero interest rates to commodity futures (http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html) and in part because of the collapse of hiring (http://cmpassocregulationblog.blogspot.com/2013/04/recovery-without-hiring-ten-million.html).

Table II-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*	$20.70*	4.2*	2.1	2.1*
Feb*	$20.79*	4.1*	2.4	1.7*
Mar	$20.82	3.7	2.8	0.9
Apr	$21.05	3.3	2.6	0.7
May	$20.83	3.7	2.7	1.0
Jun	$20.82	3.8	2.7	1.1
Jul	$20.99	3.4	2.4	1.0
Aug	$20.85	3.5	2.0	1.5
Sep	$21.19	4.1	2.8	1.3
Oct	$21.07	2.7	3.5	-0.8
Nov	$21.13	3.3	4.3	-0.9
Dec	$21.37	3.7	4.1	-0.4
2010
Jan	$22.55	1.9	2.6	-0.7
Feb	$22.61	1.4	2.1	-0.7
Mar	$22.52	1.2	2.3	-1.1
Apr	$22.57	1.8	2.2	-0.4
May	$22.64	2.5	2.0	0.5
Jun	$22.38	1.8	1.1	0.7
Jul	$22.44	1.8	1.2	0.6
Aug	$22.58	1.7	1.1	0.6
Sep	$22.63	1.8	1.1	0.7
Oct	$22.73	1.9	1.2	0.7
Nov	$22.72	1.0	1.1	0.0
Dec	$22.79	1.7	1.5	0.2
2011
Jan	$23.20	2.9	1.6	1.3
Feb	$23.03	1.9	2.1	-0.2
Mar	$22.93	1.8	2.7	-0.9
Apr	$22.99	1.9	3.2	-1.3
May	$23.09	2.0	3.6	-1.5
Jun	$22.84	2.1	3.6	-1.4
Jul	$22.97	2.4	3.6	-1.2
Aug	$22.88	1.3	3.8	-2.4
Sep	$23.08	2.0	3.9	-1.8
Oct	$23.33	2.6	3.5	-0.9
Nov	$23.18	2.0	3.4	-1.4
Dec	$23.25	2.0	3.0	-1.0
2012
Jan	$23.59	1.7	2.9	-1.2
Feb	$23.44	1.8	2.9	-1.1
Mar	$23.42	2.1	2.7	-0.6
Apr	$23.65	2.9	2.3	0.6
May	$23.36	1.2	1.7	-0.5
Jun	$23.30	2.0	1.7	0.3
Jul	$23.52	2.4	1.4	1.0
Aug	$23.30	1.8	1.7	0.1
Sep	$23.70	2.7	2.0	0.7
Oct	$23.55	0.9	2.2	-1.3
Nov	$23.62	1.9	1.8	0.1
Dec	$23.89	2.8	1.7	1.1
2013
Jan	23.92	1.4	1.6	-0.2
Feb	23.94	2.1	2.0	0.1
Mar	23.86	1.9	1.5	0.4
Apr	23.93	1.2

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/data/

Average hourly earnings of all US employees in the US in constant dollars of 1982-1984 from the dataset of the US Bureau of Labor Statistics (BLS) are provided in Table II-4. Average hourly earnings fell 0.5 percent after adjusting for inflation in the 12 months ending in Mar 2012 and gained 0.6 percent in the 12 months ending in Apr 2011 but then lost 0.6 percent in the 12 months ending in May 2012 with a gain of 0.3 percent in the 12 months ending in Jun 2012 and 1.0 percent in Jul 2012 followed by 0.1 percent in Aug 2012 and 0.7 percent in Sep 2012. Average hourly earnings adjusted by inflation fell 1.2 percent in the 12 months ending in Oct 2012. Average hourly earnings adjusted by inflation increased 0.1 percent in the 12 months ending in Nov 2012 and 1.1 percent in the 12 months ending in Dec 2012 but fell 0.2 percent in the 12 months ending in Jan 2013 and stagnated with gain of 0.1 percent in the 12 months ending in Feb 2013. Average hourly earnings adjusted for inflation increased 0.4 percent in the 12 months ending in Mar 2013. Table II-4 confirms the trend of deterioration of purchasing power of average hourly earnings in 2011 and into 2012 with 12-month percentage declines in three of the first four months of 2012 (-1.1 percent in Jan, -1.1 percent in Feb and -0.5 percent in Mar), declines of 0.6 percent in May and 1.2 percent in Oct and increase in five (0.6 percent in Apr, 0.3 percent in Jun, 1.0 percent in Jul, 0.7 percent in Sep and 1.1 percent in Dec) and stagnation in two (0.1 percent in Aug and 0.1 percent in Nov). Average hourly earnings adjusted for inflation fell 0.2 percent in the 12 months ending in Jan 2013, stagnated with gain of 0.1 percent in the 12 months ending in Feb 2013 and gained 0.4 percent in the 12 months ending Mar 2013. Annual data are revealing: -0.7 percent in 2008 during carry trades into commodity futures in a global recession, 3.2 percent in 2009 with reversal of carry trades, no change in 2010 and 2012 and decline by 1.1 percent in 2011. Annual average hourly earnings of all employees in the United States adjusted for inflation increased 1.4 percent from 2007 to 2012 at the yearly average rate of 0.3 percent (from $10.11 in 2007 to $10.25 in 2012 in dollars of 1982-1984 using data in http://www.bls.gov/data/). Those who still work bring back home a paycheck that buys fewer goods than a year earlier and savings in bank deposits do not pay anything because of financial repression (Section IIA2 and earlier http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html).

