Recovery without Hiring, Loss of Full-time Jobs, Youth and Middle Age Unemployment, Risks of Steepening Yield Curve and Peaking Valuations of Risk Financial Assets, United States International Trade, Declining Real Salaries, World Economic Slowdown and Global Recession Risk: Part I

 

Recovery without Hiring, Loss of Full-time Jobs, Youth and Middle Age Unemployment, Risks of Steepening Yield Curve and Peaking Valuations of Risk Financial Assets, United States International Trade, Declining Real Salaries, World Economic Slowdown and Global Recession Risk

Carlos M. Pelaez

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013

Executive Summary

I Recovery without Hiring

IA1 Hiring Collapse

IA2 Labor Underutilization

IA3 Ten Million Fewer Full-time Job

IA4 Youth and Middle-Age Unemployment

II United States International Trade

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

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

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

Executive Summary

Contents

ESI Tapering Quantitative Easing, Duration Dumping, Steepening Yield Curve and Global Financial and Economic Risk

ESII Recovery without Hiring

ESIII Loss of Full-time Employment

ESIV Youth Unemployment and Middle-Aged Unemployment

ESV United States International Trade

ESVI Declining Real Salaries

ESI Tapering Quantitative Easing, Duration Dumping, Steepening Yield Curve and 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 for both 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:

1. 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 10.4 percent in IIQ2011 to 7.4 percent in IVQ2011 and 6.2 percent in IQ2012, rebounding to 8.7 percent in IIQ2012, 8.2 percent in IIIQ2012 and 7.8 percent in IVQ2012. Annual equivalent growth in IQ2013 fell to 6.6 percent and to 7.0 percent in IIQ2013 (See Subsection VC and earlier at http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and_7005.html 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).
2. United States Economic Growth, Labor Markets and Budget/Debt Quagmire. The US is growing slowly with 28.7 million in job stress, fewer 10 million full-time jobs, high youth unemployment, historically low hiring and declining real wages.
3. Economic Growth and Labor Markets in Advanced Economies. Advanced economies are growing slowly. There is still high unemployment in advanced economies.
4. World Inflation Waves. Inflation continues in repetitive waves globally (http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and.html).

A list of financial uncertainties includes:

1. Euro Area Survival Risk. The resilience of the euro to fiscal and financial doubts on larger member countries is still an unknown risk.
2. Foreign Exchange Wars. Exchange rate struggles continue as zero interest rates in advanced economies induce devaluation of their currencies.
3. Valuation of Risk Financial Assets. Valuations of risk financial assets have reached extremely high levels in markets with lower volumes.
4. 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.
5. Credibility and Commitment of Central Bank Policy. There is a credibility issue of the commitment of monetary policy (Sargent and Silber 2012Mar20).
6. Carry Trades. Commodity prices driven by zero interest rates have resumed their increasing path with fluctuations caused by intermittent risk aversion

The major reason and channel of transmission of unconventional monetary policy is through expectations of inflation. Fisher (1930) provided theoretical and historical relation of interest rates and inflation. Let i_n be the nominal interest rate, i_r the real or inflation-adjusted interest rate and π^e the expectation of inflation in the time term of the interest rate, which are all expressed as proportions. The following expression provides the relation of real and nominal interest rates and the expectation of inflation:

(1 + i_r) = (1 + i_n)/(1 + π^e) (1)

That is, the real interest rate equals the nominal interest rate discounted by the expectation of inflation in time term of the interest rate. Fisher (1933) analyzed the devastating effect of deflation on debts. Nominal debt contracts remained at original principal interest but net worth and income of debtors contracted during deflation. Real interest rates increase during declining inflation. For example, if the interest rate is 3 percent and prices decline 0.2 percent, equation (1) calculates the real interest rate as:

(1 +0.03)/(1 – 0.02) = 1.03/(0.998) = 1.032

That is, the real rate of interest is (1.032 – 1) 100 or 3.2 percent. If inflation were 2 percent, the real rate of interest would be 0.98 percent, or about 1.0 percent {[(1.03/1.02) -1]100 = 0.98%}.

The yield of the one-year Treasury security was quoted in the Wall Street Journal at 0.114 percent on Fri May 17, 2013 (http://online.wsj.com/mdc/page/marketsdata.html?mod=WSJ_topnav_marketdata_main). The expected rate of inflation π^e in the next twelve months is not observed. Assume that it would be equal to the rate of inflation in the past twelve months estimated by the Bureau of Economic Analysis (BLS) at 1.1 percent (http://www.bls.gov/cpi/). The real rate of interest would be obtained as follows:

(1 + 0.00114)/(1 + 0.011) = (1 + r_r) = 0.9902

That is, i_r is equal to 1 – 0.9902 or minus 0.98 percent. Investing in a one-year Treasury security results in a loss of 0.98 percent relative to inflation. The objective of unconventional monetary policy of zero interest rates is to induce consumption and investment because of the loss to inflation of riskless financial assets. Policy would be truly irresponsible if it intended to increase inflationary expectations or π^e. The result could be the same rate of unemployment with higher inflation (Kydland and Prescott 1977).

Current focus is on “tapering” quantitative easing by the Federal Open Market Committee (FOMC). There is sharp distinction between the two measures of unconventional monetary policy: (1) fixing of the overnight rate of fed funds at 0 to ¼ percent; and (2) outright purchase of Treasury and agency securities and mortgage-backed securities for the balance sheet of the Federal Reserve. Market are overreacting to the so-called “tapering” of outright purchases of $85 billion of securities per month for the balance sheet of the Fed. What is truly important is the fixing of the overnight fed funds at 0 to ¼ percent for which there is no end in sight as evident in the FOMC statement for Jun 19, 2013 (http://www.federalreserve.gov/newsevents/press/monetary/20130619a.htm):

“To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent” (emphasis added).

In delivering the biannual report on monetary policy (Board of Governors 2013Jul17), Chairman Bernanke (2013Jul17) advised Congress that:

“Instead, we are providing additional policy accommodation through two distinct yet complementary policy tools. The first tool is expanding the Federal Reserve's portfolio of longer-term Treasury securities and agency mortgage-backed securities (MBS); we are currently purchasing $40 billion per month in agency MBS and $45 billion per month in Treasuries. We are using asset purchases and the resulting expansion of the Federal Reserve's balance sheet primarily to increase the near-term momentum of the economy, with the specific goal of achieving a substantial improvement in the outlook for the labor market in a context of price stability. We have made some progress toward this goal, and, with inflation subdued, we intend to continue our purchases until a substantial improvement in the labor market outlook has been realized. We are relying on near-zero short-term interest rates, together with our forward guidance that rates will continue to be exceptionally low--our second tool--to help maintain a high degree of monetary accommodation for an extended period after asset purchases end, even as the economic recovery strengthens and unemployment declines toward more-normal levels. In appropriate combination, these two tools can provide the high level of policy accommodation needed to promote a stronger economic recovery with price stability.

The Committee's decisions regarding the asset purchase program (and the overall stance of monetary policy) depend on our assessment of the economic outlook and of the cumulative progress toward our objectives. Of course, economic forecasts must be revised when new information arrives and are thus necessarily provisional.”

Friedman (1953) argues there are three lags in effects of monetary policy: (1) between the need for action and recognition of the need; (2) the recognition of the need and taking of actions; and (3) taking of action and actual effects. Friedman (1953) finds that the combination of these lags with insufficient knowledge of the current and future behavior of the economy causes discretionary economic policy to increase instability of the economy or standard deviations of real income σ_y and prices σ_p. Policy attempts to circumvent the lags by policy impulses based on forecasts. We are all naïve about forecasting. Data are available with lags and revised to maintain high standards of estimation. Policy simulation models estimate economic relations with structures prevailing before simulations of policy impulses such that parameters change as discovered by Lucas (1977). Economic agents adjust their behavior in ways that cause opposite results from those intended by optimal control policy as discovered by Kydland and Prescott (1977). Advance guidance attempts to circumvent expectations by economic agents that could reverse policy impulses but is of dubious effectiveness. There is strong case for using rules instead of discretionary authorities in monetary policy (http://cmpassocregulationblog.blogspot.com/search?q=rules+versus+authorities).

The key policy is maintaining fed funds rate between 0 and ¼ percent. An increase in fed funds rates could cause flight out of risk financial markets worldwide. There is no exit from this policy without major financial market repercussions. Indefinite financial repression induces carry trades with high leverage, risks and illiquidity.

A competing event is the high level of valuations of risk financial assets (http://cmpassocregulationblog.blogspot.com/2013/01/peaking-valuation-of-risk-financial.html). 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 14,164.53 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 15,425.51

on Fri Aug 2, 2013, which is higher by 8.9 percent than the value of 14,164.53 reached on Oct 9, 2007 and higher by 8.6 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 59.2 percent since the trough of the sovereign debt crisis in Europe on Jul 2, 2010 to Aug 9, 2013; S&P 500 has gained 65.4 percent; and DAX 47.0 percent. Before the current round of risk aversion, almost all assets in the column “∆% Trough to 8/9/13” 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 13.9 percent below the trough; Japan’s Nikkei Average is 54.3 percent above the trough; DJ Asia Pacific TSM is 19.8 percent above the trough; Dow Global is 33.2 percent above the trough; STOXX 50 of 50 blue-chip European equities (http://www.stoxx.com/indices/index_information.html?symbol=sx5E) is 19.2 percent above the trough; and NYSE Financial Index is 40.8 percent above the trough. DJ UBS Commodities is 1.3 percent above the trough. DAX index of German equities (http://www.bloomberg.com/quote/DAX:IND) is 47.0 percent above the trough. Japan’s Nikkei Average is 54.3 percent above the trough on Aug 31, 2010 and 19.5 percent above the peak on Apr 5, 2010. The Nikkei Average closed at 13,615.19 on Fri Aug 9, 2013 (http://professional.wsj.com/mdc/public/page/marketsdata.html?mod=WSJ_PRO_hps_marketdata), which is 32.8 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 11.9 percent relative to the euro and even higher before the new bout of sovereign risk issues in Europe. The column “∆% week to 8/9/13” in Table VI-4 shows increase of 1.1 percent in the week for China’s Shanghai Composite. DJ Asia Pacific decreased 1.0 percent. NYSE Financial decreased 1.2 percent in the week. DJ UBS Commodities decreased 0.1 percent. Dow Global decreased 0.4 percent in the week of Aug 9, 2013. The DJIA decreased 1.5 percent and S&P 500 decreased 1.1 percent. DAX of Germany decreased 0.8 percent. STOXX 50 increased 0.1 percent. The USD depreciated 0.5 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 8/9/13” that provides the percentage change from the peak in Apr 2010 before the sovereign risk event to Aug 9, 2013. Most risk financial assets had gained not only relative to the trough as shown in column “∆% Trough to 8/9/13” but also relative to the peak in column “∆% Peak to 8/9/13.” There are now several equity indexes above the peak in Table VI-4: DJIA 37.7 percent, S&P 500 38.9 percent, DAX 31.7 percent, Dow Global 8.7 percent, DJ Asia Pacific 4.9 percent, NYSE Financial Index (http://www.nyse.com/about/listed/nykid.shtml) 12.2 percent, Nikkei Average 19.5 percent and STOXX 50 by 0.9 percent. There is only one equity index below the peak: Shanghai Composite by 35.2 percent. DJ UBS Commodities Index is now 13.4 percent below the peak. The US dollar strengthened 11.8 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. Alexandra Scaggs, writing on “Tepid profits, roaring stocks,” on May 16, 2013, published in the Wall Street Journal (http://online.wsj.com/article/SB10001424127887323398204578487460105747412.html), analyzes stabilization of earnings growth: 70 percent of 458 reporting companies in the S&P 500 stock index reported earnings above forecasts but sales fell 0.2 percent relative to forecasts of increase of 0.5 percent. Paul Vigna, writing on “Earnings are a margin story but for how long,” on May 17, 2013, published in the Wall Street Journal (http://blogs.wsj.com/moneybeat/2013/05/17/earnings-are-a-margin-story-but-for-how-long/), analyzes that corporate profits increase with stagnating sales while companies manage costs tightly. More than 90 percent of S&P components reported moderate increase of earnings of 3.7 percent in IQ2013 relative to IQ2012 with decline of sales of 0.2 percent. Earnings and sales have been in declining trend. In IVQ2009, growth of earnings reached 104 percent and sales jumped 13 percent. Net margins reached 8.92 percent in IQ2013, which is almost the same at 8.95 percent in IIIQ2006. Operating margins are 9.58 percent. There is concern by market participants that reversion of margins to the mean could exert pressure on earnings unless there is more accelerated growth of sales. Vigna (op. cit.) finds sales growth limited by weak economic growth. 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. Future company cash flows derive from investment projects. Real private fixed investment fell from $2,111.5 billion in IVQ2007 to $1920.4 billion in IQ2013 or by 9.1 percent compared with growth of 24.1 percent of gross private domestic investment from IQ1980 to IVQ1985 (http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). Undistributed profits of US corporations swelled 306.9 percent from $118.0 billion IQ2007 to $480.2 billion in IQ2013 and changed signs from minus $22.1 billion in IVQ2007 (http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). Corporate profits with inventory valuation and capital consumption adjustment fell $27.8 billion relative to IVQ2012 (http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp1q13_3rd.pdf), from $2013.0 billion in IVQ2012 to $1985.2 billion in IQ2013 at the quarterly rate of minus 1.4 percent. Uncertainty originating in fiscal, regulatory and monetary policy causes wide swings in expectations and decisions by the private sector with adverse effects on investment, real economic activity and employment. The investment decision of US business is fractured.

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) popularized the view of the elusive relation between stock markets and economic activity in an often-quoted phrase “the stock market has predicted nine of the last five recessions.” In the presence of zero interest rates forever, valuations of risk financial assets are likely to differ from the performance of the overall economy. The interrelations of financial and economic variables prove difficult to analyze and measure.

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

	Peak	Trough	∆% to Trough	∆% Peak to 8/9/ /13	∆% Week 8/9/13	∆% Trough to 8/9/ 13
DJIA	4/26/ 10	7/2/10	-13.6	37.7	-1.5	59.2
S&P 500	4/23/ 10	7/20/ 10	-16.0	38.9	-1.1	65.4
NYSE Finance	4/15/ 10	7/2/10	-20.3	12.2	-1.2	40.8
Dow Global	4/15/ 10	7/2/10	-18.4	8.7	-0.4	33.2
Asia Pacific	4/15/ 10	7/2/10	-12.5	4.9	-1.0	19.8
Japan Nikkei Aver.	4/05/ 10	8/31/ 10	-22.5	19.5	-5.9	54.3
China Shang.	4/15/ 10	7/02 /10	-24.7	-35.2	1.1	-13.9
STOXX 50	4/15/10	7/2/10	-15.3	0.9	0.1	19.2
DAX	4/26/ 10	5/25/ 10	-10.5	31.7	-0.8	47.0
Dollar Euro	11/25 2009	6/7 2010	21.2	11.8	-0.5	-11.9
DJ UBS Comm.	1/6/ 10	7/2/10	-14.5	-13.4	-0.1	1.3
10-Year T Note	4/5/ 10	4/6/10	3.986	2.579

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

ESII Recovery without Hiring. Professor Edward P. Lazear (2012Jan19) at Stanford University finds that recovery of hiring in the US to peaks attained in 2007 requires an increase of hiring by 30 percent while hiring levels have increased by only 4 percent since Jan 2009. The high level of unemployment with low level of hiring reduces the statistical probability that the unemployed will find a job. According to Lazear (2012Jan19), the probability of finding a new job currently is about one third of the probability of finding a job in 2007. Improvements in labor markets have not increased the probability of finding a new job. Lazear (2012Jan19) quotes an essay coauthored with James R. Spletzer in the American Economic Review (Lazear and Spletzer 2012Mar, 2012May) on the concept of churn. A dynamic labor market occurs when a similar amount of workers is hired as those who are separated. This replacement of separated workers is called churn, which explains about two-thirds of total hiring. Typically, wage increases received in a new job are higher by 8 percent. Lazear (2012Jan19) argues that churn has declined 35 percent from the level before the recession in IVQ2007. Because of the collapse of churn, there are no opportunities in escaping falling real wages by moving to another job. As this blog argues, there are meager chances of escaping unemployment because of the collapse of hiring and those employed cannot escape falling real wages by moving to another job (http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html). Lazear and Spletzer (2012Mar, 1) argue that reductions of churn reduce the operational effectiveness of labor markets. Churn is part of the allocation of resources or in this case labor to occupations of higher marginal returns. The decline in churn can harm static and dynamic economic efficiency. Losses from decline of churn during recessions can affect an economy over the long-term by preventing optimal growth trajectories because resources are not used in the occupations where they provide highest marginal returns. Lazear and Spletzer (2012Mar 7-8) conclude that: “under a number of assumptions, we estimate that the loss in output during the recession [of 2007 to 2009] and its aftermath resulting from reduced churn equaled $208 billion. On an annual basis, this amounts to about .4% of GDP for a period of 3½ years.”

There are two additional facts discussed below: (1) there are about ten million fewer full-time jobs currently than before the recession of 2008 and 2009; and (2) the extremely high and rigid rate of youth unemployment is denying an early start to young people ages 16 to 24 years while unemployment of ages 45 years or over has swelled. There are four subsections. IA1 Hiring Collapse provides the data and analysis on the weakness of hiring in the United States economy. IA2 Labor Underutilization provides the measures of labor underutilization of the Bureau of Labor Statistics (BLS). Statistics on the decline of full-time employment are in IA3 Ten Million Fewer Full-time Jobs. IA4 Youth and Middle-Age Unemployment provides the data on high unemployment of ages 16 to 24 years and of ages 45 years or over.

IA1 Hiring Collapse. An important characteristic of the current fractured labor market of the US is the closing of the avenue for exiting unemployment and underemployment normally available through dynamic hiring. Another avenue that is closed is the opportunity for advancement in moving to new jobs that pay better salaries and benefits again because of the collapse of hiring in the United States. Those who are unemployed or underemployed cannot find a new job even accepting lower wages and no benefits. The employed cannot escape declining inflation-adjusted earnings because there is no hiring. The objective of this section is to analyze hiring and labor underutilization in the United States.

Blanchard and Katz (1997, 53 consider an appropriate measure of job stress:

“The right measure of the state of the labor market is the exit rate from unemployment, defined as the number of hires divided by the number unemployed, rather than the unemployment rate itself. What matters to the unemployed is not how many of them there are, but how many of them there are in relation to the number of hires by firms.”

The natural rate of unemployment and the similar NAIRU are quite difficult to estimate in practice (Ibid; see Ball and Mankiw 2002).

The Bureau of Labor Statistics (BLS) created the Job Openings and Labor Turnover Survey (JOLTS) with the purpose that (http://www.bls.gov/jlt/jltover.htm#purpose):

“These data serve as demand-side indicators of labor shortages at the national level. Prior to JOLTS, there was no economic indicator of the unmet demand for labor with which to assess the presence or extent of labor shortages in the United States. The availability of unfilled jobs—the jobs opening rate—is an important measure of tightness of job markets, parallel to existing measures of unemployment.”

The BLS collects data from about 16,000 US business establishments in nonagricultural industries through the 50 states and DC. The data are released monthly and constitute an important complement to other data provided by the BLS (see also Lazear and Spletzer 2012Mar, 6-7).

Hiring in the nonfarm sector (HNF) has declined from 63.8 million in 2006 to 52.0 million in 2012 or by 11.8 million while hiring in the private sector (HP) has declined from 59.5 million in 2006 to 48.5 million in 2012 or by 11.0 million, as shown in Table I-1. The ratio of nonfarm hiring to employment (RNF) has fallen from 47.2 in 2005 to 38.9 in 2012 and in the private sector (RHP) from 53.1 in 2005 to 43.4 in 2012. Hiring has not recovered as in previous cyclical expansions because of the low rate of economic growth in the current cyclical expansion. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 16 quarters from IIIQ2009 to IIQ2013. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html http://bea.gov/iTable/index_nipa.cfm http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). As a result, there are 28.3 million unemployed or underemployed in the United States for an effective unemployment rate of 17.4 percent (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html). The US missed the opportunity to recover employment as in past cyclical expansions from contractions.

Table I-1, US, Annual Total Nonfarm Hiring (HNF) and Total Private Hiring (HP) in the US and Percentage of Total Employment

	HNF	Rate RNF	HP	Rate HP
2001	62,948	47.8	58,825	53.1
2002	58,583	44.9	54,759	50.3
2003	56,451	43.4	53,056	48.9
2004	60,367	45.9	56,617	51.6
2005	63,150	47.2	59,372	53.1
2006	63,773	46.9	59,494	52.1
2007	62,421	45.4	58,035	50.3
2008	55,128	40.3	51,591	45.1
2009	46,357	35.4	43,031	39.8
2010	48,607	37.4	44,788	41.7
2011	49,675	37.8	46,552	42.5
2012	51,991	38.9	48,493	43.4

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

Chart I-1 shows the annual level of total nonfarm hiring (HNF) that collapsed during the global recession after 2007 in contrast with milder decline in the shallow recession of 2001. Nonfarm hiring has not been recovered, remaining at a depressed level.

Chart I-1, US, Level Total Nonfarm Hiring (HNF), Annual, 2001-2012

Source: US Bureau of Labor Statistics

http://www.bls.gov/jlt/

Chart I-2 shows the ratio or rate of nonfarm hiring to employment (RNF) that also fell much more in the recession of 2007 to 2009 than in the shallow recession of 2001. Recovery is weak.

Chart I-2, US, Rate Total Nonfarm Hiring (HNF), Annual, 2001-2012

Source: US Bureau of Labor Statistics

http://www.bls.gov/jlt/

Yearly percentage changes of total nonfarm hiring (HNF) are provided in Table I-2. There were much milder declines in 2002 of 6.9 percent and 3.6 percent in 2003 followed by strong rebounds of 6.9 percent in 2004 and 4.6 percent in 2005. In contrast, the contractions of nonfarm hiring in the recession after 2007 were much sharper in percentage points: 2.1 in 2007, 11.7 in 2008 and 15.9 percent in 2009. On a yearly basis, nonfarm hiring grew 4.9 percent in 2010 relative to 2009, 2.2 percent in 2011 and 4.7 percent in 2012.

Table I-2, US, Annual Total Nonfarm Hiring (HNF), Annual Percentage Change, 2002-2012

Year	Annual
2002	-6.9
2003	-3.6
2004	6.9
2005	4.6
2006	1.0
2007	-2.1
2008	-11.7
2009	-15.9
2010	4.9
2011	2.2
2012	4.7

Source: US Bureau of Labor Statistics

http://www.bls.gov/jlt

Chart I-3 plots yearly percentage changes of nonfarm hiring. Percentage declines after 2007 were quite sharp.

Chart I-3, US, Annual Total Nonfarm Hiring (HNF), Annual Percentage Change, 2001-2012

Source: Bureau of Labor Statistics

http://www.bls.gov/jlt/

Total private hiring (HP) yearly data are provided in Chart I-4. There has been sharp contraction of total private hiring in the US and only milder recovery from 2010 to 2012.

Chart I-4, US, Total Private Hiring Level, Annual, 2001-2012

Source: Bureau of Labor Statistics

http://www.bls.gov/jlt/

Chart I-5 plots the rate of total private hiring relative to employment (RHP). The rate collapsed during the global recession after 2007 with insufficient recovery.

Chart I-5, US, Rate Total Private Hiring, Annual, 2001-2012

Source: Bureau of Labor Statistics

http://www.bls.gov/jlt/

Total nonfarm hiring (HNF), total private hiring (HP) and their respective rates are provided for the month of Jun in the years from 2001 to 2013 in Table I-3. Hiring numbers are in thousands. There is meager recovery in HNF from 4280 thousand (or 4.2 million) in Jun 2009 to 4737 thousand in Jun 2010, 4883 thousand in Jun 2011, 5130 thousand in Jun 2012 and 4918 thousand in Jun 2013 for cumulative gain of 14.9 percent. HP rose from 3914 thousand in Jun 2009 to 4504 thousand in Jun 2011, 4724 thousand in Jun 2012 and 4537 in Jun 2013 for cumulative gain of 15.9 percent. HNF has fallen from 6139 in Jun 2006 to 4918 in Jun 2013 or by 19.0 percent. HP has fallen from 5661 in Jun 2006 to 4537 in Jun 2013 or by 19.9 percent. The civilian noninstitutional population of the US rose from 228.815 million in 2006 to 243.284 million in 2012 or by 14.469 million and the civilian labor force from 151.428 million in 2006 to 154.975 million in 2012 or by 3.547 million (http://www.bls.gov/data/). The number of nonfarm hires in the US fell from 63.773 million in 2006 to 51.991 million in 2012 or by 11.782 million and the number of private hires fell from 59.494 million in 2006 to 48.493 million in 2012 or by 11 million (http://www.bls.gov/jlt/). The labor market continues to be fractured, failing to provide an opportunity to exit from unemployment/underemployment or to find an opportunity for advancement away from declining inflation-adjusted earnings.

Table I-3, US, Total Nonfarm Hiring (HNF) and Total Private Hiring (HP) in the US in Thousands and in Percentage of Total Employment Not Seasonally Adjusted

	HNF	Rate RNF	HP	Rate HP
2001 Jun	5819	4.4	5351	4.8
2002 Jun	5471	4.2	5054	4.6
2003 Jun	5369	4.1	4975	4.6
2004 Jun	5703	4.3	5309	4.8
2005 Jun	6069	4.5	5675	5.0
2006 Jun	6139	4.5	5661	4.9
2007 Jun	6033	4.3	5535	4.7
2008 Jun	5525	4.0	5110	4.4
2009 Jun	4280	3.3	3914	3.6
2010 Jun	4737	3.6	4344	4.0
2011 Jun	4883	3.7	4504	4.1
2012 Jun	5130	3.8	4724	4.2
2013 Jun	4918	3.6	4537	3.9

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

Chart I-6 provides total nonfarm hiring on a monthly basis from 2001 to 2013. Nonfarm hiring rebounded in early 2010 but then fell and stabilized at a lower level than the early peak not-seasonally adjusted (NSA) of 4774 in May 2010 until it surpassed it with 4883 in Jun 2011 but declined to 3013 in Dec 2012. Nonfarm hiring fell in Dec 2011 to 2990 from 3827 in Nov and to revised 3683 in Feb 2012, increasing to 4210 in Mar 2012, 3013 in Dec 2012 and 4128 in Jan 2013 and declining to 3661 in Feb 2013. Nonfarm hires not seasonally adjusted increased to 4918 in Jun 2013. Chart I-6 provides seasonally adjusted (SA) monthly data. The number of seasonally-adjusted hires in Aug 2011 was 4187 thousand, increasing to revised 4489 thousand in Feb 2012, or 7.2 percent, moving to 4195 in Dec 2012 for cumulative increase of 0.5 percent from 4174 in Dec 2011 and 4201 in Jun 2013 for increase of 0.1 percent relative to 4195 in Dec 2012. The number of hires not seasonally adjusted was 4883 in Jun 2011, falling to 2990 in Dec 2011 but increasing to 4013 in Jan 2012 and declining to 3013 in Dec 2012. The number of nonfarm hiring not seasonally adjusted fell by 38.8 percent from 4883 in Jun 2011 to 2990 in Dec 2011 and fell 41.3 percent from 5130 in Jun 2012 to 3013 in Dec 2012 in a yearly-repeated seasonal pattern.

Chart I-6, US, Total Nonfarm Hiring (HNF), 2001-2013 Month SA

Source: Bureau of Labor Statistics

http://www.bls.gov/jlt/

Similar behavior occurs in the rate of nonfarm hiring in Chart I-7. Recovery in early 2010 was followed by decline and stabilization at a lower level but with stability in monthly SA estimates of 3.2 in Aug 2011 to 3.2 in Jan 2012, increasing to 3.4 in May 2012 and falling to 3.3 in Jun 2012 and 3.1 in Jul 2012, increasing to 3.3 in Aug 2012 but falling to 3.1 in Dec 2012 and 3.1 in Jun 2013. The rate not seasonally adjusted fell from 3.7 in Jun 2011 to 2.2 in Dec 2012, climbing to 3.8 in Jun 2012 but falling to 2.2 in Dec 2012 and 3.6 in Jun 2013. Rates of nonfarm hiring NSA were in the range of 2.8 (Dec) to 4.5 (Jun) in 2006.

Chart I-7, US, Rate Total Nonfarm Hiring, Month SA 2001-2013

Source: Bureau of Labor Statistics

http://www.bls.gov/jlt/

There is only milder improvement in total private hiring shown in Chart I-8. Hiring private (HP) rose in 2010 with stability and renewed increase in 2011 followed by almost stationary series in 2012. The number of private hiring seasonally adjusted fell from 4026 thousand in Sep 2011 to 3876 in Dec 2011 or by 3.7 percent, increasing to 3915 in Jan 2012 or decline by 2.8 percent relative to the level in Sep 2011 but decreasing to 3934 in Sep 2012 or lower by 2.3 percent relative to Sep 2011 and decreasing to 3915 in Dec 2012 for change of 0.0 percent relative to 3915 in Jan 2012. The number of private hiring not seasonally adjusted fell from 4504 in Jun 2011 to 2809 in Dec 2011 or by 37.6 percent, reaching 3749 in Jan 2012 or decline of 16.8 percent relative to Jun 2011 and moving to 2842 in Dec 2012 or 39.8 percent lower relative to 4724 in Jun 2012. Companies do not hire in the latter part of the year that explains the high seasonality in year-end employment data. For example, NSA private hiring fell from 5661 in Jun 2006 to 3635 in Dec 2006 or by 35.8 percent. Private hiring NSA data are useful in showing the huge declines from the period before the global recession. In Jul 2006, private hiring NSA was 5555, declining to 4245 in Jul 2011 or by 23.6 percent and to 4277 in Jul 2012 or lower by 23.0 percent relative to Jul 2006. Private hiring NSA fell from 5215 in Sep 2005 to 4005 in Sep 2012 or 23.2 percent and fell from 3635 in Dec 2006 to 2842 in Dec 2012 or 21.8 percent. The conclusion is that private hiring in the US is around 20 percent below the hiring before the global recession. The main problem in recovery of the US labor market has been the low rate of GDP growth. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 16 quarters from IIIQ2009 to IIQ2013. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html http://bea.gov/iTable/index_nipa.cfm http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). As a result, there are 28.3 million unemployed or underemployed in the United States for an effective unemployment rate of 17.4 percent (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html). The US missed the opportunity to recover employment as in past cyclical expansions from contractions.

Chart I-8, US, Total Private Hiring Month SA 2001-2013

Source: Bureau of Labor Statistics

http://www.bls.gov/jlt/

Chart I-9 shows similar behavior in the rate of private hiring. The rate in 2011 in monthly SA data did not rise significantly above the peak in 2010. The rate seasonally adjusted fell from 3.7 in Sep 2011 to 3.5 in Dec 2011 and reached 3.5 in Dec 2012 and 3.4 in Jun 2013. The rate not seasonally adjusted (NSA) fell from 3.7 in Sep 2011 to 2.5 in Dec 2011, increasing to 3.8 in Oct 2012 but falling to 2.5 in Dec 2012 and 3.4 in Mar 2013. The NSA rate of private hiring fell from 4.8 in Jul 2006 to 3.4 in Aug 2009 but recovery was insufficient to only 3.8 in Aug 2012, 2.5 in Dec 2012 and 3.9 in Jun 2013.

Chart I-9, US, Rate Total Private Hiring Month SA 2001-2013

Source: Bureau of Labor Statistics

http://www.bls.gov/jlt/

ESIII Loss of Full-time Employment. There is strong seasonality in US labor markets around the end of the year. The number employed part-time for economic reasons because they could not find full-time employment fell from 9.101 million in Sep 2011 to 8.043 million in Aug 2012, seasonally adjusted, or decline of 1.058 million in nine months, as shown in Table I-9, but then rebounded to 8.607 million in Sep 2012 for increase of 564,000 in one month from Aug to Sep 2012, declining to 8.286 million in Oct 2012 or by 321,000 again in one month, further declining to 8.138 million in Nov 2012 for another major one-month decline of 148,000 and 7.918 million in Dec 2012 or fewer 220,000 in just one month. The number employed part-time for economic reasons increased to 7.973 million in Jan 2013 or 55,000 more than in Dec 2012 and to 7,988 million in Feb 2013, declining to 7.904 million in May 2013 but increasing to 8.245 million in Jul 2013. There is an increase of 243,000 in part-time for economic reasons from Aug 2012 to Oct 2012 and of 95,000 from Aug 2012 to Nov 2012. The number employed full-time increased from 112.871 million in Oct 2011 to 115.145 million in Mar 2012 or 2.274 million but then fell to 114.300 million in May 2012 or 0.845 million fewer full-time employed than in Mar 2012. The number employed full-time increased from 114.492 million in Aug 2012 to 115.469 million in Oct 2012 or increase of 0.977 million full-time jobs in two months and further to 115.918 million in Jan 2013 or increase of 1.426 million more full-time jobs in four months from Aug 2012 to Jan 2013. The number of full time jobs decreased slightly to 115.841 in Feb 2013, increasing to 116.238 million in May 2013 and 115.998 million in Jun 2013. Then number of full-time jobs increased to 116.090 million in Jul 2013. Benchmark and seasonality-factors adjustments at the turn of every year could affect comparability of labor market indicators (http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html http://cmpassocregulationblog.blogspot.com/2013/03/thirty-one-million-unemployed-or.html). The number of employed part-time for economic reasons actually increased without seasonal adjustment from 8.271 million in Nov 2011 to 8.428 million in Dec 2011 or by 157,000 and then to 8.918 million in Jan 2012 or by an additional 490,000 for cumulative increase from Nov 2011 to Jan 2012 of 647,000. The level of employed part-time for economic reasons then fell from 8.918 million in Jan 2012 to 7.867 million in Mar 2012 or by 1.0151 million and to 7.694 million in Apr 2012 or 1.224 million fewer relative to Jan 2012. In Aug 2012, the number employed part-time for economic reasons reached 7.842 million NSA or 148,000 more than in Apr 2012. The number employed part-time for economic reasons increased from 7.842 million in Aug 2012 to 8.110 million in Sep 2012 or by 3.4 percent. The number part-time for economic reasons fell from 8.110 million in Sep 2012 to 7.870 million in Oct 2012 or by 240.000 in one month. The number employed part-time for economic reasons NSA increased to 8.628 million in Jan 2013 or 758,000 more than in Oct 2012. The number employed part-time for economic reasons fell to 8.298 million in Feb 2013, which is lower by 330,000 relative to 8.628 million in Jan 2013 but higher by 428,000 relative to 7.870 million in Oct 2012. The number employed part time for economic reasons fell to 7.734 million in Mar 2013 or 564,000 less than in Feb 2013 and fell to 7.709 million in Apr 2013. The number employed part-time for economic reasons reached 7.618 million in May 2013. The number employed part-time for economic reasons jumped from 7.618 million in May 2013 to 8.440 million in Jun 2013 or 822,000 in one month. The number employed part-time for economic reasons fell to 8.324 million in Jul 2013. The number employed full time without seasonal adjustment fell from 113.138 million in Nov 2011 to 113.050 million in Dec 2011 or by 88,000 and fell further to 111.879 in Jan 2012 for cumulative decrease of 1.259 million. The number employed full-time not seasonally adjusted fell from 113.138 million in Nov 2011 to 112.587 million in Feb 2012 or by 551.000 but increased to 116.214 million in Aug 2012 or 3.076 million more full-time jobs than in Nov 2011. The number employed full-time not seasonally adjusted decreased from 116.214 million in Aug 2012 to 115.678 million in Sep 2012 for loss of 536,000 full-time jobs and rose to 116.045 million in Oct 2012 or by 367,000 full-time jobs in one month relative to Sep 2012. The number employed full-time NSA fell from 116.045 million in Oct 2012 to 115.515 million in Nov 2012 or decline of 530.000 in one month. The number employed full-time fell from 115.515 in Nov 2012 to 115.079 million in Dec 2012 or decline by 436,000 in one month. The number employed full time fell from 115.079 million in Dec 2012 to 113.868 million in Jan 2013 or decline of 1.211 million in one month. The number of full time jobs increased to 114.191 in Feb 2012 or by 323,000 in one month and increased to 114.796 million in Mar 2013 for cumulative increase from Jan by 928,000 full-time jobs but decrease of 283,000 from Dec 2012. The number employed full time reached 117.400 million in Jun 2013 and increased to 117.688 in Jul 2013 or by 288,000. Comparisons over long periods require use of NSA data. The number with full-time jobs fell from a high of 123.219 million in Jul 2007 to 108.777 million in Jan 2010 or by 14.442 million. The number with full-time jobs in Jul 2013 is 117.688 million, which is lower by 5.531 million relative to the peak of 123.219 million in Jul 2007. The magnitude of the stress in US labor markets is magnified by the increase in the civilian noninstitutional population of the United States from 231.958 million in Jul 2007 to 245.756 million in Jul 2013 or by 13.798 million (http://www.bls.gov/data/) while in the same period the number of full-time jobs fell 5.819 million. There appear to be around 10 million fewer full-time jobs in the US than before the global recession while population increased around 14 million. Mediocre GDP growth is the main culprit of the fractured US labor market. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 16 quarters from IIIQ2009 to IIQ2013. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html http://bea.gov/iTable/index_nipa.cfm http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). As a result, there are 28.3 million unemployed or underemployed in the United States for an effective unemployment rate of 17.4 percent (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html). The US missed the opportunity to recover employment as in past cyclical expansions from contractions.

Table I-9, US, Employed Part-time for Economic Reasons, Thousands, and Full-time, Millions

	Part-time Thousands	Full-time Millions
Seasonally Adjusted
Jul 2013	8,245	116.090
Jun 2013	8,226	115.998
May 2013	7,904	116.238
Apr 2013	7,916	116.053
Mar 2013	7,638	115.903
Feb 2013	7,988	115.841
Jan 2013	7,973	115.918
Dec 2012	7,918	115.868
Nov 2012	8,138	115.665
Oct 2012	8,286	115.469
Sep 2012	8,607	115.259
Aug 2012	8,043	114.492
Jul 2012	8,245	114.478
Jun 2012	8,210	114.606
May 2012	8,116	114.300
Apr 2012	7,896	114.441
Mar 2012	7,664	115.145
Feb 2012	8,127	114.263
Jan 2012	8,220	113.833
Dec 2011	8,168	113.820
Nov 2011	8,436	113.217
Oct 2011	8,726	112.871
Sep 2011	9,101	112.541
Aug 2011	8,816	112.555
Jul 2011	8,416	112.141
Not Seasonally Adjusted
Jul 2013	8324	117.688
Jun 2013	8,440	117.400
May 2013	7,618	116.643
Apr 2013	7,709	115.674
Mar 2013	7,734	114.796
Feb 2013	8,298	114.191
Jan 2013	8,628	113.868
Dec 2012	8,166	115.079
Nov 2012	7,994	115.515
Oct 2012	7,870	116.045
Sep 2012	8,110	115.678
Aug 2012	7,842	116.214
Jul 2012	8,316	116.131
Jun 2012	8,394	116.024
May 2012	7,837	114.634
Apr 2012	7,694	113.999
Mar 2012	7,867	113.916
Feb 2012	8,455	112.587
Jan 2012	8,918	111.879
Dec 2011	8,428	113.050
Nov 2011	8,271	113.138
Oct 2011	8,258	113.456
Sep 2011	8,541	112.980
Aug 2011	8,604	114.286
Jul 2011	8,514	113.759
Jun 2011	8,738	113.255
May 2011	8,270	112.618
Apr 2011	8,425	111.844
Mar 2011	8,737	111.186
Feb 2011	8,749	110.731
Jan 2011	9,187	110.373
Dec 2010	9,205	111.207
Nov 2010	8,670	111.348
Oct 2010	8,408	112.342
Sep 2010	8,628	112.385
Aug 2010	8,628	113.508
Jul 2010	8,737	113.974
Jun 2010	8,867	113.856
May 2010	8,513	112.809
Apr 2010	8,921	111.391
Mar 2010	9,343	109.877
Feb 2010	9,282	109.100
Jan 2010	9,290	108.777 (low)
Dec 2009	9,354 (high)	109.875
Nov 2009	8,894	111.274
Oct 2009	8,474	111.599
Sep 2009	8,255	111.991
Aug 2009	8,835	113.863
Jul 2009	9,103	114.184
Jun 2009	9,301	114.014
May 2009	8,785	113.083
Apr 2009	8,648	112.746
Mar 2009	9,305	112.215
Feb 2009	9,170	112.947
Jan 2009	8,829	113.815
Dec 2008	8,250	116.422
Nov 2008	7,135	118.432
Oct 2008	6,267	120.020
Sep 2008	5,701	120.213
Aug 2008	5,736	121.556
Jul 2008	6,054	122.378
Jun 2008	5,697	121.845
May 2008	5,096	120.809
Apr 2008	5,071	120.027
Mar 2008	5,038	119.875
Feb 2008	5,114	119.452
Jan 2008	5,340	119.332
Dec 2007	4,750	121.042
Nov 2007	4,374	121.846
Oct 2007	4,028	122.006
Sep 2007	4,137	121.728
Aug 2007	4,494	122.870
Jul 2007	4,516	123.219 (high)
Jun 2007	4,469	122.150
May 2007	4,315	120.846
Apr 2007	4,205	119.609
Mar 2007	4,384	119.640
Feb 2007	4,417	119.041
Jan 2007	4,726	119.094
Dec 2006	4,281	120.371
Nov 2006	4,054	120.507
Oct 2006	4,010	121.199
Sep 2006	3,735 (low)	120.780
Aug 2006	4,104	121.979
Jul 2006	4,450	121.951
Jun 2006	4,456	121.070
May 2006	3,968	118.925
Apr 2006	3,787	118.559
Mar 2006	4,097	117.693
Feb 2006	4,403	116.823
Jan 2006	4,597	116.395

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

People lose their marketable job skills after prolonged unemployment and find increasing difficulty in finding another job. Chart I-18 shows the sharp rise in unemployed over 27 weeks and stabilization at an extremely high level.

Chart I-18, US, Number Unemployed for 27 Weeks or Over, Thousands SA Month 2001-2013

Sources: US Bureau of Labor Statistics

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

Another segment of U6 consists of people marginally attached to the labor force who continue to seek employment but less frequently on the frustration there may not be a job for them. Chart I-19 shows the sharp rise in people marginally attached to the labor force after 2007 and subsequent stabilization.