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

Year	Jan	Feb	Mar	Apr	May	Nov	Dec
2006			10.05	10.11	9.92	10.15	10.21
2007	10.23	10.22	10.14	10.18	10.02	10.05	10.17
2008	10.11	10.12	10.11	10.00	9.91	10.37	10.47
2009	10.48	10.50	10.47	10.40	10.32	10.40	10.38
2010	10.41	10.43	10.35	10.35	10.38	10.38	10.40
2011	10.53	10.41	10.26	10.22	10.22	10.25	10.30
2012	10.41	10.30	10.21	10.28	10.16	10.26	10.41
∆% 12 M 2012	-1.1	-1.1	-0.5	0.6	-0.6	0.1	1.1
2013	10.39	10.31	10.25
∆% 12 M 2013	-0.2	0.1	0.4

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

Chart II-2, US, Average Hourly Earnings of All Employees in Constant Dollars of 1982-1984, SA 2006-2013

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

Chart II-3, Average Hourly Earnings of All Employees NSA 12-Month Percent Change, 1982-1984 Dollars, NSA 2007-2013

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

Table II-5, US, Average Weekly Earnings of All Employees in Constant Dollars of 1982-1984, NSA 2007-2013

Year	Jan	Feb	Mar	Apr	Nov	Dec
2006			343.71	349.95	349.12	353.37
2007	348.72	349.40	347.76	353.41	346.85	356.11
2008	345.92	346.21	351.70	344.13	358.83	357.17
2009	354.10	360.31	355.81	349.33	356.59	351.95
2010	350.71	350.51	349.76	351.99	355.12	355.61
2011	360.29	353.81	349.90	350.62	351.44	354.41
2012	359.06	352.12	350.19	356.68	351.91	363.13
∆% 12 M 2012	-0.3	-0.5	0.1	1.7	0.1	2.5
2013	353.17	352.66	351.59
∆% 12 M 2013	-1.6	0.2	0.4

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

Chart II-4, US, Average Weekly Earnings of All Employees in Constant Dollars of 1982-1984, SA 2006-2013

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

Chart II-5, US, Average Weekly Earnings of All Employees NSA in Constant Dollars of 1982-1984 12-Month Percent Change, NSA 2007-2013

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

IIA Stagnating Real Disposable Income and Consumption Expenditures. There are waves of changes in personal income and expenditures in Table IIA-1 that correspond somewhat to inflation waves observed worldwide (http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html) because of the influence through price indexes. Data are distorted in Nov and Dec 2012 by the rush to realize income of all forms in anticipation of tax increases beginning in Jan 2013. There is major distortion in Jan 2013 because of higher contributions in payrolls to government social insurance that caused sharp reduction in personal income and disposable personal income. The Bureau of Economic Analysis (BEA) explains as follows (page 3 http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0313.pdf):

“The February and January [2013] changes in disposable personal income (DPI) mainly reflected the effect of special factors in January, such as the expiration of the “payroll tax holiday” and the acceleration of bonuses and personal dividends to November and to December [2012] in anticipation of changes in individual tax rates.”