Chart I-19, US, Marginally Attached to the Labor Force, NSA Month 2001-2013

Sources: US Bureau of Labor Statistics

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

Chart I-20 reveals the fracture in the US labor market. The number of workers with full-time jobs not-seasonally-adjusted rose with fluctuations from 2002 to a peak in 2007, collapsing during the global recession. The terrible state of the job market is shown in the segment from 2009 to 2013 with fluctuations around the typical behavior of a stationary series: there is no improvement in the United States in creating full-time jobs. The magnitude of the stress in US labor markets is magnified by the increase in the civilian noninstitutional population of the United States from 231.958 million in Jul 2007 to 245.756 million in Jul 2013 or by 13.798 million (http://www.bls.gov/data/) while in the same period the number of full-time jobs fell 5.531 million.

Chart I-20, US, Full-time Employed, Thousands, NSA, 2001-2013

Sources: US Bureau of Labor Statistics

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

Chart I-20A provides the noninstitutional civilian population of the United States from 2001 to 2013. There is clear trend of increase of the population while the number of full-time jobs collapsed after 2008 without sufficient recovery as shown in the preceding Chart I-20.

Chart I-20A, US, Noninstitutional Civilian Population, 2001-2013

Sources: US Bureau of Labor Statistics

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

Chart I-20B provides number of full-time jobs in the US from 1968 to 2013. There were multiple recessions followed by expansions without contraction of full-time jobs and without recovery as during the period after 2008.

Chart I-20B, US, Full-time Employed, Thousands, NSA, 1968-2013

Sources: US Bureau of Labor Statistics

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

Chart I-20C provides the noninstitutional civilian population of the United States from 1968 to 2013. Population expanded at a relatively constant rate of increase with the assurance of creation of full-time jobs that has been broken since 2008.

Chart I-20C, US, Noninstitutional Civilian Population, 1968-2013

Sources: US Bureau of Labor Statistics

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

ESIV Youth Unemployment and Middle-Aged Unemployment. The United States is experiencing high youth unemployment as in European economies. Table I-10 provides the employment level for ages 16 to 24 years of age estimated by the Bureau of Labor Statistics. On an annual basis, youth employment fell from 20.041 million in 2006 to 17.362 million in 2011 or 2.679 million fewer youth jobs and to 17.834 million in 2012 or 2.207 million fewer jobs. During the seasonal peak months of youth employment in the summer from Jun to Aug, youth employment has fallen by more than two million jobs relative to 21.914 million in Jul 2006 with 19.684 million in Jul 2013 for 2.230 million fewer youth jobs. The number of jobs ages 16 to 24 years fell from 21.914 million in Jul 2006 to 19.684 million in Jul 2013 or by 2.230 million. The civilian noninstitutional population ages 16 to 24 years increased from 37.443 million in Jul 2007 to 38.861 million in Jul 2013 or by 1.418 million while the number of jobs for ages 16 to 24 years fell by 2.230 million from 21.914 million in Jul 2007 to 19.684 million in Jul 2013. There are two hardships behind these data. First, young people cannot find employment after finishing high school and college, reducing prospects for achievement in older age. Second, students with more modest means cannot find employment to keep them in college.

Table I-10, US, Employment Level 16-24 Years, Thousands, NSA

Year	Mar	Apr	May	Jun	Jul	Annual
2001	19800	19778	19648	21212	22042	20088
2002	19091	19108	19484	20828	21501	19683
2003	18709	18873	19032	20432	20950	19351
2004	18752	19184	19237	20587	21447	19630
2005	18989	19071	19356	20949	21749	19770
2006	19291	19406	19769	21268	21914	20041
2007	19538	19368	19457	21098	21717	19875
2008	18745	19161	19254	20466	21021	19202
2009	17564	17739	17588	18726	19304	17601
2010	16587	16764	17039	17920	18564	17077
2011	16898	16970	17045	18180	18632	17362
2012	17301	17387	17681	18907	19461	17834
2013	17271	17593	17704	19125	19684

Sources: US Bureau of Labor Statistics

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

Chart I-21 provides US employment level ages 16 to 24 years from 2002 to 2013. Employment level is sharply lower in Jun 2013 relative to the peak in 2007.

Chart I-21, US, Employment Level 16-24 Years, Thousands SA, 2001-2013

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

Chart I-21A provides the US civilian noninstitutional population ages 16 to 24 years not seasonally adjusted from 2001 to 2013. The civilian noninstitutional population ages 16 to 24 years increased from 37.443 million in Jul 2007 to 38.861 million in Jul 2013, by 1.418 million or 3.8 percent, while the number of jobs for ages 16 to 24 years fell by 2.230 million from 21.914 million in Jul 2007 to 19.684 million in Jul 2013 or decline by 10.2 percent.

Chart I-21A, US, Civilian Noninstitutional Population Ages 16 to 24 Years, Thousands NSA, 2001-2013

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

Chart I-21B provides the civilian labor force of the US ages 16 to 24 years NSA from 2001 to 2013. The US civilian labor force ages 16 to 24 years fell from 24.339 million in Jul 2007 to 23.506 million in Jul 2013, by 0.833 million or decline of 3.4 percent, while the civilian noninstitutional population NSA increased from 37.443 million in Jul 2007 to 38.861 million in Jul 2013, by 1.418 million or 3.8 percent. Youth in the US abandoned their participation in the labor force because of the frustration that there are no jobs available for them

Chart I-21B, US, Civilian Labor Force Ages 16 to 24 Years, Thousands NSA, 2001-2013

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

Chart I-21C provides the ratio of labor force to noninstitutional population or labor force participation of ages 16 to 24 years not seasonally adjusted. The US labor force participation rates for ages 16 to 24 years fell from 66.7 in Jul 2006 to 60.5 in Jul 2013 because of the frustration of young people who believe there may not be jobs available for them.

Chart I-21C, US, Labor Force Participation Rate Ages 16 to 24 Years, NSA, 2001-2013

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

An important measure of the job market is the number of people with jobs relative to population available for work or civilian noninstitutional population or employment/population ratio. Chart I-21D provides the employment population ratio for ages 16 to 24 years. The US employment/population ratio NSA collapsed from 59.2 in Jul 2006 to 50.7 in Jul 2013. Chart I-21D shows vertical drop during the global recession without recovery.

Chart I-21D, US, Employment Population Ratio Ages 16 to 24 Years, Thousands NSA, 2001-2013

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

Table I-11 provides US unemployment level ages 16 to 24 years. The number unemployed ages 16 to 24 years increased from 2342 thousand in 2007 to 3634 thousand in 2011 or by 1.292 million and 3451 thousand in 2012 or by 1.109 million. The unemployment level ages 16 to 24 years rose from 2.622 million in Jul 2007 to 3.821 million in Jul 2013 or by 1.199 million. This situation may persist for many years.

Table I-11, US, Unemployment Level 16-24 Years, Thousands

Year	Feb	Mar	Apr	May	Jun	Jul	Annual
2001	2258	2253	2095	2171	2775	2585	2371
2002	2731	2822	2515	2568	3167	3034	2683
2003	2740	2601	2572	2838	3542	3200	2746
2004	2631	2588	2387	2684	3191	3018	2638
2005	2787	2520	2398	2619	3010	2688	2521
2006	2433	2216	2092	2254	2860	2750	2353
2007	2230	2096	2074	2203	2883	2622	2342
2008	2480	2347	2196	2952	3450	3408	2830
2009	3457	3371	3321	3851	4653	4387	3760
2010	3888	3748	3803	3854	4481	4374	3857
2011	3696	3520	3365	3628	4248	4110	3634
2012	3507	3294	3175	3438	4180	4011	3451
2013	3449	3261	3129	3478	4198	3821

Sources: US Bureau of Labor Statistics

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

Chart I-22 provides the unemployment level ages 16 to 24 from 2001 to 2012. The level rose sharply from 2007 to 2010 with tepid improvement into 2012 and deterioration into 2013.

Chart I-22, US, Unemployment Level 16-24 Years, Thousands SA, 2001-2013

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

Table I-12 provides the rate of unemployment of young peoples in ages 16 to 24 years. The annual rate jumped from 10.5 percent in 2007 to 18.4 percent in 2010, 17.3 percent in 2011 and 16.2 percent in 2012. During the seasonal peak in Jul the rate of youth unemployed was 18.1 percent in Jul 2011, 17.1 percent in Jul 2012 and 16.3 percent in Jul 2013 compared with 10.8 percent in Jul 2007. The rate of youth unemployment rose from 11.2 in Jun 2006 to 16.3 percent in Jul 2013 and likely higher if adding those who ceased searching for a job in frustration none may be available.

Table I-12, US, Unemployment Rate 16-24 Years, Thousands, NSA

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Dec	Annual
2001	10.3	10.3	10.2	9.6	10.0	11.6	10.5	11.0	10.6
2002	12.9	12.5	12.9	11.6	11.6	13.2	12.4	10.9	12.0
2003	12.7	12.7	12.2	12.0	13.0	14.8	13.3	10.5	12.4
2004	12.8	12.3	12.1	11.1	12.2	13.4	12.3	10.5	11.8
2005	12.4	13.0	11.7	11.2	11.9	12.6	11.0	9.4	11.3
2006	11.1	11.3	10.3	9.7	10.2	11.9	11.2	9.1	10.5
2007	10.9	10.3	9.7	9.7	10.2	12.0	10.8	10.7	10.5
2008	12.3	11.8	11.1	10.3	13.3	14.4	14.0	13.7	12.8
2009	15.8	16.4	16.1	15.8	18.0	19.9	18.5	17.5	17.6
2010	19.8	19.2	18.4	18.5	18.4	20.0	19.1	16.7	18.4
2011	18.9	18.2	17.2	16.5	17.5	18.9	18.1	15.5	17.3
2012	16.8	17.0	16.0	15.4	16.3	18.1	17.1	15.2	16.2
2013	17.6	16.7	15.9	15.1	16.4	18.0	16.3

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

Chart I-23 provides the BLS estimate of the not-seasonally-adjusted rate of youth unemployment for ages 16 to 24 years from 2001 to 2013. The rate of youth unemployment increased sharply during the global recession of 2008 and 2009 but has failed to drop to earlier lower levels because of low growth of GDP. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 16 quarters from IIIQ2009 to IIQ2013. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html http://bea.gov/iTable/index_nipa.cfm http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). As a result, there are 28.3 million unemployed or underemployed in the United States for an effective unemployment rate of 17.4 percent (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html). The US missed the opportunity to recover employment as in past cyclical expansions from contractions.

Chart I-23, US, Unemployment Rate 16-24 Years, Percent, NSA, 2001-2013

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

Chart I-24 provides longer perspective with the rate of youth unemployment in ages 16 to 24 years from 1948 to 2013. The rate of youth unemployment rose to 20 percent during the contractions of the early 1980s and also during the contraction of the global recession in 2008 and 2009. The data illustrate again the argument in this blog that the contractions of the early 1980s are the valid framework for comparison with the global recession of 2008 and 2009 instead of misleading comparisons with the 1930s. During the initial phase of recovery, the rate of youth unemployment 16 to 24 years NSA fell from 18.9 percent in Jun 1983 to 14.5 percent in Jun 1984. In contrast, the rate of youth unemployment 16 to 24 years was nearly the same during the expansion after IIIQ2009: 17.5 percent in Dec 2009, 16.7 percent in Dec 2010, 15.5 percent in Dec 2011, 15.2 percent in Dec 2012, 17.6 percent in Jan 2013, 16.7 percent in Feb 2013, 15.9 percent in Mar 2013, 15.1 percent in Apr 2013, 16.4 percent in May 2013, 18.0 percent in Jun 2013 and 16.3 percent in Jul 2013. In Jul 2007, the rate of youth unemployment was 10.8 percent, increasing to 16.3 percent in Jul 2013. The difference originates in the vigorous seasonally-adjusted annual equivalent average rate of GDP growth of 5.7 percent during the recovery from IQ1983 to IVQ1985 compared with 2.2 percent on average during the first sixteen quarters of expansion from IIIQ2009 to IIQ2013 (see table I-5 in http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html). The fractured US labor market denies an early start for young people.

Chart I-24, US, Unemployment Rate 16-24 Years, Percent NSA, 1948-2013

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

It is more difficult to move to other jobs after a certain age because of fewer available opportunities for mature individuals than for new entrants into the labor force. Middle-aged unemployed are less likely to find another job. Table I-13 provides the unemployment level ages 45 years and over. The number unemployed ages 45 years and over rose from 1.985 million in Jul 2006 to 4.821 million in July 2010 or by 142.9 percent. The number of unemployed ages 45 years and over declined to 4.405 million in Jul 2012 that is still higher by 121.9 percent than in Jul 2006. In Jul 2013, the number unemployed ages 45 and over reached 3.727 million, which is higher by 87.8 percent relative to 1.985 million in Jul 2006. The number unemployed age 45 and over jumped from 1.794 million in Dec 2006 to 4.762 million in Dec 2010 or 165.4 percent. At 3.927 million in Dec 2012, mature unemployment is higher by 2.133 million or 118.9 percent higher than 1.794 million in Dec 2006. The level of unemployment of those aged 45 year or more of 3.727 million in Jul 2013 is higher by 1.742 million than 1.985 million in Jul 2006 or higher by 87.8 percent.

Table I-13, US, Unemployment Level 45 Years and Over, Thousands NSA

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Annual
2000	1498	1392	1291	1062	1074	1163	1253	1249
2001	1572	1587	1533	1421	1259	1371	1539	1576
2002	2235	2280	2138	2101	1999	2190	2173	2114
2003	2495	2415	2485	2287	2112	2212	2281	2253
2004	2453	2397	2354	2160	2025	2182	2116	2149
2005	2286	2286	2126	1939	1844	1868	2119	2009
2006	2126	2056	1881	1843	1784	1813	1985	1848
2007	2155	2138	2031	1871	1803	1805	2053	1966
2008	2336	2336	2326	2104	2095	2211	2492	2540
2009	4138	4380	4518	4172	4175	4505	4757	4500
2010	5314	5307	5194	4770	4565	4564	4821	4879
2011	5027	4837	4748	4373	4356	4559	4772	4537
2012	4458	4472	4390	4037	4083	4084	4405	4133
2013	4394	4107	3929	3689	3605	3648	3727

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

Chart I-25 provides the level unemployed ages 45 years and over. There was an increase in the recessions of the 1980s, 1991 and 2001 followed by declines to earlier levels. The current expansion of the economy after IIIQ2009 has not been sufficiently vigorous to reduce significantly middle-age unemployment.

Chart I-25, US, Unemployment Level Ages 45 Years and Over, Thousands, NSA, 1976-2013

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

ESV United States International Trade. Table IIA-1 provides the trade balance of the US and monthly growth of exports and imports seasonally adjusted with the latest release and revisions (http://www.census.gov/foreign-trade/). Because of heavy dependence on imported oil, fluctuations in the US trade account originate largely in fluctuations of commodity futures prices caused by carry trades from zero interest rates into commodity futures exposures in a process similar to world inflation waves (http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and.html). Data for 2012 have been revised. The US trade balance deteriorated from deficit of $40,149 million in Apr 2013 to deficit of $44,097 million in May 2013 and improved to lower deficit of $34,224 million in Jun 2013. Exports increased 2.2 percent in Jun 2013 while imports decreased 2.5 percent. The trade balance deteriorated from cumulative deficit of $499,379 million in Jan-Dec 2010 to deficit of $556,838 million in Jan-Dec 2011 and improved to marginally lower deficit of $534,656 million in Jan-Dec 2012.

Table IIA-1, US, Trade Balance of Goods and Services Seasonally Adjusted Millions of Dollars and ∆%  

	Trade Balance	Exports	Month ∆%	Imports	Month ∆%
Jun 2013	-34,224	191,173	2.2	225,397	-2.5
May	-44,097	187,063	-0.3	231,160	1.5
Apr	-40,149	187,562	1.3	227,711	2.4
Mar	-37,132	185,208	-1.0	222,340	-3.7
Feb	-43,836	187,130	0.2	230,966	0.7
Jan	-42,690	186,680	-1.1	229,370	1.0
Dec 2012	-38,307	188,686	1.9	226,994	-2.0
Nov	-46,422	185,220	1.4	231,641	2.8
Oct	-42,650	182,655	-2.2	225,304	-1.4
Sep	-41,570	186,829	2.6	228,400	1.0
Aug	-44,007	182,071	-0.7	226,078	-0.3
Jul	-43,451	183,375	-1.0	226,826	-0.4
Jun	-42,430	185,218	0.5	227,648	-1.2
May	-46,247	184,217	0.0	230,464	-0.2
Apr	-46,625	184,267	-1.2	230,892	-1.5
Mar	-47,790	186,505	2.4	234,295	3.7
Feb	-43,763	182,064	1.4	225,827	-2.2
Jan	-51,393	179,477	0.2	230,871	0.2
Jan-Dec 2012	-534,656	2,210,585		2,745,240
Jan-Dec 2011	-556,838	2,112,825		2,669,663
Jan-Dec 2010	-499,379	1,844,468		2,343,847

Note: Trade Balance of Goods and Services = Exports of Goods and Services less Imports of Goods and Services. Trade balance may not add exactly because of errors of rounding and seasonality. Source: US Census Bureau http://www.census.gov/foreign-trade/

Table IIA-2 provides the US international trade balance, exports and imports on an annual basis from 1992 to 2012. The trade balance deteriorated sharply over the long term. The US has a large deficit in goods or exports less imports of goods but it has a surplus in services that helps to reduce the trade account deficit or exports less imports of goods and services. The current account deficit of the US decreased from $100.4 billion in IQ2012, or 3.1 percent of GDP to $83.2 billion in IQ2013, or 2.7 percent of GDP (http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million_16.html). The ratio of the current account deficit to GDP has stabilized around 3 percent of GDP compared with much higher percentages before the recession (see Pelaez and Pelaez, The Global Recession Risk (2007), Globalization and the State, Vol. II (2008b), 183-94, Government Intervention in Globalization (2008c), 167-71). The last row of Table IIA-2 shows marginal improvement of the trade deficit from $556,838 million in 2011 to lower $534,656 million in 2012 with exports growing 4.6 percent and imports 2.8 percent. Growth and commodity shocks under alternating inflation waves (http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and.html) have deteriorated the trade deficit from the low of $383,657 million in 2009.

Table IIA-2, US, International Trade Balance, Exports and Imports SA, Millions of Dollars and ∆%

1960	3,508	25,940	22,432
1961	4,195	26,403	22,208
1962	3,370	27,722	24,352
1963	4,210	29,620	25,410
1964	6,022	33,341	27,319
1965	4,664	35,285	30,621
1966	2,939	38,926	35,987
1967	2,604	41,333	38,729
1968	250	45,543	45,293
1969	91	49,220	49,129
1970	2,254	56,640	54,386
1971	-1,302	59,677	60,979
1972	-5,443	67,222	72,665
1973	1,900	91,242	89,342
1974	-4,293	120,897	125,190
1975	12,404	132,585	120,181
1976	-6,082	142,716	148,798
1977	-27,246	152,301	179,547
1978	-29,763	178,428	208,191
1979	-24,565	224,131	248,696
1980	-19,407	271,834	291,241
1981	-16,172	294,398	310,570
1982	-24,156	275,236	299,391
1983	-57,767	266,106	323,874
1984	-109,072	291,094	400,166
1985	-121,880	289,070	410,950
1986	-138,538	310,033	448,572
1987	-151,684	348,869	500,552
1988	-114,566	431,149	545,715
1989	-93,141	487,003	580,144
1990	-80,864	535,233	616,097
1991	-31,135	578,344	609,479
1992	-39,212	616,882	656,094
1993	-70,311	642,863	713,174
1994	-98,493	703,254	801,747
1995	-96,384	794,387	890,771
1996	-104,065	851,602	955,667
1997	-108,273	934,453	1,042,726
1998	-166,140	933,174	1,099,314
1999	-263,755	967,008	1,230,764
2000	-377,337	1,072,782	1,450,119
2001	-362,339	1,007,725	1,370,065
2002	-418,165	980,879	1,399,044
2003	-490,545	1,023,937	1,514,482
2004	-604,897	1,163,724	1,768,622
2005	-707,914	1,288,257	1,996,171
2006	-752,399	1,460,792	2,213,191
2007	-699,065	1,652,859	2,351,925
2008	-702,302	1,840,332	2,542,634
2009	-383,657	1,578,187	1,961,844
2010	-499,379	1,844,468	2,343,847
2011	-556,838	2,112,825	2,669,663
2012	-534,656	2,210,585	2,745,240

Source: US Census Bureau http://www.census.gov/foreign-trade/

Chart IIA-1 of the US Census Bureau of the Department of Commerce shows that the trade deficit (gap between exports and imports) fell during the economic contraction after 2007 but has grown again during the expansion. The low average rate of growth of GDP of 2.2 percent during the expansion beginning in IIIQ2009 does not deteriorate further the trade balance. Higher rates of growth may cause sharper deterioration.

Chart IIA-1, US, International Trade Balance, Exports and Imports of Goods and Services USD Billions

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr042.html

Chart IIA-2 of the US Census Bureau provides the US trade account in goods and services SA from Jan 1992 to Jun 2013. There is long-term trend of deterioration of the US trade deficit shown vividly by Chart IIA-2. The trend of deterioration was reversed by the global recession from IVQ2007 to IIQ2009. Deterioration resumed together with incomplete recovery and was influenced significantly by the carry trade from zero interest rates to commodity futures exposures (these arguments are elaborated in Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4 http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html). Earlier research focused on the long-term external imbalance of the US in the form of trade and current account deficits (Pelaez and Pelaez, The Global Recession Risk (2007), Globalization and the State Vol. II (2008b) 183-94, Government Intervention in Globalization (2008c), 167-71). US external imbalances have not been fully resolved and tend to widen together with improving world economic activity and commodity price shocks.

Chart IIA-2, US, Balance of Trade SA, Monthly, Millions of Dollars, Jan 1992-Jun 2013

Source: US Census Bureau

http://www.census.gov/foreign-trade/

Chart IIA-3 of the US Census Bureau provides US exports SA from Jan 1992 to Jun 2013. There was sharp acceleration from 2003 to 2007 during worldwide economic boom and increasing inflation. Exports fell sharply during the financial crisis and global recession from IVQ2007 to IIQ2009. Growth picked up again together with world trade and inflation but stalled in the final segment with less rapid global growth and inflation.

Chart IIA-3, US, Exports SA, Monthly, Millions of Dollars Jan 1992-Jun 2013

Source: US Census Bureau

http://www.census.gov/foreign-trade/

Chart IIA-4 of the US Census Bureau provides US imports SA from Jan 1992 to Jun 2013. Growth was stronger between 2003 and 2007 with worldwide economic boom and inflation. There was sharp drop during the financial crisis and global recession. There is stalling import levels in the final segment resulting from weaker world economic growth and diminishing inflation because of risk aversion.

Chart IIA-4, US, Imports SA, Monthly, Millions of Dollars Jan 1992-Jun 2013

Source: US Census Bureau

http://www.census.gov/foreign-trade/

The balance of international trade in goods of the US seasonally adjusted is shown in Table IIA-3. The US has a dynamic surplus in services that reduces the large deficit in goods for a still very sizeable deficit in international trade of goods and services. The balance in international trade of goods decreased from deficit of $59,142 billion in Jun 2012 to $53,162 billion in May 2013. The relative imporvement of the goods balance in Jun 2013 relative to Jun 2012 occurred mostly in the petroleum balance, exports less imports of petroleum, in the magnitude of decreasing the deficit by $5324 million, while there was moderate improvement in the nonpetroleum balance, exports less imports of nonpetroleum goods, in the magnitude of decreasing the deficit by $1245 million. US terms of trade, export prices relative to import prices, and the US trade account fluctuate in accordance with the carry trade from zero interest rates to commodity futures exposures, especially oil futures. Exports increased 2.1 percent with nonpetroleum exports increasing 1.6 percent. Total imports decreased 1.8 percent with petroleum imports declining 12.6 percent and nonpetroleum imports increasing 0.4 percent.

Table IIA-3, US, International Trade in Goods Balance, Exports and Imports $ Millions and ∆% SA

	Jun 2013	Jun 2012	∆%
Total Balance	-53,162	-59,142
Petroleum	-17,408	-22,732
Non Petroleum	-34,377	-35,622
Total Exports	134,261	131,446	2.1
Petroleum	11,551	10,389	11.2
Non Petroleum	121,761	119,829	1.6
Total Imports	187,423	190,858	-1.8
Petroleum	28,959	33,121	-12.6
Non Petroleum	156,139	155,451	0.4

Details may not add because of rounding and seasonal adjustment

Source: US Census Bureau http://www.census.gov/foreign-trade/

US exports and imports of goods not seasonally adjusted in Jan-Jun 2013 and Jan-Jun 2012 are shown in Table IIA-4. The rate of growth of exports was 1.1 percent and minus 2.1 percent for imports. The US has partial hedge of commodity price increases in exports of agricultural commodities that increased 1.1 percent and of mineral fuels that changed 0.0 percent both because higher prices of raw materials and commodities increase and fall recurrently as a result of shocks of risk aversion. The US exports an insignificant amount of crude oil. US exports and imports consist mostly of manufactured products, with less rapidly increasing prices. US manufactured exports rose 1.1 percent while manufactured imports rose 0.5 percent. Significant part of the US trade imbalance originates in imports of mineral fuels decreasing 14.4 percent and petroleum decreasing 15.4 percent with wide oscillations in oil prices. The limited hedge in exports of agricultural commodities and mineral fuels compared with substantial imports of mineral fuels and crude oil results in waves of deterioration of the terms of trade of the US, or export prices relative to import prices, originating in commodity price increases caused by carry trades from zero interest rates. These waves are similar to those in worldwide inflation (http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and.html).

Table IIA-4, US, Exports and Imports of Goods, Not Seasonally Adjusted Millions of Dollars and %

	Jan-Jun 2013 $ Millions	Jan-Jun 2012 $ Millions	∆%
Exports	781,107	772,974	1.1
Manufactured	588,519	581,842	1.1
Agricultural Commodities	67,961	67,239	1.1
Mineral Fuels	66,912	66,879	0.0
Petroleum	54,861	54,108	1.4
Imports	1,108,454	1,132,336	-2.1
Manufactured	890,646	885,954	0.5
Agricultural Commodities	54,140	53,112	1.9
Mineral Fuels	190,353	222,311	-14.4
Petroleum	181,544	214,643	-15.4

Source: US Census Bureau http://www.census.gov/foreign-trade/

The G7 meeting in Washington on Apr 21 2006 of finance ministers and heads of central bank governors of the G7 established the “doctrine of shared responsibility” (G7 2006Apr):

“We, Ministers and Governors, reviewed a strategy for addressing global imbalances. We recognized that global imbalances are the product of a wide array of macroeconomic and microeconomic forces throughout the world economy that affect public and private sector saving and investment decisions. We reaffirmed our view that the adjustment of global imbalances:

• Is shared responsibility and requires participation by all regions in this global process;
• Will importantly entail the medium-term evolution of private saving and investment across countries as well as counterpart shifts in global capital flows; and
• Is best accomplished in a way that maximizes sustained growth, which requires strengthening policies and removing distortions to the adjustment process.

In this light, we reaffirmed our commitment to take vigorous action to address imbalances. We agreed that progress has been, and is being, made. The policies listed below not only would be helpful in addressing imbalances, but are more generally important to foster economic growth.

• In the United States, further action is needed to boost national saving by continuing fiscal consolidation, addressing entitlement spending, and raising private saving.
• In Europe, further action is needed to implement structural reforms for labor market, product, and services market flexibility, and to encourage domestic demand led growth.
• In Japan, further action is needed to ensure the recovery with fiscal soundness and long-term growth through structural reforms.

Others will play a critical role as part of the multilateral adjustment process.

• In emerging Asia, particularly China, greater flexibility in exchange rates is critical to allow necessary appreciations, as is strengthening domestic demand, lessening reliance on export-led growth strategies, and actions to strengthen financial sectors.

• In oil-producing countries, accelerated investment in capacity, increased economic diversification, enhanced exchange rate flexibility in some cases.

• Other current account surplus countries should encourage domestic consumption and investment, increase micro-economic flexibility and improve investment climates.

We recognized the important contribution that the IMF can make to multilateral surveillance.”

The concern at that time was that fiscal and current account global imbalances could result in disorderly correction with sharp devaluation of the dollar after an increase in premiums on yields of US Treasury debt (see Pelaez and Pelaez, The Global Recession Risk (2007)). The IMF was entrusted with monitoring and coordinating action to resolve global imbalances. The G7 was eventually broadened to the formal G20 in the effort to coordinate policies of countries with external surpluses and deficits.

The database of the WEO (http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx) is used to contract Table IIA-5 with fiscal and current account imbalances projected for 2013 and 2015. The WEO finds the need to rebalance external and domestic demand (IMF 2011WEOSep xvii):

“Progress on this front has become even more important to sustain global growth. Some emerging market economies are contributing more domestic demand than is desirable (for example, several economies in Latin America); others are not contributing enough (for example, key economies in emerging Asia). The first set needs to restrain strong domestic demand by considerably reducing structural fiscal deficits and, in some cases, by further removing monetary accommodation. The second set of economies needs significant currency appreciation alongside structural reforms to reduce high surpluses of savings over investment. Such policies would help improve their resilience to shocks originating in the advanced economies as well as their medium-term growth potential.”

The IMF (2012WEOApr, XVII) explains decreasing importance of the issue of global imbalances as follows:

“The latest developments suggest that global current account imbalances are no longer expected to widen again, following their sharp reduction during the Great Recession. This is largely because the excessive consumption growth that characterized economies that ran large external deficits prior to the crisis has been wrung out and has not been offset by stronger consumption in surplus economies. Accordingly, the global economy has experienced a loss of demand and growth in all regions relative to the boom years just before the crisis. Rebalancing activity in key surplus economies toward higher consumption, supported by more market-determined exchange rates, would help strengthen their prospects as well as those of the rest of the world.”

Table IIA-5, Fiscal Deficit, Current Account Deficit and Government Debt as % of GDP and 2011 Dollar GDP

	GDP $B 2012	FD %GDP 2013	CAD %GDP 2013	Debt %GDP 2013	FD%GDP 2015	CAD%GDP 2015	Debt %GDP 2015
US	15685	-7.3	-3.1	80.3	-2.3	-3.2	88.3
Japan	5964	-9.1	2.0	126.6	-5.8	2.4	155.0
UK	2441	-5.8	-1.9	78.3	-0.8	-0.4	88.1
Euro	12198	-1.6	0.3	68.4	1.1	1.2	71.3
Ger	3401	0.7	5.7	56.1	1.4	4.3	52.4
France	2609	-2.9	-2.2	80.4	0.3	-0.8	83.8
Italy	2014	0.8	-3.2	99.6	4.4	-1.6	101.5
Can	1819	-4.1	-2.8	33.3	-1.1	-2.5	37.4
China	8227	-1.2	2.7	25.8	-0.1	3.4	14.8
Brazil	2396	3.3	-2.4	33.6	3.1	-3.3	30.8

Note: GER = Germany; Can = Canada; FD = fiscal deficit; CAD = current account deficit

FD is primary except total for China; Debt is net except gross for China

Source: IMF World Economic Outlook databank http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx

The current account of the US balance of payments is provided in Table IIA-6 for IQ2012 and IQ2013. The US has a large deficit in goods or exports less imports of goods but it has a surplus in services that helps to reduce the trade account deficit or exports less imports of goods and services. The current account deficit of the US decreased from $100.4 billion in IQ2012, or 3.1 percent of GDP, to $83.2 billion in IQ2013, or 2.7 percent of GDP. The ratio of the current account deficit to GDP has stabilized around 3 percent of GDP compared with much higher percentages before the recession but is combined now with much higher imbalance in the Treasury budget (see Pelaez and Pelaez, The Global Recession Risk (2007), Globalization and the State, Vol. II (2008b), 183-94, Government Intervention in Globalization (2008c), 167-71).

Table IIA-6, US, Balance of Payments, Millions of Dollars NSA

	IQ2012	IQ2013	Difference
Goods Balance	-174,091	-157,503	16,588
X Goods	385,589	385,955	0.1 ∆%
M Goods	-559,679	-543,459	-2.9 ∆%
Services Balance	51,893	56,222	4,329
X Services	157,061	164,383	4.7 ∆%
M Services	-105,169	-108,161	2.8 ∆%
Balance Goods and Services	-122,198	-101,281	20,917
Balance Income	55,315	53,030	-2,285
Unilateral Transfers	-33,546	-34,968	-1,422
Current Account Balance	-100,429	-83,219	17,210
% GDP	IQ2012	IQ2013	IVQ2012
	3.1	2.7	2.6

X: exports; M: imports

Balance on Current Account = Balance on Goods and Services + Balance on Income + Unilateral Transfers

Source: Bureau of Economic Analysis http://www.bea.gov/international/index.htm#bop http://www.bea.gov/iTable/index_nipa.cfm

In their classic work on “unpleasant monetarist arithmetic,” Sargent and Wallace (1981, 2) consider a regime of domination of monetary policy by fiscal policy (emphasis added):

“Imagine that fiscal policy dominates monetary policy. The fiscal authority independently sets its budgets, announcing all current and future deficits and surpluses and thus determining the amount of revenue that must be raised through bond sales and seignorage. Under this second coordination scheme, the monetary authority faces the constraints imposed by the demand for government bonds, for it must try to finance with seignorage any discrepancy between the revenue demanded by the fiscal authority and the amount of bonds that can be sold to the public. Suppose that the demand for government bonds implies an interest rate on bonds greater than the economy’s rate of growth. Then if the fiscal authority runs deficits, the monetary authority is unable to control either the growth rate of the monetary base or inflation forever. If the principal and interest due on these additional bonds are raised by selling still more bonds, so as to continue to hold down the growth of base money, then, because the interest rate on bonds is greater than the economy’s growth rate, the real stock of bonds will growth faster than the size of the economy. This cannot go on forever, since the demand for bonds places an upper limit on the stock of bonds relative to the size of the economy. Once that limit is reached, the principal and interest due on the bonds already sold to fight inflation must be financed, at least in part, by seignorage, requiring the creation of additional base money.”

The alternative fiscal scenario of the CBO (2012NovCDR) resembles an economic world in which eventually the placement of debt reaches a limit of what is proportionately desired of US debt in investment portfolios. This unpleasant environment is occurring in various European countries.

The current real value of government debt plus monetary liabilities depends on the expected discounted values of future primary surpluses or difference between tax revenue and government expenditure excluding interest payments (Cochrane 2011Jan, 27, equation (16)). There is a point when adverse expectations about the capacity of the government to generate primary surpluses to honor its obligations can result in increases in interest rates on government debt.

This analysis suggests that there may be a point of saturation of demand for United States financial liabilities without an increase in interest rates on Treasury securities. A risk premium may develop on US debt. Such premium is not apparent currently because of distressed conditions in the world economy and international financial system. Risk premiums are observed in the spread of bonds of highly indebted countries in Europe relative to bonds of the government of Germany.

The issue of global imbalances centered on the possibility of a disorderly correction (Pelaez and Pelaez, The Global Recession Risk (2007), Globalization and the State Vol. II (2008b) 183-94, Government Intervention in Globalization (2008c), 167-71). Such a correction has not occurred historically but there is no argument proving that it could not occur. The need for a correction would originate in unsustainable large and growing United States current account deficits (CAD) and net international investment position (NIIP) or excess of financial liabilities of the US held by foreigners net relative to financial liabilities of foreigners held by US residents. The IMF estimated that the US could maintain a CAD of two to three percent of GDP without major problems (Rajan 2004). The threat of disorderly correction is summarized by Pelaez and Pelaez, The Global Recession Risk (2007), 15):

“It is possible that foreigners may be unwilling to increase their positions in US financial assets at prevailing interest rates. An exit out of the dollar could cause major devaluation of the dollar. The depreciation of the dollar would cause inflation in the US, leading to increases in American interest rates. There would be an increase in mortgage rates followed by deterioration of real estate values. The IMF has simulated that such an adjustment would cause a decline in the rate of growth of US GDP to 0.5 percent over several years. The decline of demand in the US by four percentage points over several years would result in a world recession because the weakness in Europe and Japan could not compensate for the collapse of American demand. The probability of occurrence of an abrupt adjustment is unknown. However, the adverse effects are quite high, at least hypothetically, to warrant concern.”

The United States could be moving toward a situation typical of heavily indebted countries, requiring fiscal adjustment and increases in productivity to become more competitive internationally. The CAD and NIIP of the United States are not observed in full deterioration because the economy is well below potential. There are two complications in the current environment relative to the concern with disorderly correction in the first half of the past decade. In the release of Jun 14, 2013, the Bureau of Economic Analysis (http://www.bea.gov/newsreleases/international/transactions/2013/pdf/trans113.pdf) informs of revisions of US data on US international transactions since 1999:

“The statistics of the U.S. international transactions accounts released today have been revised for the first quarter of 1999 to the fourth quarter of 2012 to incorporate newly available and revised source data, updated seasonal adjustments, changes in definitions and classifications, and improved estimating methodologies.”

Table IIA-7 provides data on the US fiscal and balance of payments imbalances. In 2007, the federal deficit of the US was $161 billion corresponding to 1.2 percent of GDP while the Congressional Budget Office (CBO 2012NovCDR) estimates the federal deficit in 2012 at $1089 billion or 7.0 percent of GDP (http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html). The combined record federal deficits of the US from 2009 to 2012 are $5092 billion or 33 percent of the estimate of GDP of $15,549 billion for fiscal year 2012 by the CBO (http://www.cbo.gov/publication/43905 CBO (2013BEOFeb5)). The deficits from 2009 to 2012 exceed one trillion dollars per year, adding to $5.090 trillion in four years, using the fiscal year deficit of $1087 billion for fiscal year 2012, which is the worst fiscal performance since World War II. Federal debt in 2007 was $5035 billion, less than the combined deficits from 2009 to 2012 of $5.090 billion. Federal debt in 2011 was 67.8 percent of GDP and is estimated to reach 72.6 percent of GDP in 2012 (CBO2012AugBEO, CBO2012NovCDR, CBO2013BEOFeb5). This situation may worsen in the future (CBO 2012LTBO):

“The budget outlook is much bleaker under the extended alternative fiscal scenario, which maintains what some analysts might consider “current policies,” as opposed to current laws. Federal debt would grow rapidly from its already high level, exceeding 90 percent of GDP in 2022. After that, the growing imbalance between revenues and spending, combined with spiraling interest payments, would swiftly push debt to higher and higher levels. Debt as a share of GDP would exceed its historical peak of 109 percent by 2026, and it would approach 200 percent in 2037.

The changes under this scenario would result in much lower revenues than would occur under the extended baseline scenario because almost all expiring tax provisions are assumed to be extended through 2022 (with the exception of the current reduction in the payroll tax rate for Social Security). After 2022, revenues under this scenario are assumed to remain at their 2022 level of 18.5 percent of GDP, just above the average of the past 40 years.

Outlays would be much higher than under the other scenario. This scenario incorporates assumptions that through 2022, lawmakers will act to prevent Medicare’s payment rates for physicians from declining; that after 2022, lawmakers will not allow various restraints on the growth of Medicare costs and health insurance subsidies to exert their full effect; and that the automatic reductions in spending required by the Budget Control Act of 2011 will not occur (although the original caps on discretionary appropriations in that law are assumed to remain in place). Finally, under this scenario, federal spending as a percentage of GDP for activities other than Social Security, the major health care programs, and interest payments is assumed to return to its average level during the past two decades, rather than fall significantly below that level, as it does under the extended baseline scenario.”

Table IIA-7, US, Current Account, NIIP, Fiscal Balance, Nominal GDP, Federal Debt and Direct Investment, Dollar Billions and %

	2007	2008	2009	2010	2011	2012
Goods & Services	-699	-702	-384	-499	-557	-535
Income	101	146	124	178	233	224
UT	-115	-125	-122	-128	-134	-130
Current Account	-713	-681	-382	-449	-458	-440
NGDP	14028	14291	13974	14499	15076	15684
Current Account % GDP	-5.1	-4.8	-2.7	-3.1	-3.1	-2.8
NIIP	-1796	-3260	-2321	-2474	-4030	-4416
US Owned Assets Abroad	18400	19464	18512	20298	21132	20760
Foreign Owned Assets in US	20196	22724	20833	22772	25162	25176
NIIP % GDP	-12.8	-22.8	-16.6	-17.1	-26.7	-28.2
Exports Goods Services Income	2487	2654	2185	2523	2874	2987
NIIP % Exports Goods Services Income	-72	-123	-106	-98	-140	-148
DIA MV	5274	3102	4287	4767	4499	5191
DIUS MV	3551	2486	2995	3397	3509	3931
Fiscal Balance	-161	-459	-1413	-1294	-1296	-1087
Fiscal Balance % GDP	-1.2	-3.2	-10.1	-9.0	-8.7	-7.0
Federal   Debt	5035	5803	7545	9019	10128	11281
Federal Debt % GDP	36.3	40.5	54.0	62.9	67.8	72.6
Federal Outlays	2729	2983	3518	3456	3598	3537
∆%	2.8	9.3	17.9	-1.8	4.1	-1.7
% GDP	19.7	20.8	25.2	24.1	24.1	22.7
Federal Revenue	2568	2524	2105	2162	2302	2450
∆%	6.7	-1.7	-16.6	2.7	6.5	6.4
% GDP	18.5	17.6	15.1	15.1	15.4	15.8

Notes: UT: unilateral transfers; NGDP: nominal GDP or in current dollars; NIIP: Net International Investment Position; DIA MV: US Direct Investment Abroad at Market Value; DIUS MV: Direct Investment in the US at Market Value. There are minor discrepancies in the decimal point of percentages of GDP between the balance of payments data and federal debt, outlays, revenue and deficits in which the original number of the CBO source is maintained. These discrepancies do not alter conclusions.

Sources: http://www.cbo.gov/ budget http://www.bea.gov/international/index.htm#bop Balance of Payments and NIIP, Bureau of Economic Analysis (BEA)

Gross Domestic Product, Bureau of Economic Analysis (BEA) http://www.bea.gov/iTable/index_nipa.cfm

Chart IIA-5 of the Bureau of Economic Analysis shows the US balance on current account from 1960 to 2012. The sharp devaluation of the dollar resulting from unconventional monetary policy of zero interest rates and elimination of auctions of 30-year Treasury bonds did not adjust the US balance of payments. Partial adjustment only occurred after the contraction of economic activity during the global recession.

Chart IIA-5, US, Balance on Current Account, 1960-2012, Millions of Dollars

Source: Bureau of Economic Analysis

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

Chart IIA-6 provides the quarterly balance of current account of the United States in millions of dollars from 1995 to IQ2013. The global recession appeared to be adjusting the current account deficit that rises to lower dollar values. Recovery of the economy worsened again the current account deficit. Growth at trend worsens the external imbalance of the US that combines now with unsustainable Treasury deficits/debt.