In the first wave in Jan-Apr 2011 with relaxed risk aversion, nominal personal income (NPI) increased at the annual equivalent rate of 8.4 percent, nominal disposable personal income (NDPI) at 5.8 percent and nominal personal consumption expenditures (NPCE) at 6.5 percent. Real disposable income (RDPI) increased at the annual equivalent rate of 1.5 percent and real personal consumption expenditures (RPCE) rose at annual equivalent 2.4 percent. In the second wave in May-Aug 2011 under risk aversion, NPI rose at annual equivalent 0.9 percent, NPDI at 1.2 percent and NPCE at 2.7 percent. RDPI contracted at 1.5 percent annual equivalent and RPCE crawled at 0.3 percent annual equivalent. With mixed shocks of risk aversion in the third wave from Sep to Dec 2011, NPI rose at 1.5 percent annual equivalent, NDPI at 0.9 percent and NPCE at 2.7 percent. RDPI increased at 0.3 percent annual equivalent and RPCE at 1.8 percent annual equivalent. In the fourth wave from Jan to Mar 2012, NPI increased at 8.7 percent annual equivalent and NDPI at 8.3 percent. Real disposable income (RDPI) is more dynamic in the revisions, growing at 4.5 percent annual equivalent and RPCE at 2.8 percent. The policy of repressing savings with zero interest rates stimulated growth of nominal consumption (NPCE) at the annual equivalent rate of 6.6 percent and real consumption (RPCE) at 2.8 percent. In the fifth wave in Apr-Jul 2012, NPI increased at annual equivalent 1.5 percent, NDPI at 1.2 percent and RDPI at 1.8 percent. Financial repression failed to stimulate consumption with NPCE growing at 1.2 percent annual equivalent and RPCE at 1.2 percent. In the sixth wave in Aug-Oct 2012, in another wave of carry trades into commodity futures, NPI and NDPI increased at 2.0 percent annual equivalent while real disposable income (RDPI) declined at 1.2 percent annual equivalent. Data for Nov-Dec 2012 have illusory increases: “Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf). In the seventh wave, anticipations of tax increases in Jan 2013 caused exceptional income gains that increased personal income to annual equivalent 24.6 percent in Nov-Dec 2012, nominal disposable income at 24.6 percent and real disposable personal income at 26.0 percent with likely effects on nominal personal consumption that increased at 3.0 percent and real personal consumption at 4.3 percent with subdued prices. The numbers in parentheses show that without the exceptional effects NDPI (nominal disposable personal income) increased at 5.5 percent and RDPI (real disposable personal income) at 8.7 percent. In the eighth wave, nominal personal income fell 3.6 percent in Jan 2013 or at the annual equivalent rate of decline of 35.6 percent; nominal disposable personal income fell 4.0 percent or at the annual equivalent rate of decline of 38.7 percent; real disposable income fell 4.0 percent or at the annual rate of decline of 38.7 percent; nominal personal consumption expenditures increased 0.3 percent or at the annual equivalent rate of 3.7 percent; and real personal consumption expenditures increased 0.2 percent or at the annual equivalent rate of 2.4 percent. The savings rate fell significantly from 6.5 percent in Dec 2012 to 2.3 percent in Jan 2013. The Bureau of Economic Analysis explains as follows (http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf 3):

“Contributions for government social insurance -- a subtraction in calculating personal income -- increased $126.7 billion in January, compared with an increase of $6.3 billion in December. The

Further explanation is provided by the Bureau of Economic Analysis (http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf 2-3):

“Contributions for government social insurance -- a subtraction in calculating personal income --increased $6.4 billion in February, compared with an increase of $126.8 billion in January. The

The increase was provided in the “fiscal cliff” law H.R. 8 American Taxpayer Relief Act of 2012 (http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf). In the ninth wave in Feb-Mar 2013, nominal personal income increased at 8.1 percent and nominal disposable income at 8.1 percent annual equivalnet, while real disposable income increased at 6.2 percent annual equivalent. Nominal personal consumption expenditures grew at 5.5 annual equivalent and real personal consumption expenditures 3.7 percent annual equivalent. The savings rate collapsed from 3.4 percent in Oct 2012, 4.1 percent in Nov 2012 and 6.5 percent in Dec 2012 to 2.3 percent in Jan 2013 and 2.7 percent in Feb-Mar 2013.

The economy of the US can be summarized in growth of economic activity or GDP as decelerating from mediocre growth of 2.4 percent on an annual basis in 2010 and 1.8 percent in 2011 to 2.2 percent in 2012. Calculations below show that actual growth is around 1.9 percent per year. This rate is well below 3 percent per year in trend from 1870 to 2010, which has been always recovered after events such as wars and recessions (Lucas 2011May). United States real GDP grew at the rate of 3.2 percent between 1929 and 2012 and at 3.2 percent between 1947 and 2012 (http://www.bea.gov/iTable/index_nipa.cfm see http://cmpassocregulationblog.blogspot.com/2013/04/world-inflation-waves-squeeze-of.html). The average of 7.8 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 3.2 percent obtained by diving GDP of $13,103.5 billion in IIIQ2010 by GDP of $12,701.0 billion in IIQ2009 {[$13.103.5/$12,701.0 -1]100 = 3.2%}, or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html).The growth rate in annual equivalent for the four quarters of 2011, the four quarters of 2012 and the first quarter of 2013 is 1.9 percent {[(1.00025 x 1.0062 x 1.0032 x 1.010 x 1.005 x 1.0032 x 1.0077 x 1.001 x 1.0062)^4/9 -1]100 = 1.9%], or {[($13,750.1/$13,181.2)]^4/9-1]100 = 1.9%} dividing the SAAR of IVQ2012 by the SAAR of IVQ2010 (Table I-6 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html), obtaining the average for nine quarters and the annual average for one year of four quarters. Growth in the four quarters of 2012 accumulates to 1.7 percent {[(1.02)^1/4(1.013)^1/4(1.031)^1/4(1.004)^1/4 -1]100 = 1.7%}. This is equivalent to dividing the SAAR of $13,665.4 billion for IVQ2012 (Table I-6 http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states_28.html)by the SAAR of $13,441.0 billion in IVQ2011 except for a rounding discrepancy to obtain 1.7 percent {[($13,665.4/$13,441.0) – 1]100 = 1.7%}. The US economy is still close to a standstill especially considering the GDP report in detail.

RDPI stagnated in Jan-Dec 2011 with the latest revised data compared with growth of 3.3 percent in Jan-Dec 2010 but grew at annual equivalent 4.5 percent in Jan-Mar 2012 and 1.5 percent in Apr-Jul 2012. The salient deceleration is the decline of the annual equivalent rate of NPCE (nominal personal consumption expenditures) to 1.2 percent annual equivalent in Apr-Jul 2012 and of RPCE (real personal consumption expenditures) to 1.2 percent. A bump occurred in Aug 2012 with increases of commodity prices by the carry trade from zero interest rates to exposures in commodity futures and other risk financial assets. Real disposable income fell 0.2 percent in Aug 2012 or at annual equivalent minus 2.4 percent. Nominal personal consumption expenditures increased 0.3 percent in Aug 2012 or at annual equivalent 3.7 percent but stagnated in real terms. Both nominal personal income and nominal disposable income increased 0.1 percent in Aug 2012 or at 1.2 percent in annual equivalent. Real disposable income (RDPI) fell 0.2 percent in Oct 2012 while real personal consumption expenditures (RPCE) contracted 0.2 percent. RDPI increased 1.2 percent in Nov 2012 and 2.7 percent in Dec 2012 because of realization of incomes in anticipation of tax increases in Jan 2013 while RPCE increased 0.5 percent in Nov 2012 and 0.2 percent in Dec 2012. In Jan-Dec 2012, RDPI increased 5.4 percent and RPCE 2.0 percent.

Table IIA-1, US, Percentage Change from Prior Month Seasonally Adjusted of Personal Income, Disposable Income and Personal Consumption Expenditures %