Chart IIA-6, US, Balance on Current Account, Quarterly 1979-2013, Millions of Dollars, SA

Source: Bureau of Economic Analysis

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

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

ESVI Declining Real Salaries. There is different behavior of 12 months percentage rates of private-sector wages and salaries in Chart VA-5. 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-5, 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-6 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 1.8 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 1.7 percent in the 12 months ending in Mar 2013 while inflation was 1.5 percent. Wages and salaries increased 1.9 percent in the 12 months ending in Jun 2013 while inflation was 1.8 percent.

Chart VA-6, US, Consumer Price Index, 12-Month Percentage Change, NSA, 2001-2013

Source: US Bureau of Labor Statistics

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

I Recovery without Hiring. Professor Edward P. Lazear (2012Jan19) at Stanford University finds that recovery of hiring in the US to peaks attained in 2007 requires an increase of hiring by 30 percent while hiring levels have increased by only 4 percent since Jan 2009. The high level of unemployment with low level of hiring reduces the statistical probability that the unemployed will find a job. According to Lazear (2012Jan19), the probability of finding a new job currently is about one third of the probability of finding a job in 2007. Improvements in labor markets have not increased the probability of finding a new job. Lazear (2012Jan19) quotes an essay coauthored with James R. Spletzer in the American Economic Review (Lazear and Spletzer 2012Mar, 2012May) on the concept of churn. A dynamic labor market occurs when a similar amount of workers is hired as those who are separated. This replacement of separated workers is called churn, which explains about two-thirds of total hiring. Typically, wage increases received in a new job are higher by 8 percent. Lazear (2012Jan19) argues that churn has declined 35 percent from the level before the recession in IVQ2007. Because of the collapse of churn, there are no opportunities in escaping falling real wages by moving to another job. As this blog argues, there are meager chances of escaping unemployment because of the collapse of hiring and those employed cannot escape falling real wages by moving to another job (http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html). Lazear and Spletzer (2012Mar, 1) argue that reductions of churn reduce the operational effectiveness of labor markets. Churn is part of the allocation of resources or in this case labor to occupations of higher marginal returns. The decline in churn can harm static and dynamic economic efficiency. Losses from decline of churn during recessions can affect an economy over the long-term by preventing optimal growth trajectories because resources are not used in the occupations where they provide highest marginal returns. Lazear and Spletzer (2012Mar 7-8) conclude that: “under a number of assumptions, we estimate that the loss in output during the recession [of 2007 to 2009] and its aftermath resulting from reduced churn equaled $208 billion. On an annual basis, this amounts to about .4% of GDP for a period of 3½ years.”

There are two additional facts discussed below: (1) there are about ten million fewer full-time jobs currently than before the recession of 2008 and 2009; and (2) the extremely high and rigid rate of youth unemployment is denying an early start to young people ages 16 to 24 years while unemployment of ages 45 years or over has swelled. There are four subsections. IA1 Hiring Collapse provides the data and analysis on the weakness of hiring in the United States economy. IA2 Labor Underutilization provides the measures of labor underutilization of the Bureau of Labor Statistics (BLS). Statistics on the decline of full-time employment are in IA3 Ten Million Fewer Full-time Jobs. IA4 Youth and Middle-Age Unemployment provides the data on high unemployment of ages 16 to 24 years and of ages 45 years or over.

IA1 Hiring Collapse. An important characteristic of the current fractured labor market of the US is the closing of the avenue for exiting unemployment and underemployment normally available through dynamic hiring. Another avenue that is closed is the opportunity for advancement in moving to new jobs that pay better salaries and benefits again because of the collapse of hiring in the United States. Those who are unemployed or underemployed cannot find a new job even accepting lower wages and no benefits. The employed cannot escape declining inflation-adjusted earnings because there is no hiring. The objective of this section is to analyze hiring and labor underutilization in the United States.

Blanchard and Katz (1997, 53 consider an appropriate measure of job stress:

“The right measure of the state of the labor market is the exit rate from unemployment, defined as the number of hires divided by the number unemployed, rather than the unemployment rate itself. What matters to the unemployed is not how many of them there are, but how many of them there are in relation to the number of hires by firms.”

The natural rate of unemployment and the similar NAIRU are quite difficult to estimate in practice (Ibid; see Ball and Mankiw 2002).

The Bureau of Labor Statistics (BLS) created the Job Openings and Labor Turnover Survey (JOLTS) with the purpose that (http://www.bls.gov/jlt/jltover.htm#purpose):

“These data serve as demand-side indicators of labor shortages at the national level. Prior to JOLTS, there was no economic indicator of the unmet demand for labor with which to assess the presence or extent of labor shortages in the United States. The availability of unfilled jobs—the jobs opening rate—is an important measure of tightness of job markets, parallel to existing measures of unemployment.”

The BLS collects data from about 16,000 US business establishments in nonagricultural industries through the 50 states and DC. The data are released monthly and constitute an important complement to other data provided by the BLS (see also Lazear and Spletzer 2012Mar, 6-7).

Hiring in the nonfarm sector (HNF) has declined from 63.8 million in 2006 to 52.0 million in 2012 or by 11.8 million while hiring in the private sector (HP) has declined from 59.5 million in 2006 to 48.5 million in 2012 or by 11.0 million, as shown in Table I-1. The ratio of nonfarm hiring to employment (RNF) has fallen from 47.2 in 2005 to 38.9 in 2012 and in the private sector (RHP) from 53.1 in 2005 to 43.4 in 2012. Hiring has not recovered as in previous cyclical expansions because of the low rate of economic growth in the current cyclical expansion. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 16 quarters from IIIQ2009 to IIQ2013. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html http://bea.gov/iTable/index_nipa.cfm http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). As a result, there are 28.3 million unemployed or underemployed in the United States for an effective unemployment rate of 17.4 percent (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html). The US missed the opportunity to recover employment as in past cyclical expansions from contractions.

Table I-1, US, Annual Total Nonfarm Hiring (HNF) and Total Private Hiring (HP) in the US and Percentage of Total Employment

	HNF	Rate RNF	HP	Rate HP
2001	62,948	47.8	58,825	53.1
2002	58,583	44.9	54,759	50.3
2003	56,451	43.4	53,056	48.9
2004	60,367	45.9	56,617	51.6
2005	63,150	47.2	59,372	53.1
2006	63,773	46.9	59,494	52.1
2007	62,421	45.4	58,035	50.3
2008	55,128	40.3	51,591	45.1
2009	46,357	35.4	43,031	39.8
2010	48,607	37.4	44,788	41.7
2011	49,675	37.8	46,552	42.5
2012	51,991	38.9	48,493	43.4

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

Chart I-1 shows the annual level of total nonfarm hiring (HNF) that collapsed during the global recession after 2007 in contrast with milder decline in the shallow recession of 2001. Nonfarm hiring has not been recovered, remaining at a depressed level.

Chart I-1, US, Level Total Nonfarm Hiring (HNF), Annual, 2001-2012

Source: US Bureau of Labor Statistics

http://www.bls.gov/jlt/

Chart I-2 shows the ratio or rate of nonfarm hiring to employment (RNF) that also fell much more in the recession of 2007 to 2009 than in the shallow recession of 2001. Recovery is weak.

Chart I-2, US, Rate Total Nonfarm Hiring (HNF), Annual, 2001-2012

Source: US Bureau of Labor Statistics

http://www.bls.gov/jlt/

Yearly percentage changes of total nonfarm hiring (HNF) are provided in Table I-2. There were much milder declines in 2002 of 6.9 percent and 3.6 percent in 2003 followed by strong rebounds of 6.9 percent in 2004 and 4.6 percent in 2005. In contrast, the contractions of nonfarm hiring in the recession after 2007 were much sharper in percentage points: 2.1 in 2007, 11.7 in 2008 and 15.9 percent in 2009. On a yearly basis, nonfarm hiring grew 4.9 percent in 2010 relative to 2009, 2.2 percent in 2011 and 4.7 percent in 2012.

Table I-2, US, Annual Total Nonfarm Hiring (HNF), Annual Percentage Change, 2002-2012

Year	Annual
2002	-6.9
2003	-3.6
2004	6.9
2005	4.6
2006	1.0
2007	-2.1
2008	-11.7
2009	-15.9
2010	4.9
2011	2.2
2012	4.7

Source: US Bureau of Labor Statistics

http://www.bls.gov/jlt

Chart I-3 plots yearly percentage changes of nonfarm hiring. Percentage declines after 2007 were quite sharp.

Chart I-3, US, Annual Total Nonfarm Hiring (HNF), Annual Percentage Change, 2001-2012

Source: Bureau of Labor Statistics

http://www.bls.gov/jlt/

Total private hiring (HP) yearly data are provided in Chart I-4. There has been sharp contraction of total private hiring in the US and only milder recovery from 2010 to 2012.

Chart I-4, US, Total Private Hiring Level, Annual, 2001-2012

Source: Bureau of Labor Statistics

http://www.bls.gov/jlt/

Chart I-5 plots the rate of total private hiring relative to employment (RHP). The rate collapsed during the global recession after 2007 with insufficient recovery.

Chart I-5, US, Rate Total Private Hiring, Annual, 2001-2012

Source: Bureau of Labor Statistics

http://www.bls.gov/jlt/

Total nonfarm hiring (HNF), total private hiring (HP) and their respective rates are provided for the month of Jun in the years from 2001 to 2013 in Table I-3. Hiring numbers are in thousands. There is meager recovery in HNF from 4280 thousand (or 4.2 million) in Jun 2009 to 4737 thousand in Jun 2010, 4883 thousand in Jun 2011, 5130 thousand in Jun 2012 and 4918 thousand in Jun 2013 for cumulative gain of 14.9 percent. HP rose from 3914 thousand in Jun 2009 to 4504 thousand in Jun 2011, 4724 thousand in Jun 2012 and 4537 in Jun 2013 for cumulative gain of 15.9 percent. HNF has fallen from 6139 in Jun 2006 to 4918 in Jun 2013 or by 19.0 percent. HP has fallen from 5661 in Jun 2006 to 4537 in Jun 2013 or by 19.9 percent. The civilian noninstitutional population of the US rose from 228.815 million in 2006 to 243.284 million in 2012 or by 14.469 million and the civilian labor force from 151.428 million in 2006 to 154.975 million in 2012 or by 3.547 million (http://www.bls.gov/data/). The number of nonfarm hires in the US fell from 63.773 million in 2006 to 51.991 million in 2012 or by 11.782 million and the number of private hires fell from 59.494 million in 2006 to 48.493 million in 2012 or by 11 million (http://www.bls.gov/jlt/). The labor market continues to be fractured, failing to provide an opportunity to exit from unemployment/underemployment or to find an opportunity for advancement away from declining inflation-adjusted earnings.

Table I-3, US, Total Nonfarm Hiring (HNF) and Total Private Hiring (HP) in the US in Thousands and in Percentage of Total Employment Not Seasonally Adjusted

	HNF	Rate RNF	HP	Rate HP
2001 Jun	5819	4.4	5351	4.8
2002 Jun	5471	4.2	5054	4.6
2003 Jun	5369	4.1	4975	4.6
2004 Jun	5703	4.3	5309	4.8
2005 Jun	6069	4.5	5675	5.0
2006 Jun	6139	4.5	5661	4.9
2007 Jun	6033	4.3	5535	4.7
2008 Jun	5525	4.0	5110	4.4
2009 Jun	4280	3.3	3914	3.6
2010 Jun	4737	3.6	4344	4.0
2011 Jun	4883	3.7	4504	4.1
2012 Jun	5130	3.8	4724	4.2
2013 Jun	4918	3.6	4537	3.9

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

Chart I-6 provides total nonfarm hiring on a monthly basis from 2001 to 2013. Nonfarm hiring rebounded in early 2010 but then fell and stabilized at a lower level than the early peak not-seasonally adjusted (NSA) of 4774 in May 2010 until it surpassed it with 4883 in Jun 2011 but declined to 3013 in Dec 2012. Nonfarm hiring fell in Dec 2011 to 2990 from 3827 in Nov and to revised 3683 in Feb 2012, increasing to 4210 in Mar 2012, 3013 in Dec 2012 and 4128 in Jan 2013 and declining to 3661 in Feb 2013. Nonfarm hires not seasonally adjusted increased to 4918 in Jun 2013. Chart I-6 provides seasonally adjusted (SA) monthly data. The number of seasonally-adjusted hires in Aug 2011 was 4187 thousand, increasing to revised 4489 thousand in Feb 2012, or 7.2 percent, moving to 4195 in Dec 2012 for cumulative increase of 0.5 percent from 4174 in Dec 2011 and 4201 in Jun 2013 for increase of 0.1 percent relative to 4195 in Dec 2012. The number of hires not seasonally adjusted was 4883 in Jun 2011, falling to 2990 in Dec 2011 but increasing to 4013 in Jan 2012 and declining to 3013 in Dec 2012. The number of nonfarm hiring not seasonally adjusted fell by 38.8 percent from 4883 in Jun 2011 to 2990 in Dec 2011 and fell 41.3 percent from 5130 in Jun 2012 to 3013 in Dec 2012 in a yearly-repeated seasonal pattern.

Chart I-6, US, Total Nonfarm Hiring (HNF), 2001-2013 Month SA

Source: Bureau of Labor Statistics

http://www.bls.gov/jlt/

Similar behavior occurs in the rate of nonfarm hiring in Chart I-7. Recovery in early 2010 was followed by decline and stabilization at a lower level but with stability in monthly SA estimates of 3.2 in Aug 2011 to 3.2 in Jan 2012, increasing to 3.4 in May 2012 and falling to 3.3 in Jun 2012 and 3.1 in Jul 2012, increasing to 3.3 in Aug 2012 but falling to 3.1 in Dec 2012 and 3.1 in Jun 2013. The rate not seasonally adjusted fell from 3.7 in Jun 2011 to 2.2 in Dec 2012, climbing to 3.8 in Jun 2012 but falling to 2.2 in Dec 2012 and 3.6 in Jun 2013. Rates of nonfarm hiring NSA were in the range of 2.8 (Dec) to 4.5 (Jun) in 2006.

Chart I-7, US, Rate Total Nonfarm Hiring, Month SA 2001-2013

Source: Bureau of Labor Statistics

http://www.bls.gov/jlt/

There is only milder improvement in total private hiring shown in Chart I-8. Hiring private (HP) rose in 2010 with stability and renewed increase in 2011 followed by almost stationary series in 2012. The number of private hiring seasonally adjusted fell from 4026 thousand in Sep 2011 to 3876 in Dec 2011 or by 3.7 percent, increasing to 3915 in Jan 2012 or decline by 2.8 percent relative to the level in Sep 2011 but decreasing to 3934 in Sep 2012 or lower by 2.3 percent relative to Sep 2011 and decreasing to 3915 in Dec 2012 for change of 0.0 percent relative to 3915 in Jan 2012. The number of private hiring not seasonally adjusted fell from 4504 in Jun 2011 to 2809 in Dec 2011 or by 37.6 percent, reaching 3749 in Jan 2012 or decline of 16.8 percent relative to Jun 2011 and moving to 2842 in Dec 2012 or 39.8 percent lower relative to 4724 in Jun 2012. Companies do not hire in the latter part of the year that explains the high seasonality in year-end employment data. For example, NSA private hiring fell from 5661 in Jun 2006 to 3635 in Dec 2006 or by 35.8 percent. Private hiring NSA data are useful in showing the huge declines from the period before the global recession. In Jul 2006, private hiring NSA was 5555, declining to 4245 in Jul 2011 or by 23.6 percent and to 4277 in Jul 2012 or lower by 23.0 percent relative to Jul 2006. Private hiring NSA fell from 5215 in Sep 2005 to 4005 in Sep 2012 or 23.2 percent and fell from 3635 in Dec 2006 to 2842 in Dec 2012 or 21.8 percent. The conclusion is that private hiring in the US is around 20 percent below the hiring before the global recession. The main problem in recovery of the US labor market has been the low rate of GDP growth. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 16 quarters from IIIQ2009 to IIQ2013. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html http://bea.gov/iTable/index_nipa.cfm http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). As a result, there are 28.3 million unemployed or underemployed in the United States for an effective unemployment rate of 17.4 percent (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html). The US missed the opportunity to recover employment as in past cyclical expansions from contractions.

Chart I-8, US, Total Private Hiring Month SA 2001-2013

Source: Bureau of Labor Statistics

http://www.bls.gov/jlt/

Chart I-9 shows similar behavior in the rate of private hiring. The rate in 2011 in monthly SA data did not rise significantly above the peak in 2010. The rate seasonally adjusted fell from 3.7 in Sep 2011 to 3.5 in Dec 2011 and reached 3.5 in Dec 2012 and 3.4 in Jun 2013. The rate not seasonally adjusted (NSA) fell from 3.7 in Sep 2011 to 2.5 in Dec 2011, increasing to 3.8 in Oct 2012 but falling to 2.5 in Dec 2012 and 3.4 in Mar 2013. The NSA rate of private hiring fell from 4.8 in Jul 2006 to 3.4 in Aug 2009 but recovery was insufficient to only 3.8 in Aug 2012, 2.5 in Dec 2012 and 3.9 in Jun 2013.

Chart I-9, US, Rate Total Private Hiring Month SA 2001-2013

Source: Bureau of Labor Statistics

http://www.bls.gov/jlt/

The JOLTS report of the Bureau of Labor Statistics also provides total nonfarm job openings (TNF JOB), TNF JOB rate and TNF LD (layoffs and discharges) shown in Table I-4 for the month of Jun from 2001 to 2013. The final column provides annual TNF LD for the years from 2001 to 2012. Nonfarm job openings (TNF JOB) fell from a peak of 4595 in Jun 2007 to 3953 in Jun 2013 or by 14.0 percent while the rate dropped from 3.2 to 2.8. Nonfarm layoffs and discharges (TNF LD) rose from 1687 in Jun 2006 to 2001 in Jun 2009 or by 18.6 percent. The annual data show layoffs and discharges rising from 21.2 million in 2006 to 26.8 million in 2009 or by 26.4 percent. Business pruned payroll jobs to survive the global recession but there has not been hiring because of the low rate of GDP growth. . Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 16 quarters from IIIQ2009 to IIQ2013. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.8 percent from IQ1983 to IVQ1983 (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). As a result, there are 28.3 million unemployed or underemployed in the United States for an effective unemployment rate of 17.4 percent (Section II and earlier at http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html).

Table I-4, US, Total Nonfarm Job Openings and Total Nonfarm Layoffs and Discharges, Thousands NSA

	TNF JOB	TNF JOB Rate	TNF LD	TNF LD Annual
Jun 2001	4243	3.1	1821	24499
Jun 2002	3191	2.4	1725	22922
Jun 2003	3133	2.3	1925	23294
Jun 2004	3322	2.4	1728	22802
Jun 2005	3926	2.8	1811	22185
Jun 2006	4230	3.0	1687	21157
Jun 2007	4595	3.2	1727	22142
Jun 2008	3732	2.6	1856	24181
Jun 2009	2362	1.8	2001	26784
Jun 2010	2628	2.0	1913	21773
Jun 2011	3167	2.3	1685	20401
Jun 2012	3777	2.7	1728	20546
Jun 2013	3953	2.8	1474

Notes: TNF JOB: Total Nonfarm Job Openings; LD: Layoffs and Discharges

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

Chart I-10 shows monthly job openings rising from the trough in 2009 to a high in the beginning of 2010. Job openings then stabilized into 2011 but have surpassed the peak of 3142 seasonally adjusted in Apr 2010 with 3612 seasonally adjusted in Dec 2012, which is higher by 15.0 percent relative to Apr 2010 but lower by 4.7 percent than 3789 in Nov 2012 and lower by 6.1 percent than 3848 in Mar 2012. Nonfarm job openings increased from 3612 in Dec 2012 to 3936 in Jun 2013 or by 9.0 percent. The high of job openings not seasonally adjusted in 2010 was 3396 in Apr 2010 that was surpassed by 3554 in Jul 2011, increasing to 3896 in Oct 2012 but declining to 3103 in Dec 2012 and increasing to 3953 in Jun 2013. The level of job openings not seasonally adjusted fell to 3103 in Dec 2012 or by 19.0 percent relative to 3831 in Apr 2012. There is here again the strong seasonality of year-end labor data. The level of job openings of 3953 in Jun 2013 NSA is lower by 14.0 percent relative to 4595 in Jun 2006. The main problem in recovery of the US labor market has been the low rate of GDP growth. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 16 quarters from IIIQ2009 to IIQ2013. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html http://bea.gov/iTable/index_nipa.cfm http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). As a result, there are 28.3 million unemployed or underemployed in the United States for an effective unemployment rate of 17.4 percent (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html). The US missed the opportunity to recover employment as in past cyclical expansions from contractions.

Chart I-10, US Job Openings, Thousands NSA, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/jlt/

The rate of job openings in Chart I-11 shows similar behavior. The rate seasonally adjusted rose from 2.2 percent in Jan 2011 to 2.5 percent in Dec 2011, 2.6 in Dec 2012 and 2.8 in Jun 2013. The rate not seasonally adjusted rose from the high of 2.6 in Apr 2010 to 3.0 in Apr 2013 and 2.8 in Jun 2013. The rate of job openings NSA fell from 3.4 in Jul 2007 to 1.6 in Nov-Dec 2009, recovering insufficiently to 2.8 in Jun 2013.

Chart I-11, US, Rate of Job Openings, NSA, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/jlt/

Total separations are shown in Chart I-12. Separations are much lower in 2012-2-13 than before the global recession but hiring has not recovered.

Chart I-12, US, Total Nonfarm Separations, Month SA, 2001-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/jlt/

Annual total separations are shown in Chart I-13. Separations are much lower in 2011-2012 than before the global recession but without recovery in hiring.