	NPI	NDPI	RDPI	NPCE	RPCE
2013
Mar	0.2	0.2	0.3	0.2	0.3
Feb	1.1	1.1	0.7	0.7	0.3
AE ∆% Feb-Mar	8.1	8.1	6.2	5.5	3.7
Jan	-3.6	-4.0 (0.1)^a	-4.0	0.3	0.2
AE ∆% Jan	-35.6	-38.7 (3.7)^a	-38.7	3.7	2.4
2012
∆% Jan-Dec 2012***	7.1	7.0	5.4	3.6	2.0
Dec	2.6	2.7 (0.3)*	2.7 (0.5)*	0.2	0.2
Nov	1.1	1.0 (0.6)*	1.2 (0.9)*	0.3	0.5
AE ∆% Nov-Dec	24.6	24.6 (5.5)*	26.0 (8.7)*	3.0	4.3
Oct	0.0	0.0	-0.2	0.0	-0.2
Sep	0.4	0.4	0.1	0.8	0.5
Aug	0.1	0.1	-0.2	0.3	0.0
AE ∆% Aug-Oct	2.0	2.0	-1.2	4.5	1.2
Jul	0.2	0.2	0.1	0.4	0.3
Jun	0.3	0.2	0.1	0.0	-0.1
May	0.1	0.1	0.3	-0.2	0.0
Apr	0.0	0.0	0.0	0.2	0.2
AE ∆% Apr-Jul	1.8	1.5	1.5	1.2	1.2
Mar	0.5	0.5	0.2	0.3	0.0
Feb	0.7	0.6	0.3	0.8	0.4
Jan	0.9	0.9	0.6	0.5	0.3
AE ∆% Jan-Mar	8.7	8.3	4.5	6.6	2.8
2011
∆% Jan-Dec 2011*	3.6	2.5	0.0	4.2	1.7
Dec	0.3	0.3	0.2	0.1	0.0
Nov	-0.2	-0.3	-0.3	0.1	0.0
Oct	0.3	0.3	0.3	0.2	0.2
Sep	0.1	0.0	-0.1	0.5	0.4
AE ∆% Sep-Dec	1.5	0.9	0.3	2.7	1.8
Aug	0.0	0.0	-0.3	0.2	-0.1
Jul	0.1	0.2	-0.1	0.7	0.5
Jun	0.2	0.2	0.1	-0.1	-0.2
May	0.0	0.0	-0.2	0.1	-0.1
AE ∆% May-Aug	0.9	1.2	-1.5	2.7	0.3
Apr	0.3	0.3	0.0	0.4	0.0
Mar	0.1	0.1	-0.3	0.7	0.3
Feb	0.4	0.4	0.0	0.6	0.3
Jan	1.9	1.1	0.8	0.4	0.2
AE ∆% Jan-Apr	8.4	5.8	1.5	6.5	2.4
2010
∆% Jan-Dec 2010**	5.3	4.9	3.3	4.4	2.8
Dec	0.7	0.7	0.4	0.4	0.2
Nov	0.2	0.2	0.1	0.5	0.4
Oct	0.4	0.3	0.1	0.7	0.4
IVQ2010∆%	1.3	1.2	0.6	1.6	1.0
IVQ2010 AE ∆%	5.3	4.9	2.4	6.6	4.1

Notes: *Excluding exceptional income gains in Nov and Dec 2012 because of anticipated tax increases in Jan 2013 ((page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf). ^aExcluding employee contributions for government social insurance (pages 1-2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0113.pdf )Excluding NPI: current dollars personal income; NDPI: current dollars disposable personal income; RDPI: chained (2005) dollars DPI; NPCE: current dollars personal consumption expenditures; RPCE: chained (2005) dollars PCE; AE: annual equivalent; IVQ2010: fourth quarter 2010; A: annual equivalent

Percentage change month to month seasonally adjusted

*∆% Dec 2011/Dec 2010 **∆% Dec 2010/Dec 2009 *** ∆% Dec 2012/Dec 2011

Source: US Bureau of Economic Analysis

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

Further information on income and consumption is provided by Table IIA-2. The 12-month rates of increase of RDPI and RPCE in 2011 show sharp trend of deterioration of RDPI from over 3 percent in the final four months of 2010 to less than 3 percent at the end of IQ2011 and then collapsing to a range of 0.9 to 0.0 percent in Jun-Dec 2011. Revisions shows decline of RDPI of 0.2 percent in the 12 months ending in Jan 2012 and marginal increase of 0.1 percent in the 12 months ending in Feb 2012. The significant difference is continuing growth of 12-month percentage changes of RDPI with 1.3 percent in Jun 2012, 1.5 percent Jul 2012, 1.6 percent in Aug 2012, 1.7 percent in Sep 2012 but 1.3 percent in Oct 2012 followed by 2.8 percent in Nov 2012 and 5.4 percent in Dec 2012. Increases of RDPI in Nov-Dec 2012 are explained by the BEA as: “Personal income in November and December was boosted by accelerated and special dividend payments to persons and by accelerated bonus payments and other irregular pay in private wages and salaries in anticipation of changes in individual income tax rates. Personal income in December was also boosted by lump-sum social security benefit payments” (page 2 at http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi1212.pdf). The 12-month rate of growth of real disposable personal income fell from 5.4 percent in Dec 2012 to 0.6 percent in Jan 2013, increasing to 1.0 percent in Feb 2013 and 1.1 percent in Mar 2013. Real disposable income fell 4.0 percent in Jan 2013, which is explained by the Bureau of Economic Analysis as follows (page 2 http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf):

“The January change in disposable personal income (DPI) mainly reflected the effect of special factors, such as the expiration of the “payroll tax holiday” and the acceleration of bonuses and personal dividends to December in anticipation of changes in individual tax rates. Excluding these special factors and others, which are discussed more fully below, DPI increased $46.8 billion in February, or 0.4 percent, after increasing $15.8 billion, or 0.1 percent, in January.”

The increase was provided in the “fiscal cliff” law H.R. 8 American Taxpayer Relief Act of 2012 (http://www.gpo.gov/fdsys/pkg/BILLS-112hr8eas/pdf/BILLS-112hr8eas.pdf)

RPCE growth decelerated less sharply from close to 3 percent in IVQ 2010 to 1.6 percent in Mar 2012, 1.5 percent in Oct 2012, 1.9 percent in Nov 2012, 2.1 percent in Dec 2012 perhaps also with some effects of anticipations of tax increases in Jan 2013, 2.0 percent in Jan 2013 by burning savings, 1.9 percent in Feb 2013 and 2.2 percent in Mar 2013. Subdued growth of RPCE could affect revenues of business. Growth rates of personal consumption have weakened. Goods and especially durable goods have been driving growth of PCE as shown by the much higher 12-month rates of growth of real goods PCE (RPCEG) and durable goods real PCE (RPCEGD) than services real PCE (RPCES). The faster expansion of industry in the economy is derived from growth of consumption of goods and, in particular, of consumer durable goods while growth of consumption of services is much more moderate. The 12-month rates of growth of RPCEGD have fallen from around 10 percent and even higher in several months from Sep 2010 to Feb 2011 to the range of 6.4 to 9.5 percent from Jan 2012 to Mar 2013. RPCEG growth rates have fallen from around 5 percent late in 2010 and early Jan-Feb 2011 to the range of 2.4 to 3.9 percent from Jan 2012 to Mar 2013. There are limits to sustained growth based on financial repression in an environment of weak labor markets and real labor remuneration.

Table IIA-2, Real Disposable Personal Income and Real Personal Consumption Expenditures

Percentage Change from the Same Month a Year Earlier %

	RDPI	RPCE	RPCEG	RPCEGD	RPCES
2013
Mar	1.1	2.2	2.5	7.2	2.0
Feb	1.0	1.9	2.9	7.3	1.4
Jan	0.6	2.0	3.2	8.0	1.4
2012
Dec	5.4	2.1	3.9	9.5	1.1
Nov	2.8	1.9	3.4	9.0	1.2
Oct	1.3	1.5	2.4	6.4	1.1
Sep	1.7	1.9	3.7	8.9	1.1
Aug	1.6	1.9	3.7	8.9	0.9
Jul	1.5	1.9	3.1	7.3	1.2
Jun	1.3	2.0	3.5	8.6	1.3
May	1.3	1.9	3.0	7.4	1.4
Apr	0.7	1.8	2.4	6.5	1.5
Mar	0.7	1.6	2.6	6.6	1.1
Feb	0.1	1.9	2.7	7.4	1.5
Jan	-0.2	1.8	2.6	6.8	1.4
2011
Dec	0.0	1.7	2.5	6.0	1.3
Nov	0.3	1.9	2.6	5.8	1.5
Oct	0.7	2.3	3.2	5.9	1.8
Sep	0.5	2.4	3.4	7.0	2.0
Aug	0.4	2.1	2.6	5.3	1.9
Jul	0.9	2.8	4.1	6.4	2.1
Jun	0.9	2.4	3.4	5.3	1.9
May	1.0	2.6	3.9	6.5	2.0
Apr	1.8	3.0	4.7	8.2	2.1
Mar	2.6	3.0	4.2	7.8	2.4
Feb	3.4	3.1	5.5	11.3	1.9
Jan	3.5	3.1	5.5	11.0	1.9
2010
Dec	3.3	2.8	4.7	9.0	1.9
Nov	3.5	3.2	5.1	8.8	2.2
Oct	3.7	2.7	5.3	10.8	1.5
Sep	3.2	2.5	4.7	9.1	1.5

Notes: RDPI: real disposable personal income; RPCE: real personal consumption expenditures (PCE); RPCEG: real PCE goods; RPCEGD: RPCEG durable goods; RPCES: RPCE services

Numbers are percentage changes from the same month a year earlier

Source: US Bureau of Economic Analysis

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

Chart IIA-1 shows US real personal consumption expenditures (RPCE) between 1995 and 2012. There is an evident drop in RPCE during the global recession in 2007 to 2009 but the slope is flatter during the current recovery than in the period before 2007.