Chart I-13, US, Total Separations, Annual, 2001-2012

Source: US Bureau of Labor Statistics

http://www.bls.gov/jlt/

Table I-5 provides total nonfarm total separations from 2001 to 2012. Separations fell from 61.6 million in 2006 to 47.6 million in 2010 or by 14.0 million and 47.6 million in 2011 or by 14.0 million. Total separations increased from 47.6 million in 2011 to 49.7 million in 2012 or by 2.1 million.

Table I-5, US, Total Nonfarm Total Separations, Thousands, 2001-2012

Year	Annual
2001	64765
2002	59190
2003	56487
2004	58340
2005	60733
2006	61565
2007	61162
2008	58627
2009	51532
2010	47646
2011	47626
2012	49676

Source: US Bureau of Labor Statistics

http://www.bls.gov/jlt/

Monthly data of layoffs and discharges reach a peak in early 2009, as shown in Chart I-14. Layoffs and discharges dropped sharply with the recovery of the economy in 2010 and 2011 once employers reduced their job count to what was required for cost reductions and loss of business. Weak rates of growth of GDP (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html) frustrated employment recovery. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 16 quarters from IIIQ2009 to IIQ2013. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html http://bea.gov/iTable/index_nipa.cfm http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). As a result, there are 28.3 million unemployed or underemployed in the United States for an effective unemployment rate of 17.4 percent (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html). The US missed the opportunity to recover employment as in past cyclical expansions from contractions.

Chart I-14, US, Total Nonfarm Layoffs and Discharges, Monthly SA, 2011-2013

Source: US Bureau of Labor Statistics

http://www.bls.gov/jlt/

Layoffs and discharges in Chart I-15 rose sharply to a peak in 2009. There was pronounced drop into 2010 and 2011 with mild increase into 2012.

Chart I-15, US, Total Nonfarm Layoffs and Discharges, Annual, 2001-2012

Source: US Bureau of Labor Statistics

http://www.bls.gov/jlt/

able I-6 provides annual nonfarm layoffs and discharges from 2001 to 2012. Layoffs and discharges peaked at 26.8 million in 2009 and then fell to 20.4 million in 2011, by 6.4 million, or 23.9 percent. Total nonfarm layoffs and discharges increased mildly to 20.5 million in 2012.

Table I-6, US, Total Nonfarm Layoffs and Discharges, 2001-2012

Year	Annual
2001	24499
2002	22922
2003	23294
2004	22802
2005	22185
2006	21157
2007	22142
2008	24181
2009	26784
2010	21773
2011	20401
2012	20546

Source: US Bureau of Labor Statistics

http://www.bls.gov/jlt/

IA2 Labor Underutilization. The Bureau of Labor Statistics also provides alternative measures of labor underutilization shown in Table I-7. The most comprehensive measure is U6 that consists of total unemployed plus total employed part time for economic reasons plus all marginally attached workers as percent of the labor force. U6 not seasonally annualized has risen from 8.2 percent in 2006 to 14.3 percent in Jul 2013.

Table I-7, US, Alternative Measures of Labor Underutilization NSA %

	U1	U2	U3	U4	U5	U6
2013
Jul	3.7	3.8	7.7	8.3	9.1	14.3
Jun	3.9	3.8	7.8	8.4	9.3	14.6
May	4.1	3.7	7.3	7.7	8.5	13.4
Apr	4.3	3.9	7.1	7.6	8.5	13.4
Mar	4.3	4.3	7.6	8.1	9.0	13.9
Feb	4.3	4.6	8.1	8.6	9.6	14.9
Jan	4.3	4.9	8.5	9.0	9.9	15.4
2012
Dec	4.2	4.3	7.6	8.3	9.2	14.4
Nov	4.2	3.9	7.4	7.9	8.8	13.9
Oct	4.3	3.9	7.5	8.0	9.0	13.9
Sep	4.2	4.0	7.6	8.0	9.0	14.2
Aug	4.3	4.4	8.2	8.7	9.7	14.6
Jul	4.3	4.6	8.6	9.1	10.0	15.2
Jun	4.5	4.4	8.4	8.9	9.9	15.1
May	4.7	4.3	7.9	8.4	9.3	14.3
Apr	4.8	4.3	7.7	8.3	9.1	14.1
Mar	4.9	4.8	8.4	8.9	9.7	14.8
Feb	4.9	5.1	8.7	9.3	10.2	15.6
Jan	4.9	5.4	8.8	9.4	10.5	16.2
2011
Dec	4.8	5.0	8.3	8.8	9.8	15.2
Nov	4.9	4.7	8.2	8.9	9.7	15.0
Oct	5.0	4.8	8.5	9.1	10.0	15.3
Sep	5.2	5.0	8.8	9.4	10.2	15.7
Aug	5.2	5.1	9.1	9.6	10.6	16.1
Jul	5.2	5.2	9.3	10.0	10.9	16.3
Jun	5.1	5.1	9.3	9.9	10.9	16.4
May	5.5	5.1	8.7	9.2	10.0	15.4
Apr	5.5	5.2	8.7	9.2	10.1	15.5
Mar	5.7	5.8	9.2	9.7	10.6	16.2
Feb	5.6	6.0	9.5	10.1	11.1	16.7
Jan	5.6	6.2	9.8	10.4	11.4	17.3
Dec  2010	5.4	5.9	9.1	9.9	10.7	16.6
Annual
2012	4.5	4.4	8.1	8.6	9.5	14.7
2011	5.3	5.3	8.9	9.5	10.4	15.9
2010	5.7	6.0	9.6	10.3	11.1	16.7
2009	4.7	5.9	9.3	9.7	10.5	16.2
2008	2.1	3.1	5.8	6.1	6.8	10.5
2007	1.5	2.3	4.6	4.9	5.5	8.3
2006	1.5	2.2	4.6	4.9	5.5	8.2
2005	1.8	2.5	5.1	5.4	6.1	8.9
2004	2.1	2.8	5.5	5.8	6.5	9.6
2003	2.3	3.3	6.0	6.3	7.0	10.1
2002	2.0	3.2	5.8	6.0	6.7	9.6
2001	1.2	2.4	4.7	4.9	5.6	8.1
2000	0.9	1.8	4.0	4.2	4.8	7.0

Note: LF: labor force; U1, persons unemployed 15 weeks % LF; U2, job losers and persons who completed temporary jobs %LF; U3, total unemployed % LF; U4, total unemployed plus discouraged workers, plus all other marginally attached workers; % LF plus discouraged workers; U5, total unemployed, plus discouraged workers, plus all other marginally attached workers % LF plus all marginally attached workers; U6, total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons % LF plus all marginally attached workers

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

Monthly seasonally adjusted measures of labor underutilization are provided in Table I-8. U6 climbed from 16.1 percent in Aug 2011 to 16.3 percent in Sep 2011 and then fell to 14.5 percent in Apr 2012, reaching 14.0 percent in Jul 2013. Unemployment is an incomplete measure of the stress in US job markets. A different calculation in this blog is provided by using the participation rate in the labor force before the global recession. This calculation shows 28.3 million in job stress of unemployment/underemployment in Jul 2013, not seasonally adjusted, corresponding to 17.4 percent of the labor force (Table I-4 http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html).

Table I-8, US, Alternative Measures of Labor Underutilization SA %

	U1	U2	U3	U4	U5	U6
Jul 2013	3.9	3.8	7.4	8.0	8.8	14.0
Jun	4.0	3.9	7.6	8.2	9.1	14.3
May	4.1	3.9	7.6	8.0	8.8	13.8
Apr	4.1	4.1	7.5	8.0	8.9	13.9
Mar	4.1	4.1	7.6	8.1	8.9	13.8
Feb	4.2	4.2	7.7	8.3	9.2	14.3
Jan	4.2	4.3	7.9	8.4	9.3	14.4
Dec 2012	4.3	4.1	7.8	8.5	9.4	14.4
Nov	4.3	4.1	7.8	8.3	9.2	14.4
Oct	4.4	4.2	7.9	8.4	9.3	14.5
Sep	4.3	4.2	7.8	8.3	9.3	14.7
Aug	4.4	4.5	8.1	8.6	9.6	14.7
Jul	4.5	4.6	8.2	8.7	9.7	14.9
Jun	4.6	4.6	8.2	8.7	9.6	14.8
May	4.6	4.5	8.2	8.7	9.6	14.8
Apr	4.5	4.5	8.1	8.7	9.5	14.5
Mar	4.6	4.5	8.2	8.7	9.6	14.5
Feb	4.8	4.6	8.3	8.9	9.8	15.0
Jan	4.8	4.7	8.3	8.9	9.9	15.1
Dec 2011	4.9	4.9	8.5	9.0	10.0	15.2
Nov	5.0	4.9	8.6	9.3	10.2	15.5
Oct	5.1	5.1	8.9	9.5	10.4	16.0
Sep	5.4	5.2	9.0	9.6	10.5	16.3
Aug	5.3	5.2	9.0	9.6	10.5	16.1
Jul	5.3	5.3	9.0	9.7	10.6	16.0
Jun	5.3	5.3	9.1	9.7	10.7	16.1
May	5.3	5.4	9.0	9.5	10.3	15.8
Apr	5.2	5.4	9.0	9.6	10.5	16.0
Mar	5.3	5.4	8.9	9.5	10.4	15.8
Feb	5.4	5.5	9.0	9.6	10.6	16.0
Jan	5.5	5.5	9.1	9.7	10.8	16.2

Note: LF: labor force; U1, persons unemployed 15 weeks % LF; U2, job losers and persons who completed temporary jobs %LF; U3, total unemployed % LF; U4, total unemployed plus discouraged workers, plus all other marginally attached workers; % LF plus discouraged workers; U5, total unemployed, plus discouraged workers, plus all other marginally attached workers % LF plus all marginally attached workers; U6, total unemployed, plus all marginally attached workers, plus total employed part time for economic reasons % LF plus all marginally attached workers

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

Chart I-16 provides U6 on a monthly basis from 2001 to 2013. There was a steep climb from 2007 into 2009 and then this measure of unemployment and underemployment stabilized at that high level but declined into 2012. The low of U6 SA was 8.0 percent in Mar 2006 and the peak was 17.1 percent in Apr 2010. The low NSA was 7.6 percent in Oct 2006 and the peak was 18.0 percent in Jan 2010.

Chart I-16, US, U6, total unemployed, plus all marginally attached workers, plus total employed Part-Time for Economic Reasons, Month, SA, 2001-2013

Source: US Bureau of Labor Statistics

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

Chart I-17 provides the number employed part-time for economic reasons or who cannot find full-time employment. There are sharp declines at the end of 2009, 2010 and 2011 but an increase in 2012 followed by stability in 2013.

Chart I-17, US, Working Part-time for Economic Reasons

Thousands, Month SA 2001-2013

Sources: US Bureau of Labor Statistics

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

There is strong seasonality in US labor markets around the end of the year. The number employed part-time for economic reasons because they could not find full-time employment fell from 9.101 million in Sep 2011 to 8.043 million in Aug 2012, seasonally adjusted, or decline of 1.058 million in nine months, as shown in Table I-9, but then rebounded to 8.607 million in Sep 2012 for increase of 564,000 in one month from Aug to Sep 2012, declining to 8.286 million in Oct 2012 or by 321,000 again in one month, further declining to 8.138 million in Nov 2012 for another major one-month decline of 148,000 and 7.918 million in Dec 2012 or fewer 220,000 in just one month. The number employed part-time for economic reasons increased to 7.973 million in Jan 2013 or 55,000 more than in Dec 2012 and to 7,988 million in Feb 2013, declining to 7.904 million in May 2013 but increasing to 8.245 million in Jul 2013. There is an increase of 243,000 in part-time for economic reasons from Aug 2012 to Oct 2012 and of 95,000 from Aug 2012 to Nov 2012. The number employed full-time increased from 112.871 million in Oct 2011 to 115.145 million in Mar 2012 or 2.274 million but then fell to 114.300 million in May 2012 or 0.845 million fewer full-time employed than in Mar 2012. The number employed full-time increased from 114.492 million in Aug 2012 to 115.469 million in Oct 2012 or increase of 0.977 million full-time jobs in two months and further to 115.918 million in Jan 2013 or increase of 1.426 million more full-time jobs in four months from Aug 2012 to Jan 2013. The number of full time jobs decreased slightly to 115.841 in Feb 2013, increasing to 116.238 million in May 2013 and 115.998 million in Jun 2013. Then number of full-time jobs increased to 116.090 million in Jul 2013. Benchmark and seasonality-factors adjustments at the turn of every year could affect comparability of labor market indicators (http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html http://cmpassocregulationblog.blogspot.com/2013/03/thirty-one-million-unemployed-or.html). The number of employed part-time for economic reasons actually increased without seasonal adjustment from 8.271 million in Nov 2011 to 8.428 million in Dec 2011 or by 157,000 and then to 8.918 million in Jan 2012 or by an additional 490,000 for cumulative increase from Nov 2011 to Jan 2012 of 647,000. The level of employed part-time for economic reasons then fell from 8.918 million in Jan 2012 to 7.867 million in Mar 2012 or by 1.0151 million and to 7.694 million in Apr 2012 or 1.224 million fewer relative to Jan 2012. In Aug 2012, the number employed part-time for economic reasons reached 7.842 million NSA or 148,000 more than in Apr 2012. The number employed part-time for economic reasons increased from 7.842 million in Aug 2012 to 8.110 million in Sep 2012 or by 3.4 percent. The number part-time for economic reasons fell from 8.110 million in Sep 2012 to 7.870 million in Oct 2012 or by 240.000 in one month. The number employed part-time for economic reasons NSA increased to 8.628 million in Jan 2013 or 758,000 more than in Oct 2012. The number employed part-time for economic reasons fell to 8.298 million in Feb 2013, which is lower by 330,000 relative to 8.628 million in Jan 2013 but higher by 428,000 relative to 7.870 million in Oct 2012. The number employed part time for economic reasons fell to 7.734 million in Mar 2013 or 564,000 less than in Feb 2013 and fell to 7.709 million in Apr 2013. The number employed part-time for economic reasons reached 7.618 million in May 2013. The number employed part-time for economic reasons jumped from 7.618 million in May 2013 to 8.440 million in Jun 2013 or 822,000 in one month. The number employed part-time for economic reasons fell to 8.324 million in Jul 2013. The number employed full time without seasonal adjustment fell from 113.138 million in Nov 2011 to 113.050 million in Dec 2011 or by 88,000 and fell further to 111.879 in Jan 2012 for cumulative decrease of 1.259 million. The number employed full-time not seasonally adjusted fell from 113.138 million in Nov 2011 to 112.587 million in Feb 2012 or by 551.000 but increased to 116.214 million in Aug 2012 or 3.076 million more full-time jobs than in Nov 2011. The number employed full-time not seasonally adjusted decreased from 116.214 million in Aug 2012 to 115.678 million in Sep 2012 for loss of 536,000 full-time jobs and rose to 116.045 million in Oct 2012 or by 367,000 full-time jobs in one month relative to Sep 2012. The number employed full-time NSA fell from 116.045 million in Oct 2012 to 115.515 million in Nov 2012 or decline of 530.000 in one month. The number employed full-time fell from 115.515 in Nov 2012 to 115.079 million in Dec 2012 or decline by 436,000 in one month. The number employed full time fell from 115.079 million in Dec 2012 to 113.868 million in Jan 2013 or decline of 1.211 million in one month. The number of full time jobs increased to 114.191 in Feb 2012 or by 323,000 in one month and increased to 114.796 million in Mar 2013 for cumulative increase from Jan by 928,000 full-time jobs but decrease of 283,000 from Dec 2012. The number employed full time reached 117.400 million in Jun 2013 and increased to 117.688 in Jul 2013 or by 288,000. Comparisons over long periods require use of NSA data. The number with full-time jobs fell from a high of 123.219 million in Jul 2007 to 108.777 million in Jan 2010 or by 14.442 million. The number with full-time jobs in Jul 2013 is 117.688 million, which is lower by 5.531 million relative to the peak of 123.219 million in Jul 2007. The magnitude of the stress in US labor markets is magnified by the increase in the civilian noninstitutional population of the United States from 231.958 million in Jul 2007 to 245.756 million in Jul 2013 or by 13.798 million (http://www.bls.gov/data/) while in the same period the number of full-time jobs fell 5.819 million. There appear to be around 10 million fewer full-time jobs in the US than before the global recession while population increased around 14 million. Mediocre GDP growth is the main culprit of the fractured US labor market. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 16 quarters from IIIQ2009 to IIQ2013. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html http://bea.gov/iTable/index_nipa.cfm http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). As a result, there are 28.3 million unemployed or underemployed in the United States for an effective unemployment rate of 17.4 percent (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html). The US missed the opportunity to recover employment as in past cyclical expansions from contractions.

Table I-9, US, Employed Part-time for Economic Reasons, Thousands, and Full-time, Millions

	Part-time Thousands	Full-time Millions
Seasonally Adjusted
Jul 2013	8,245	116.090
Jun 2013	8,226	115.998
May 2013	7,904	116.238
Apr 2013	7,916	116.053
Mar 2013	7,638	115.903
Feb 2013	7,988	115.841
Jan 2013	7,973	115.918
Dec 2012	7,918	115.868
Nov 2012	8,138	115.665
Oct 2012	8,286	115.469
Sep 2012	8,607	115.259
Aug 2012	8,043	114.492
Jul 2012	8,245	114.478
Jun 2012	8,210	114.606
May 2012	8,116	114.300
Apr 2012	7,896	114.441
Mar 2012	7,664	115.145
Feb 2012	8,127	114.263
Jan 2012	8,220	113.833
Dec 2011	8,168	113.820
Nov 2011	8,436	113.217
Oct 2011	8,726	112.871
Sep 2011	9,101	112.541
Aug 2011	8,816	112.555
Jul 2011	8,416	112.141
Not Seasonally Adjusted
Jul 2013	8324	117.688
Jun 2013	8,440	117.400
May 2013	7,618	116.643
Apr 2013	7,709	115.674
Mar 2013	7,734	114.796
Feb 2013	8,298	114.191
Jan 2013	8,628	113.868
Dec 2012	8,166	115.079
Nov 2012	7,994	115.515
Oct 2012	7,870	116.045
Sep 2012	8,110	115.678
Aug 2012	7,842	116.214
Jul 2012	8,316	116.131
Jun 2012	8,394	116.024
May 2012	7,837	114.634
Apr 2012	7,694	113.999
Mar 2012	7,867	113.916
Feb 2012	8,455	112.587
Jan 2012	8,918	111.879
Dec 2011	8,428	113.050
Nov 2011	8,271	113.138
Oct 2011	8,258	113.456
Sep 2011	8,541	112.980
Aug 2011	8,604	114.286
Jul 2011	8,514	113.759
Jun 2011	8,738	113.255
May 2011	8,270	112.618
Apr 2011	8,425	111.844
Mar 2011	8,737	111.186
Feb 2011	8,749	110.731
Jan 2011	9,187	110.373
Dec 2010	9,205	111.207
Nov 2010	8,670	111.348
Oct 2010	8,408	112.342
Sep 2010	8,628	112.385
Aug 2010	8,628	113.508
Jul 2010	8,737	113.974
Jun 2010	8,867	113.856
May 2010	8,513	112.809
Apr 2010	8,921	111.391
Mar 2010	9,343	109.877
Feb 2010	9,282	109.100
Jan 2010	9,290	108.777 (low)
Dec 2009	9,354 (high)	109.875
Nov 2009	8,894	111.274
Oct 2009	8,474	111.599
Sep 2009	8,255	111.991
Aug 2009	8,835	113.863
Jul 2009	9,103	114.184
Jun 2009	9,301	114.014
May 2009	8,785	113.083
Apr 2009	8,648	112.746
Mar 2009	9,305	112.215
Feb 2009	9,170	112.947
Jan 2009	8,829	113.815
Dec 2008	8,250	116.422
Nov 2008	7,135	118.432
Oct 2008	6,267	120.020
Sep 2008	5,701	120.213
Aug 2008	5,736	121.556
Jul 2008	6,054	122.378
Jun 2008	5,697	121.845
May 2008	5,096	120.809
Apr 2008	5,071	120.027
Mar 2008	5,038	119.875
Feb 2008	5,114	119.452
Jan 2008	5,340	119.332
Dec 2007	4,750	121.042
Nov 2007	4,374	121.846
Oct 2007	4,028	122.006
Sep 2007	4,137	121.728
Aug 2007	4,494	122.870
Jul 2007	4,516	123.219 (high)
Jun 2007	4,469	122.150
May 2007	4,315	120.846
Apr 2007	4,205	119.609
Mar 2007	4,384	119.640
Feb 2007	4,417	119.041
Jan 2007	4,726	119.094
Dec 2006	4,281	120.371
Nov 2006	4,054	120.507
Oct 2006	4,010	121.199
Sep 2006	3,735 (low)	120.780
Aug 2006	4,104	121.979
Jul 2006	4,450	121.951
Jun 2006	4,456	121.070
May 2006	3,968	118.925
Apr 2006	3,787	118.559
Mar 2006	4,097	117.693
Feb 2006	4,403	116.823
Jan 2006	4,597	116.395

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

People lose their marketable job skills after prolonged unemployment and find increasing difficulty in finding another job. Chart I-18 shows the sharp rise in unemployed over 27 weeks and stabilization at an extremely high level.

Chart I-18, US, Number Unemployed for 27 Weeks or Over, Thousands SA Month 2001-2013

Sources: US Bureau of Labor Statistics

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

Another segment of U6 consists of people marginally attached to the labor force who continue to seek employment but less frequently on the frustration there may not be a job for them. Chart I-19 shows the sharp rise in people marginally attached to the labor force after 2007 and subsequent stabilization.

Chart I-19, US, Marginally Attached to the Labor Force, NSA Month 2001-2013

Sources: US Bureau of Labor Statistics

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

IA3 Ten Million Fewer Full-time Jobs. Chart I-20 reveals the fracture in the US labor market. The number of workers with full-time jobs not-seasonally-adjusted rose with fluctuations from 2002 to a peak in 2007, collapsing during the global recession. The terrible state of the job market is shown in the segment from 2009 to 2013 with fluctuations around the typical behavior of a stationary series: there is no improvement in the United States in creating full-time jobs. The magnitude of the stress in US labor markets is magnified by the increase in the civilian noninstitutional population of the United States from 231.958 million in Jul 2007 to 245.756 million in Jul 2013 or by 13.798 million (http://www.bls.gov/data/) while in the same period the number of full-time jobs fell 5.531 million.

Chart I-20, US, Full-time Employed, Thousands, NSA, 2001-2013

Sources: US Bureau of Labor Statistics

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

Chart I-20A provides the noninstitutional civilian population of the United States from 2001 to 2013. There is clear trend of increase of the population while the number of full-time jobs collapsed after 2008 without sufficient recovery as shown in the preceding Chart I-20.

Chart I-20A, US, Noninstitutional Civilian Population, 2001-2013

Sources: US Bureau of Labor Statistics

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

Chart I-20B provides number of full-time jobs in the US from 1968 to 2013. There were multiple recessions followed by expansions without contraction of full-time jobs and without recovery as during the period after 2008.

Chart I-20B, US, Full-time Employed, Thousands, NSA, 1968-2013

Sources: US Bureau of Labor Statistics

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

Chart I-20C provides the noninstitutional civilian population of the United States from 1968 to 2013. Population expanded at a relatively constant rate of increase with the assurance of creation of full-time jobs that has been broken since 2008.

Chart I-20C, US, Noninstitutional Civilian Population, 1968-2013

Sources: US Bureau of Labor Statistics

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

IA4 Youth Unemployment and Middle-Aged Unemployment. The United States is experiencing high youth unemployment as in European economies. Table I-10 provides the employment level for ages 16 to 24 years of age estimated by the Bureau of Labor Statistics. On an annual basis, youth employment fell from 20.041 million in 2006 to 17.362 million in 2011 or 2.679 million fewer youth jobs and to 17.834 million in 2012 or 2.207 million fewer jobs. During the seasonal peak months of youth employment in the summer from Jun to Aug, youth employment has fallen by more than two million jobs relative to 21.914 million in Jul 2006 with 19.684 million in Jul 2013 for 2.230 million fewer youth jobs. The number of jobs ages 16 to 24 years fell from 21.914 million in Jul 2006 to 19.684 million in Jul 2013 or by 2.230 million. The civilian noninstitutional population ages 16 to 24 years increased from 37.443 million in Jul 2007 to 38.861 million in Jul 2013 or by 1.418 million while the number of jobs for ages 16 to 24 years fell by 2.230 million from 21.914 million in Jul 2007 to 19.684 million in Jul 2013. There are two hardships behind these data. First, young people cannot find employment after finishing high school and college, reducing prospects for achievement in older age. Second, students with more modest means cannot find employment to keep them in college.

Table I-10, US, Employment Level 16-24 Years, Thousands, NSA

Year	Mar	Apr	May	Jun	Jul	Annual
2001	19800	19778	19648	21212	22042	20088
2002	19091	19108	19484	20828	21501	19683
2003	18709	18873	19032	20432	20950	19351
2004	18752	19184	19237	20587	21447	19630
2005	18989	19071	19356	20949	21749	19770
2006	19291	19406	19769	21268	21914	20041
2007	19538	19368	19457	21098	21717	19875
2008	18745	19161	19254	20466	21021	19202
2009	17564	17739	17588	18726	19304	17601
2010	16587	16764	17039	17920	18564	17077
2011	16898	16970	17045	18180	18632	17362
2012	17301	17387	17681	18907	19461	17834
2013	17271	17593	17704	19125	19684

Sources: US Bureau of Labor Statistics

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

Chart I-21 provides US employment level ages 16 to 24 years from 2002 to 2013. Employment level is sharply lower in Jun 2013 relative to the peak in 2007.

Chart I-21, US, Employment Level 16-24 Years, Thousands SA, 2001-2013

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

Chart I-21A provides the US civilian noninstitutional population ages 16 to 24 years not seasonally adjusted from 2001 to 2013. The civilian noninstitutional population ages 16 to 24 years increased from 37.443 million in Jul 2007 to 38.861 million in Jul 2013, by 1.418 million or 3.8 percent, while the number of jobs for ages 16 to 24 years fell by 2.230 million from 21.914 million in Jul 2007 to 19.684 million in Jul 2013 or decline by 10.2 percent.

Chart I-21A, US, Civilian Noninstitutional Population Ages 16 to 24 Years, Thousands NSA, 2001-2013

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

Chart I-21B provides the civilian labor force of the US ages 16 to 24 years NSA from 2001 to 2013. The US civilian labor force ages 16 to 24 years fell from 24.339 million in Jul 2007 to 23.506 million in Jul 2013, by 0.833 million or decline of 3.4 percent, while the civilian noninstitutional population NSA increased from 37.443 million in Jul 2007 to 38.861 million in Jul 2013, by 1.418 million or 3.8 percent. Youth in the US abandoned their participation in the labor force because of the frustration that there are no jobs available for them

Chart I-21B, US, Civilian Labor Force Ages 16 to 24 Years, Thousands NSA, 2001-2013

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

Chart I-21C provides the ratio of labor force to noninstitutional population or labor force participation of ages 16 to 24 years not seasonally adjusted. The US labor force participation rates for ages 16 to 24 years fell from 66.7 in Jul 2006 to 60.5 in Jul 2013 because of the frustration of young people who believe there may not be jobs available for them.

Chart I-21C, US, Labor Force Participation Rate Ages 16 to 24 Years, NSA, 2001-2013

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

An important measure of the job market is the number of people with jobs relative to population available for work or civilian noninstitutional population or employment/population ratio. Chart I-21D provides the employment population ratio for ages 16 to 24 years. The US employment/population ratio NSA collapsed from 59.2 in Jul 2006 to 50.7 in Jul 2013. Chart I-21D shows vertical drop during the global recession without recovery.

Chart I-21D, US, Employment Population Ratio Ages 16 to 24 Years, Thousands NSA, 2001-2013

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

Table I-11 provides US unemployment level ages 16 to 24 years. The number unemployed ages 16 to 24 years increased from 2342 thousand in 2007 to 3634 thousand in 2011 or by 1.292 million and 3451 thousand in 2012 or by 1.109 million. The unemployment level ages 16 to 24 years rose from 2.622 million in Jul 2007 to 3.821 million in Jul 2013 or by 1.199 million. This situation may persist for many years.

Table I-11, US, Unemployment Level 16-24 Years, Thousands

Year	Feb	Mar	Apr	May	Jun	Jul	Annual
2001	2258	2253	2095	2171	2775	2585	2371
2002	2731	2822	2515	2568	3167	3034	2683
2003	2740	2601	2572	2838	3542	3200	2746
2004	2631	2588	2387	2684	3191	3018	2638
2005	2787	2520	2398	2619	3010	2688	2521
2006	2433	2216	2092	2254	2860	2750	2353
2007	2230	2096	2074	2203	2883	2622	2342
2008	2480	2347	2196	2952	3450	3408	2830
2009	3457	3371	3321	3851	4653	4387	3760
2010	3888	3748	3803	3854	4481	4374	3857
2011	3696	3520	3365	3628	4248	4110	3634
2012	3507	3294	3175	3438	4180	4011	3451
2013	3449	3261	3129	3478	4198	3821

Sources: US Bureau of Labor Statistics

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

Chart I-22 provides the unemployment level ages 16 to 24 from 2001 to 2012. The level rose sharply from 2007 to 2010 with tepid improvement into 2012 and deterioration into 2013.

Chart I-22, US, Unemployment Level 16-24 Years, Thousands SA, 2001-2013

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

Table I-12 provides the rate of unemployment of young peoples in ages 16 to 24 years. The annual rate jumped from 10.5 percent in 2007 to 18.4 percent in 2010, 17.3 percent in 2011 and 16.2 percent in 2012. During the seasonal peak in Jul the rate of youth unemployed was 18.1 percent in Jul 2011, 17.1 percent in Jul 2012 and 16.3 percent in Jul 2013 compared with 10.8 percent in Jul 2007. The rate of youth unemployment rose from 11.2 in Jun 2006 to 16.3 percent in Jul 2013 and likely higher if adding those who ceased searching for a job in frustration none may be available.

Table I-12, US, Unemployment Rate 16-24 Years, Thousands, NSA

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Dec	Annual
2001	10.3	10.3	10.2	9.6	10.0	11.6	10.5	11.0	10.6
2002	12.9	12.5	12.9	11.6	11.6	13.2	12.4	10.9	12.0
2003	12.7	12.7	12.2	12.0	13.0	14.8	13.3	10.5	12.4
2004	12.8	12.3	12.1	11.1	12.2	13.4	12.3	10.5	11.8
2005	12.4	13.0	11.7	11.2	11.9	12.6	11.0	9.4	11.3
2006	11.1	11.3	10.3	9.7	10.2	11.9	11.2	9.1	10.5
2007	10.9	10.3	9.7	9.7	10.2	12.0	10.8	10.7	10.5
2008	12.3	11.8	11.1	10.3	13.3	14.4	14.0	13.7	12.8
2009	15.8	16.4	16.1	15.8	18.0	19.9	18.5	17.5	17.6
2010	19.8	19.2	18.4	18.5	18.4	20.0	19.1	16.7	18.4
2011	18.9	18.2	17.2	16.5	17.5	18.9	18.1	15.5	17.3
2012	16.8	17.0	16.0	15.4	16.3	18.1	17.1	15.2	16.2
2013	17.6	16.7	15.9	15.1	16.4	18.0	16.3

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

Chart I-23 provides the BLS estimate of the not-seasonally-adjusted rate of youth unemployment for ages 16 to 24 years from 2001 to 2013. The rate of youth unemployment increased sharply during the global recession of 2008 and 2009 but has failed to drop to earlier lower levels because of low growth of GDP. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 16 quarters from IIIQ2009 to IIQ2013. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html http://bea.gov/iTable/index_nipa.cfm http://bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_adv.pdf http://bea.gov/newsreleases/national/pi/2013/pdf/pi0613.pdf). The average of 7.7 percent in the first four quarters of major cyclical expansions is in contrast with the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 of only 2.7 percent obtained by diving GDP of $14,738.0 billion in IIQ2010 by GDP of $14,356.9 billion in IIQ2009 {[$14,738.0/$14,356.9 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.7 percent and at 7.8 percent from IQ1983 to IVQ1983 (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier http://cmpassocregulationblog.blogspot.com/2013/06/tapering-quantitative-easing-policy-and.html). As a result, there are 28.3 million unemployed or underemployed in the United States for an effective unemployment rate of 17.4 percent (http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html and earlier at http://cmpassocregulationblog.blogspot.com/2013/07/twenty-nine-million-unemployed-or.html). The US missed the opportunity to recover employment as in past cyclical expansions from contractions.

Chart I-23, US, Unemployment Rate 16-24 Years, Percent, NSA, 2001-2013

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

Chart I-24 provides longer perspective with the rate of youth unemployment in ages 16 to 24 years from 1948 to 2013. The rate of youth unemployment rose to 20 percent during the contractions of the early 1980s and also during the contraction of the global recession in 2008 and 2009. The data illustrate again the argument in this blog that the contractions of the early 1980s are the valid framework for comparison with the global recession of 2008 and 2009 instead of misleading comparisons with the 1930s. During the initial phase of recovery, the rate of youth unemployment 16 to 24 years NSA fell from 18.9 percent in Jun 1983 to 14.5 percent in Jun 1984. In contrast, the rate of youth unemployment 16 to 24 years was nearly the same during the expansion after IIIQ2009: 17.5 percent in Dec 2009, 16.7 percent in Dec 2010, 15.5 percent in Dec 2011, 15.2 percent in Dec 2012, 17.6 percent in Jan 2013, 16.7 percent in Feb 2013, 15.9 percent in Mar 2013, 15.1 percent in Apr 2013, 16.4 percent in May 2013, 18.0 percent in Jun 2013 and 16.3 percent in Jul 2013. In Jul 2007, the rate of youth unemployment was 10.8 percent, increasing to 16.3 percent in Jul 2013. The difference originates in the vigorous seasonally-adjusted annual equivalent average rate of GDP growth of 5.7 percent during the recovery from IQ1983 to IVQ1985 compared with 2.2 percent on average during the first sixteen quarters of expansion from IIIQ2009 to IIQ2013 (see table I-5 in http://cmpassocregulationblog.blogspot.com/2013/08/risks-of-steepening-yield-curve-and.html). The fractured US labor market denies an early start for young people.

Chart I-24, US, Unemployment Rate 16-24 Years, Percent NSA, 1948-2013

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

It is more difficult to move to other jobs after a certain age because of fewer available opportunities for mature individuals than for new entrants into the labor force. Middle-aged unemployed are less likely to find another job. Table I-13 provides the unemployment level ages 45 years and over. The number unemployed ages 45 years and over rose from 1.985 million in Jul 2006 to 4.821 million in July 2010 or by 142.9 percent. The number of unemployed ages 45 years and over declined to 4.405 million in Jul 2012 that is still higher by 121.9 percent than in Jul 2006. In Jul 2013, the number unemployed ages 45 and over reached 3.727 million, which is higher by 87.8 percent relative to 1.985 million in Jul 2006. The number unemployed age 45 and over jumped from 1.794 million in Dec 2006 to 4.762 million in Dec 2010 or 165.4 percent. At 3.927 million in Dec 2012, mature unemployment is higher by 2.133 million or 118.9 percent higher than 1.794 million in Dec 2006. The level of unemployment of those aged 45 year or more of 3.727 million in Jul 2013 is higher by 1.742 million than 1.985 million in Jul 2006 or higher by 87.8 percent.

Table I-13, US, Unemployment Level 45 Years and Over, Thousands NSA

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Annual
2000	1498	1392	1291	1062	1074	1163	1253	1249
2001	1572	1587	1533	1421	1259	1371	1539	1576
2002	2235	2280	2138	2101	1999	2190	2173	2114
2003	2495	2415	2485	2287	2112	2212	2281	2253
2004	2453	2397	2354	2160	2025	2182	2116	2149
2005	2286	2286	2126	1939	1844	1868	2119	2009
2006	2126	2056	1881	1843	1784	1813	1985	1848
2007	2155	2138	2031	1871	1803	1805	2053	1966
2008	2336	2336	2326	2104	2095	2211	2492	2540
2009	4138	4380	4518	4172	4175	4505	4757	4500
2010	5314	5307	5194	4770	4565	4564	4821	4879
2011	5027	4837	4748	4373	4356	4559	4772	4537
2012	4458	4472	4390	4037	4083	4084	4405	4133
2013	4394	4107	3929	3689	3605	3648	3727

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

Chart I-25 provides the level unemployed ages 45 years and over. There was an increase in the recessions of the 1980s, 1991 and 2001 followed by declines to earlier levels. The current expansion of the economy after IIIQ2009 has not been sufficiently vigorous to reduce significantly middle-age unemployment.

Chart I-25, US, Unemployment Level Ages 45 Years and Over, Thousands, NSA, 1976-2013

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

II United States International Trade. Table IIA-1 provides the trade balance of the US and monthly growth of exports and imports seasonally adjusted with the latest release and revisions (http://www.census.gov/foreign-trade/). Because of heavy dependence on imported oil, fluctuations in the US trade account originate largely in fluctuations of commodity futures prices caused by carry trades from zero interest rates into commodity futures exposures in a process similar to world inflation waves (http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and.html). Data for 2012 have been revised. The US trade balance deteriorated from deficit of $40,149 million in Apr 2013 to deficit of $44,097 million in May 2013 and improved to lower deficit of $34,224 million in Jun 2013. Exports increased 2.2 percent in Jun 2013 while imports decreased 2.5 percent. The trade balance deteriorated from cumulative deficit of $499,379 million in Jan-Dec 2010 to deficit of $556,838 million in Jan-Dec 2011 and improved to marginally lower deficit of $534,656 million in Jan-Dec 2012.

Table IIA-1, US, Trade Balance of Goods and Services Seasonally Adjusted Millions of Dollars and ∆%  

	Trade Balance	Exports	Month ∆%	Imports	Month ∆%
Jun 2013	-34,224	191,173	2.2	225,397	-2.5
May	-44,097	187,063	-0.3	231,160	1.5
Apr	-40,149	187,562	1.3	227,711	2.4
Mar	-37,132	185,208	-1.0	222,340	-3.7
Feb	-43,836	187,130	0.2	230,966	0.7
Jan	-42,690	186,680	-1.1	229,370	1.0
Dec 2012	-38,307	188,686	1.9	226,994	-2.0
Nov	-46,422	185,220	1.4	231,641	2.8
Oct	-42,650	182,655	-2.2	225,304	-1.4
Sep	-41,570	186,829	2.6	228,400	1.0
Aug	-44,007	182,071	-0.7	226,078	-0.3
Jul	-43,451	183,375	-1.0	226,826	-0.4
Jun	-42,430	185,218	0.5	227,648	-1.2
May	-46,247	184,217	0.0	230,464	-0.2
Apr	-46,625	184,267	-1.2	230,892	-1.5
Mar	-47,790	186,505	2.4	234,295	3.7
Feb	-43,763	182,064	1.4	225,827	-2.2
Jan	-51,393	179,477	0.2	230,871	0.2
Jan-Dec 2012	-534,656	2,210,585		2,745,240
Jan-Dec 2011	-556,838	2,112,825		2,669,663
Jan-Dec 2010	-499,379	1,844,468		2,343,847

Note: Trade Balance of Goods and Services = Exports of Goods and Services less Imports of Goods and Services. Trade balance may not add exactly because of errors of rounding and seasonality. Source: US Census Bureau http://www.census.gov/foreign-trade/

Table IIA-2 provides the US international trade balance, exports and imports on an annual basis from 1992 to 2012. The trade balance deteriorated sharply over the long term. The US has a large deficit in goods or exports less imports of goods but it has a surplus in services that helps to reduce the trade account deficit or exports less imports of goods and services. The current account deficit of the US decreased from $100.4 billion in IQ2012, or 3.1 percent of GDP to $83.2 billion in IQ2013, or 2.7 percent of GDP (http://cmpassocregulationblog.blogspot.com/2013/06/recovery-without-hiring-seven-million_16.html). The ratio of the current account deficit to GDP has stabilized around 3 percent of GDP compared with much higher percentages before the recession (see Pelaez and Pelaez, The Global Recession Risk (2007), Globalization and the State, Vol. II (2008b), 183-94, Government Intervention in Globalization (2008c), 167-71). The last row of Table IIA-2 shows marginal improvement of the trade deficit from $556,838 million in 2011 to lower $534,656 million in 2012 with exports growing 4.6 percent and imports 2.8 percent. Growth and commodity shocks under alternating inflation waves (http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and.html) have deteriorated the trade deficit from the low of $383,657 million in 2009.

Table IIA-2, US, International Trade Balance, Exports and Imports SA, Millions of Dollars and ∆%

1960	3,508	25,940	22,432
1961	4,195	26,403	22,208
1962	3,370	27,722	24,352
1963	4,210	29,620	25,410
1964	6,022	33,341	27,319
1965	4,664	35,285	30,621
1966	2,939	38,926	35,987
1967	2,604	41,333	38,729
1968	250	45,543	45,293
1969	91	49,220	49,129
1970	2,254	56,640	54,386
1971	-1,302	59,677	60,979
1972	-5,443	67,222	72,665
1973	1,900	91,242	89,342
1974	-4,293	120,897	125,190
1975	12,404	132,585	120,181
1976	-6,082	142,716	148,798
1977	-27,246	152,301	179,547
1978	-29,763	178,428	208,191
1979	-24,565	224,131	248,696
1980	-19,407	271,834	291,241
1981	-16,172	294,398	310,570
1982	-24,156	275,236	299,391
1983	-57,767	266,106	323,874
1984	-109,072	291,094	400,166
1985	-121,880	289,070	410,950
1986	-138,538	310,033	448,572
1987	-151,684	348,869	500,552
1988	-114,566	431,149	545,715
1989	-93,141	487,003	580,144
1990	-80,864	535,233	616,097
1991	-31,135	578,344	609,479
1992	-39,212	616,882	656,094
1993	-70,311	642,863	713,174
1994	-98,493	703,254	801,747
1995	-96,384	794,387	890,771
1996	-104,065	851,602	955,667
1997	-108,273	934,453	1,042,726
1998	-166,140	933,174	1,099,314
1999	-263,755	967,008	1,230,764
2000	-377,337	1,072,782	1,450,119
2001	-362,339	1,007,725	1,370,065
2002	-418,165	980,879	1,399,044
2003	-490,545	1,023,937	1,514,482
2004	-604,897	1,163,724	1,768,622
2005	-707,914	1,288,257	1,996,171
2006	-752,399	1,460,792	2,213,191
2007	-699,065	1,652,859	2,351,925
2008	-702,302	1,840,332	2,542,634
2009	-383,657	1,578,187	1,961,844
2010	-499,379	1,844,468	2,343,847
2011	-556,838	2,112,825	2,669,663
2012	-534,656	2,210,585	2,745,240

Source: US Census Bureau http://www.census.gov/foreign-trade/

Chart IIA-1 of the US Census Bureau of the Department of Commerce shows that the trade deficit (gap between exports and imports) fell during the economic contraction after 2007 but has grown again during the expansion. The low average rate of growth of GDP of 2.2 percent during the expansion beginning in IIIQ2009 does not deteriorate further the trade balance. Higher rates of growth may cause sharper deterioration.