Chart IIA-1, US, Real Personal Consumption Expenditures, Quarterly Seasonally Adjusted at Annual Rates 1995-2013

Source: US Bureau of Economic Analysis

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

Percent changes from the prior period in seasonally-adjusted annual equivalent quarterly rates (SAAR) of real personal consumption expenditures (RPCE) are provided in Chart IIA-2 from 1995 to 2012. The average rate could be visualized as a horizontal line. Although there are not yet sufficient observations, it appears from Chart IIA-2 that the average rate of growth of RPCE was higher before the recession than during the past fourteen quarters of expansion that began in IIIQ2009.

Chart IIA-2, Percent Change from Prior Period in Real Personal Consumption Expenditure, Quarterly Seasonally Adjusted at Annual Rates 1995-2013

Source: US Bureau of Economic Analysis

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

Personal income and its disposition are shown in Table IIA-3. The latest estimates and revisions have changed movements in four forms: (1) Increase of personal income by $30.9 billion from Feb 2013 to Mar 2013 or seasonally-adjusted annual rate of 0.2 percent with increase of disposable income by $20.7 billion or 0.2 percent; (2) Increase of personal income by $151.2 billion from Jan 2013 into Feb 2013 or 1.1 percent and of disposable income by $134.0 billion at seasonally adjusted annual rate (SAAR) or 1.1 percent; and (3) contraction of personal income from Dec 2012 into Jan 2013 at $507.2 billion and disposable income at $493.7 billion in seasonally adjusted annual rate (SAAR) or decline by 3.6 percent of personal income and 4.0 percent of disposable personal income, which the Bureau of Economic Analysis explains as (http://www.bea.gov/newsreleases/national/pi/2013/pdf/pi0213.pdf 2-3):

“Contributions for government social insurance -- a subtraction in calculating personal income --increased $6.4 billion in February, compared with an increase of $126.8 billion in January. The

;and (4) collapse of the savings rate from 6.5 percent in Dec 2012 to 2.3 percent in Jan 2013 and 2.7 percent in Feb and Mar 2013 after stronger trend of increase of the savings rate with decline into Aug and Sep, marginal increase in Oct 2012 and Nov 2012 and jump in Dec 2012 propelled by exceptional realizations of income in anticipation of tax increases in Jan 2012. Personal income fell 507.2 billion or 3.6 percent from Dec 2012 to Jan 2013 at SAAR while disposable personal income fell $493.7 billion or 4.0 percent. There was partial compensation with increases in Feb 2013 of $151.2 billion of personal income and $134.0 billion of disposable personal income. Disposable personal income in current dollars or without adjusting for inflation increased from $11,837.7 billion in Mar 2012 to $12,079.8 billion in Mar 2013 by 2.0 percent or 1.1 percent adjusting for inflation (see Table IIA-2). Disposable personal income in current dollars or without adjusting for inflation increased from the annual rate of $11,609.1 billion in Dec 2011 to $12,418.8 billion in Dec 2012, by 7.0 percent and 5.4 percent adjusting for inflation (see Table IIA-2). Nominal wages and salaries fell $39.7 billion from Dec 2012 to Jan 2013 or by 0.6 percent and increased $21.9 billion or 0.3 percent from Dec 2012 to Mar 2013. Nominal wages and salaries increased 2.5 percent from the annual rate of $6869.4 billion in Mar 2012 to $7039.2 billion in Mar 2013. Nominal wage and salary disbursements increased from the annual rate of $6687.6 billion in Dec 2011 to $7017.3 billion in Dec 2012, by 4.9 percent. From Dec 2010 to Dec 2011, wage and salary disbursements increased 3.2 percent and disposable personal income 2.5 percent. Personal savings as percent of disposable personal income, or savings rate, fell from 4.9 percent in Dec 2010 to 3.4 percent in Dec 2011, climbing back to 4.1 percent in Jun 2012 but declined to 3.7 percent in Aug 2012 and 3.3 percent in Sep 2012, increasing marginally to 3.4 percent in Oct 2012, 4.1 percent in Nov 2012 and 6.5 percent in Dec 2012 probably propelled by realization of income in Nov-Dec 2012 in anticipation of higher tax rates in Jan 2013. The savings rate collapsed to 2.3 percent in Jan 2013 and 2.7 percent in Feb-Mar 2013. Revised data suggest that economic weakness originates in increasing savings but fractured labor markets (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/04/thirty-million-unemployed-or.html) and weak hiring (http://cmpassocregulationblog.blogspot.com/2013/04/recovery-without-hiring-ten-million.html) are ignored in such interpretation.

Table IIA-3, US, Personal Income and its Disposition, Seasonally Adjusted at Annual Rates $ Billions

	Personal Income	Wages & Salaries	Personal Taxes	DPI	Savings Rate %
Mar 2013	13,630.4	7,039.2	1,550.5	12,079.8	2.7
Feb 2013	13,599.5	7,023.8	1,540.3	12,059.1	2.7
Change Feb 2013/ Jan 2013	30.9 ∆% 0.2	15.4 ∆% 0.2	10.2 ∆% 0.7	20.7 ∆% 0.2
Jan 2013	13,448.3	6,977.6	1,523.2	11,925.1	2.3
Change Feb 2013/ Jan 2013	151.2 ∆% 1.1	46.2 ∆% 0.7	17.1 ∆% 1.0	134.0 ∆% 1.1
Dec 2012	13,955.5	7,017.3	1,536.7	12,418.8	6.5
Change Jan 2013/ Dec 2012	-507.2 ∆% -3.6	-39.7 ∆% -0.6	-13.5 ∆% -0.9	-493.7 ∆% -4.0
Nov 2012	13,597.6	6,967.1	1,508.1	12,089.5	4.1
Change Dec/Nov	357.9 ∆% 2.6	50.2 ∆% 0.7	28.6 ∆% 1.9	329.3 ∆% 2.7
Oct 2012	13,452.4	6,893.4	1,487.6	11,964.8	3.4
Change Nov/Oct	145.2 ∆% 1.1	73.7 ∆% 1.1	20.5 ∆% 1.4	124.7 ∆% 1.0
Sep 2012	13,446.0	6,909.7	1,481.3	11,964.7	3.3
Change Oct/Sep	6.4 ∆% 0.0	-16.3 ∆% -0.2	6.3 ∆% 0.4	0.1 ∆% 0.0
Aug 2012	13,395.7	6,883.4	1,475.4	11,920.3	3.7
Change Sep/Aug	50.3 ∆% 0.4	26.3 ∆% 0.4	5.9 ∆% 0.4	44.4 ∆% 0.4
Jul 2012	13,376.9	6,872.5	1,472.7	11,904.2	3.9
Change Aug/Jul	18.8 ∆% 0.1	10.9 ∆% 0.2	2.7 ∆% 0.2	16.1 ∆% 0.1
Jun 2012	13,355.9	6,858.5	1,470.0	11,885.9	4.1
Change Jul/Jun	21.0 ∆% 0.2	14.0 ∆% 0.2	2.7 ∆% 0.2	18.3 ∆% 0.2
May 2012	13,322.3	6,840.3	1,464.1	11,858.2	3.9
Change Jun/ May	33.6 ∆% 0.3	18.2 ∆% 0.3	5.9 ∆% 0.4	27.7 ∆% 0.2
Apr 2012	13,302.9	6,848.9	1,461.6	11,841.3	3.5
Change May/ Apr	19.4 ∆% 0.1	-8.6 ∆% -0.1	2.5 ∆% 0.2	16.9 ∆% 0.1
Mar	13,298.3	6,869.4	1,460.6	11,837.7	3.7
Change Apr/ Mar	4.6 ∆% 0.0	-20.5 ∆% -0.3	1.0 ∆% 0.1	3.6 ∆% 0.0
Feb 2012	13,234.7	6,831.5	1,452.0	11,782.7	3.5
Change Mar/ Feb	63.6 ∆% 0.5	37.9 ∆% 0.6	8.6 ∆% 0.6	55.0 ∆% 0.5
Jan	13,148.4	6,776.7	1,439.6	11,708.8	3.7
Change Feb/Jan	86.3 ∆% 0.7	54.8 ∆% 0.8	12.4 ∆% 0.9	73.9 ∆% 0.6
Dec 2012	13,955.5	7,017.3	1,536.7	12,418.8	6.5
Change Dec 2012/ Dec 2011	923.3 ∆% 7.1	329.7 ∆% 4.9	113.6∆% 8.0	809.7 ∆% 7.0
Dec 2011	13,032.2	6,687.6	1,423.1	11,609.1	3.4
Change Jan/Dec	116.2 ∆% 0.9	89.1 ∆% 1.3	16.5 ∆% 1.2	99.7 ∆% 0.9
Dec 2010	12,574.1	6,482.8	1,243.5	11,330.6	4.9
Change Dec 2011/ Dec 2010	458.1 ∆% 3.6	204.8 ∆% 3.2	179.6 ∆% 14.4	278.5 ∆% 2.5

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

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Monday, May 6, 2013

Twenty Nine Million Unemployed or Underemployed, Stagnating Real Wages and Real Disposable Income, Peaking Valuations of Risk Financial Assets, World Economic Slowdown and Global Recession Risk: Part I

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