Chart IIA-1, US, International Trade Balance, Exports and Imports of Goods and Services USD Billions

Source: US Census Bureau

http://www.census.gov/briefrm/esbr/www/esbr042.html

Chart IIA-2 of the US Census Bureau provides the US trade account in goods and services SA from Jan 1992 to Jun 2013. There is long-term trend of deterioration of the US trade deficit shown vividly by Chart IIA-2. The trend of deterioration was reversed by the global recession from IVQ2007 to IIQ2009. Deterioration resumed together with incomplete recovery and was influenced significantly by the carry trade from zero interest rates to commodity futures exposures (these arguments are elaborated in Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 157-66, Regulation of Banks and Finance (2009b), 217-27, International Financial Architecture (2005), 15-18, The Global Recession Risk (2007), 221-5, Globalization and the State Vol. II (2008b), 197-213, Government Intervention in Globalization (2008c), 182-4 http://cmpassocregulationblog.blogspot.com/2011/07/causes-of-2007-creditdollar-crisis.html http://cmpassocregulationblog.blogspot.com/2011/01/professor-mckinnons-bubble-economy.html http://cmpassocregulationblog.blogspot.com/2011/01/world-inflation-quantitative-easing.html http://cmpassocregulationblog.blogspot.com/2011/01/treasury-yields-valuation-of-risk.html http://cmpassocregulationblog.blogspot.com/2010/11/quantitative-easing-theory-evidence-and.html http://cmpassocregulationblog.blogspot.com/2010/12/is-fed-printing-money-what-are.html). Earlier research focused on the long-term external imbalance of the US in the form of trade and current account deficits (Pelaez and Pelaez, The Global Recession Risk (2007), Globalization and the State Vol. II (2008b) 183-94, Government Intervention in Globalization (2008c), 167-71). US external imbalances have not been fully resolved and tend to widen together with improving world economic activity and commodity price shocks.

Chart IIA-2, US, Balance of Trade SA, Monthly, Millions of Dollars, Jan 1992-Jun 2013

Source: US Census Bureau

http://www.census.gov/foreign-trade/

Chart IIA-3 of the US Census Bureau provides US exports SA from Jan 1992 to Jun 2013. There was sharp acceleration from 2003 to 2007 during worldwide economic boom and increasing inflation. Exports fell sharply during the financial crisis and global recession from IVQ2007 to IIQ2009. Growth picked up again together with world trade and inflation but stalled in the final segment with less rapid global growth and inflation.

Chart IIA-3, US, Exports SA, Monthly, Millions of Dollars Jan 1992-Jun 2013

Source: US Census Bureau

http://www.census.gov/foreign-trade/

Chart IIA-4 of the US Census Bureau provides US imports SA from Jan 1992 to Jun 2013. Growth was stronger between 2003 and 2007 with worldwide economic boom and inflation. There was sharp drop during the financial crisis and global recession. There is stalling import levels in the final segment resulting from weaker world economic growth and diminishing inflation because of risk aversion.

Chart IIA-4, US, Imports SA, Monthly, Millions of Dollars Jan 1992-Jun 2013

Source: US Census Bureau

http://www.census.gov/foreign-trade/

The balance of international trade in goods of the US seasonally adjusted is shown in Table IIA-3. The US has a dynamic surplus in services that reduces the large deficit in goods for a still very sizeable deficit in international trade of goods and services. The balance in international trade of goods decreased from deficit of $59,142 billion in Jun 2012 to $53,162 billion in May 2013. The relative imporvement of the goods balance in Jun 2013 relative to Jun 2012 occurred mostly in the petroleum balance, exports less imports of petroleum, in the magnitude of decreasing the deficit by $5324 million, while there was moderate improvement in the nonpetroleum balance, exports less imports of nonpetroleum goods, in the magnitude of decreasing the deficit by $1245 million. US terms of trade, export prices relative to import prices, and the US trade account fluctuate in accordance with the carry trade from zero interest rates to commodity futures exposures, especially oil futures. Exports increased 2.1 percent with nonpetroleum exports increasing 1.6 percent. Total imports decreased 1.8 percent with petroleum imports declining 12.6 percent and nonpetroleum imports increasing 0.4 percent.

Table IIA-3, US, International Trade in Goods Balance, Exports and Imports $ Millions and ∆% SA

	Jun 2013	Jun 2012	∆%
Total Balance	-53,162	-59,142
Petroleum	-17,408	-22,732
Non Petroleum	-34,377	-35,622
Total Exports	134,261	131,446	2.1
Petroleum	11,551	10,389	11.2
Non Petroleum	121,761	119,829	1.6
Total Imports	187,423	190,858	-1.8
Petroleum	28,959	33,121	-12.6
Non Petroleum	156,139	155,451	0.4

Details may not add because of rounding and seasonal adjustment

Source: US Census Bureau http://www.census.gov/foreign-trade/

US exports and imports of goods not seasonally adjusted in Jan-Jun 2013 and Jan-Jun 2012 are shown in Table IIA-4. The rate of growth of exports was 1.1 percent and minus 2.1 percent for imports. The US has partial hedge of commodity price increases in exports of agricultural commodities that increased 1.1 percent and of mineral fuels that changed 0.0 percent both because higher prices of raw materials and commodities increase and fall recurrently as a result of shocks of risk aversion. The US exports an insignificant amount of crude oil. US exports and imports consist mostly of manufactured products, with less rapidly increasing prices. US manufactured exports rose 1.1 percent while manufactured imports rose 0.5 percent. Significant part of the US trade imbalance originates in imports of mineral fuels decreasing 14.4 percent and petroleum decreasing 15.4 percent with wide oscillations in oil prices. The limited hedge in exports of agricultural commodities and mineral fuels compared with substantial imports of mineral fuels and crude oil results in waves of deterioration of the terms of trade of the US, or export prices relative to import prices, originating in commodity price increases caused by carry trades from zero interest rates. These waves are similar to those in worldwide inflation (http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and.html).

Table IIA-4, US, Exports and Imports of Goods, Not Seasonally Adjusted Millions of Dollars and %

	Jan-Jun 2013 $ Millions	Jan-Jun 2012 $ Millions	∆%
Exports	781,107	772,974	1.1
Manufactured	588,519	581,842	1.1
Agricultural Commodities	67,961	67,239	1.1
Mineral Fuels	66,912	66,879	0.0
Petroleum	54,861	54,108	1.4
Imports	1,108,454	1,132,336	-2.1
Manufactured	890,646	885,954	0.5
Agricultural Commodities	54,140	53,112	1.9
Mineral Fuels	190,353	222,311	-14.4
Petroleum	181,544	214,643	-15.4

Source: US Census Bureau http://www.census.gov/foreign-trade/

The G7 meeting in Washington on Apr 21 2006 of finance ministers and heads of central bank governors of the G7 established the “doctrine of shared responsibility” (G7 2006Apr):

“We, Ministers and Governors, reviewed a strategy for addressing global imbalances. We recognized that global imbalances are the product of a wide array of macroeconomic and microeconomic forces throughout the world economy that affect public and private sector saving and investment decisions. We reaffirmed our view that the adjustment of global imbalances:

• Is shared responsibility and requires participation by all regions in this global process;
• Will importantly entail the medium-term evolution of private saving and investment across countries as well as counterpart shifts in global capital flows; and
• Is best accomplished in a way that maximizes sustained growth, which requires strengthening policies and removing distortions to the adjustment process.

In this light, we reaffirmed our commitment to take vigorous action to address imbalances. We agreed that progress has been, and is being, made. The policies listed below not only would be helpful in addressing imbalances, but are more generally important to foster economic growth.

• In the United States, further action is needed to boost national saving by continuing fiscal consolidation, addressing entitlement spending, and raising private saving.
• In Europe, further action is needed to implement structural reforms for labor market, product, and services market flexibility, and to encourage domestic demand led growth.
• In Japan, further action is needed to ensure the recovery with fiscal soundness and long-term growth through structural reforms.

Others will play a critical role as part of the multilateral adjustment process.

• In emerging Asia, particularly China, greater flexibility in exchange rates is critical to allow necessary appreciations, as is strengthening domestic demand, lessening reliance on export-led growth strategies, and actions to strengthen financial sectors.

• In oil-producing countries, accelerated investment in capacity, increased economic diversification, enhanced exchange rate flexibility in some cases.

• Other current account surplus countries should encourage domestic consumption and investment, increase micro-economic flexibility and improve investment climates.

We recognized the important contribution that the IMF can make to multilateral surveillance.”

The concern at that time was that fiscal and current account global imbalances could result in disorderly correction with sharp devaluation of the dollar after an increase in premiums on yields of US Treasury debt (see Pelaez and Pelaez, The Global Recession Risk (2007)). The IMF was entrusted with monitoring and coordinating action to resolve global imbalances. The G7 was eventually broadened to the formal G20 in the effort to coordinate policies of countries with external surpluses and deficits.

The database of the WEO (http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx) is used to contract Table IIA-5 with fiscal and current account imbalances projected for 2013 and 2015. The WEO finds the need to rebalance external and domestic demand (IMF 2011WEOSep xvii):

“Progress on this front has become even more important to sustain global growth. Some emerging market economies are contributing more domestic demand than is desirable (for example, several economies in Latin America); others are not contributing enough (for example, key economies in emerging Asia). The first set needs to restrain strong domestic demand by considerably reducing structural fiscal deficits and, in some cases, by further removing monetary accommodation. The second set of economies needs significant currency appreciation alongside structural reforms to reduce high surpluses of savings over investment. Such policies would help improve their resilience to shocks originating in the advanced economies as well as their medium-term growth potential.”

The IMF (2012WEOApr, XVII) explains decreasing importance of the issue of global imbalances as follows:

“The latest developments suggest that global current account imbalances are no longer expected to widen again, following their sharp reduction during the Great Recession. This is largely because the excessive consumption growth that characterized economies that ran large external deficits prior to the crisis has been wrung out and has not been offset by stronger consumption in surplus economies. Accordingly, the global economy has experienced a loss of demand and growth in all regions relative to the boom years just before the crisis. Rebalancing activity in key surplus economies toward higher consumption, supported by more market-determined exchange rates, would help strengthen their prospects as well as those of the rest of the world.”

Table IIA-5, Fiscal Deficit, Current Account Deficit and Government Debt as % of GDP and 2011 Dollar GDP

	GDP $B 2012	FD %GDP 2013	CAD %GDP 2013	Debt %GDP 2013	FD%GDP 2015	CAD%GDP 2015	Debt %GDP 2015
US	15685	-7.3	-3.1	80.3	-2.3	-3.2	88.3
Japan	5964	-9.1	2.0	126.6	-5.8	2.4	155.0
UK	2441	-5.8	-1.9	78.3	-0.8	-0.4	88.1
Euro	12198	-1.6	0.3	68.4	1.1	1.2	71.3
Ger	3401	0.7	5.7	56.1	1.4	4.3	52.4
France	2609	-2.9	-2.2	80.4	0.3	-0.8	83.8
Italy	2014	0.8	-3.2	99.6	4.4	-1.6	101.5
Can	1819	-4.1	-2.8	33.3	-1.1	-2.5	37.4
China	8227	-1.2	2.7	25.8	-0.1	3.4	14.8
Brazil	2396	3.3	-2.4	33.6	3.1	-3.3	30.8

Note: GER = Germany; Can = Canada; FD = fiscal deficit; CAD = current account deficit

FD is primary except total for China; Debt is net except gross for China

Source: IMF World Economic Outlook databank http://www.imf.org/external/pubs/ft/weo/2013/01/weodata/index.aspx

The current account of the US balance of payments is provided in Table IIA-6 for IQ2012 and IQ2013. The US has a large deficit in goods or exports less imports of goods but it has a surplus in services that helps to reduce the trade account deficit or exports less imports of goods and services. The current account deficit of the US decreased from $100.4 billion in IQ2012, or 3.1 percent of GDP, to $83.2 billion in IQ2013, or 2.7 percent of GDP. The ratio of the current account deficit to GDP has stabilized around 3 percent of GDP compared with much higher percentages before the recession but is combined now with much higher imbalance in the Treasury budget (see Pelaez and Pelaez, The Global Recession Risk (2007), Globalization and the State, Vol. II (2008b), 183-94, Government Intervention in Globalization (2008c), 167-71).

Table IIA-6, US, Balance of Payments, Millions of Dollars NSA

	IQ2012	IQ2013	Difference
Goods Balance	-174,091	-157,503	16,588
X Goods	385,589	385,955	0.1 ∆%
M Goods	-559,679	-543,459	-2.9 ∆%
Services Balance	51,893	56,222	4,329
X Services	157,061	164,383	4.7 ∆%
M Services	-105,169	-108,161	2.8 ∆%
Balance Goods and Services	-122,198	-101,281	20,917
Balance Income	55,315	53,030	-2,285
Unilateral Transfers	-33,546	-34,968	-1,422
Current Account Balance	-100,429	-83,219	17,210
% GDP	IQ2012	IQ2013	IVQ2012
	3.1	2.7	2.6

X: exports; M: imports

Balance on Current Account = Balance on Goods and Services + Balance on Income + Unilateral Transfers

Source: Bureau of Economic Analysis http://www.bea.gov/international/index.htm#bop http://www.bea.gov/iTable/index_nipa.cfm

In their classic work on “unpleasant monetarist arithmetic,” Sargent and Wallace (1981, 2) consider a regime of domination of monetary policy by fiscal policy (emphasis added):

“Imagine that fiscal policy dominates monetary policy. The fiscal authority independently sets its budgets, announcing all current and future deficits and surpluses and thus determining the amount of revenue that must be raised through bond sales and seignorage. Under this second coordination scheme, the monetary authority faces the constraints imposed by the demand for government bonds, for it must try to finance with seignorage any discrepancy between the revenue demanded by the fiscal authority and the amount of bonds that can be sold to the public. Suppose that the demand for government bonds implies an interest rate on bonds greater than the economy’s rate of growth. Then if the fiscal authority runs deficits, the monetary authority is unable to control either the growth rate of the monetary base or inflation forever. If the principal and interest due on these additional bonds are raised by selling still more bonds, so as to continue to hold down the growth of base money, then, because the interest rate on bonds is greater than the economy’s growth rate, the real stock of bonds will growth faster than the size of the economy. This cannot go on forever, since the demand for bonds places an upper limit on the stock of bonds relative to the size of the economy. Once that limit is reached, the principal and interest due on the bonds already sold to fight inflation must be financed, at least in part, by seignorage, requiring the creation of additional base money.”

The alternative fiscal scenario of the CBO (2012NovCDR) resembles an economic world in which eventually the placement of debt reaches a limit of what is proportionately desired of US debt in investment portfolios. This unpleasant environment is occurring in various European countries.

The current real value of government debt plus monetary liabilities depends on the expected discounted values of future primary surpluses or difference between tax revenue and government expenditure excluding interest payments (Cochrane 2011Jan, 27, equation (16)). There is a point when adverse expectations about the capacity of the government to generate primary surpluses to honor its obligations can result in increases in interest rates on government debt.

This analysis suggests that there may be a point of saturation of demand for United States financial liabilities without an increase in interest rates on Treasury securities. A risk premium may develop on US debt. Such premium is not apparent currently because of distressed conditions in the world economy and international financial system. Risk premiums are observed in the spread of bonds of highly indebted countries in Europe relative to bonds of the government of Germany.

The issue of global imbalances centered on the possibility of a disorderly correction (Pelaez and Pelaez, The Global Recession Risk (2007), Globalization and the State Vol. II (2008b) 183-94, Government Intervention in Globalization (2008c), 167-71). Such a correction has not occurred historically but there is no argument proving that it could not occur. The need for a correction would originate in unsustainable large and growing United States current account deficits (CAD) and net international investment position (NIIP) or excess of financial liabilities of the US held by foreigners net relative to financial liabilities of foreigners held by US residents. The IMF estimated that the US could maintain a CAD of two to three percent of GDP without major problems (Rajan 2004). The threat of disorderly correction is summarized by Pelaez and Pelaez, The Global Recession Risk (2007), 15):

“It is possible that foreigners may be unwilling to increase their positions in US financial assets at prevailing interest rates. An exit out of the dollar could cause major devaluation of the dollar. The depreciation of the dollar would cause inflation in the US, leading to increases in American interest rates. There would be an increase in mortgage rates followed by deterioration of real estate values. The IMF has simulated that such an adjustment would cause a decline in the rate of growth of US GDP to 0.5 percent over several years. The decline of demand in the US by four percentage points over several years would result in a world recession because the weakness in Europe and Japan could not compensate for the collapse of American demand. The probability of occurrence of an abrupt adjustment is unknown. However, the adverse effects are quite high, at least hypothetically, to warrant concern.”

The United States could be moving toward a situation typical of heavily indebted countries, requiring fiscal adjustment and increases in productivity to become more competitive internationally. The CAD and NIIP of the United States are not observed in full deterioration because the economy is well below potential. There are two complications in the current environment relative to the concern with disorderly correction in the first half of the past decade. In the release of Jun 14, 2013, the Bureau of Economic Analysis (http://www.bea.gov/newsreleases/international/transactions/2013/pdf/trans113.pdf) informs of revisions of US data on US international transactions since 1999:

“The statistics of the U.S. international transactions accounts released today have been revised for the first quarter of 1999 to the fourth quarter of 2012 to incorporate newly available and revised source data, updated seasonal adjustments, changes in definitions and classifications, and improved estimating methodologies.”

Table IIA-7 provides data on the US fiscal and balance of payments imbalances. In 2007, the federal deficit of the US was $161 billion corresponding to 1.2 percent of GDP while the Congressional Budget Office (CBO 2012NovCDR) estimates the federal deficit in 2012 at $1089 billion or 7.0 percent of GDP (http://cmpassocregulationblog.blogspot.com/2013/02/united-states-unsustainable-fiscal.html). The combined record federal deficits of the US from 2009 to 2012 are $5092 billion or 33 percent of the estimate of GDP of $15,549 billion for fiscal year 2012 by the CBO (http://www.cbo.gov/publication/43905 CBO (2013BEOFeb5)). The deficits from 2009 to 2012 exceed one trillion dollars per year, adding to $5.090 trillion in four years, using the fiscal year deficit of $1087 billion for fiscal year 2012, which is the worst fiscal performance since World War II. Federal debt in 2007 was $5035 billion, less than the combined deficits from 2009 to 2012 of $5.090 billion. Federal debt in 2011 was 67.8 percent of GDP and is estimated to reach 72.6 percent of GDP in 2012 (CBO2012AugBEO, CBO2012NovCDR, CBO2013BEOFeb5). This situation may worsen in the future (CBO 2012LTBO):

“The budget outlook is much bleaker under the extended alternative fiscal scenario, which maintains what some analysts might consider “current policies,” as opposed to current laws. Federal debt would grow rapidly from its already high level, exceeding 90 percent of GDP in 2022. After that, the growing imbalance between revenues and spending, combined with spiraling interest payments, would swiftly push debt to higher and higher levels. Debt as a share of GDP would exceed its historical peak of 109 percent by 2026, and it would approach 200 percent in 2037.

The changes under this scenario would result in much lower revenues than would occur under the extended baseline scenario because almost all expiring tax provisions are assumed to be extended through 2022 (with the exception of the current reduction in the payroll tax rate for Social Security). After 2022, revenues under this scenario are assumed to remain at their 2022 level of 18.5 percent of GDP, just above the average of the past 40 years.

Outlays would be much higher than under the other scenario. This scenario incorporates assumptions that through 2022, lawmakers will act to prevent Medicare’s payment rates for physicians from declining; that after 2022, lawmakers will not allow various restraints on the growth of Medicare costs and health insurance subsidies to exert their full effect; and that the automatic reductions in spending required by the Budget Control Act of 2011 will not occur (although the original caps on discretionary appropriations in that law are assumed to remain in place). Finally, under this scenario, federal spending as a percentage of GDP for activities other than Social Security, the major health care programs, and interest payments is assumed to return to its average level during the past two decades, rather than fall significantly below that level, as it does under the extended baseline scenario.”

Table IIA-7, US, Current Account, NIIP, Fiscal Balance, Nominal GDP, Federal Debt and Direct Investment, Dollar Billions and %

	2007	2008	2009	2010	2011	2012
Goods & Services	-699	-702	-384	-499	-557	-535
Income	101	146	124	178	233	224
UT	-115	-125	-122	-128	-134	-130
Current Account	-713	-681	-382	-449	-458	-440
NGDP	14028	14291	13974	14499	15076	15684
Current Account % GDP	-5.1	-4.8	-2.7	-3.1	-3.1	-2.8
NIIP	-1796	-3260	-2321	-2474	-4030	-4416
US Owned Assets Abroad	18400	19464	18512	20298	21132	20760
Foreign Owned Assets in US	20196	22724	20833	22772	25162	25176
NIIP % GDP	-12.8	-22.8	-16.6	-17.1	-26.7	-28.2
Exports Goods Services Income	2487	2654	2185	2523	2874	2987
NIIP % Exports Goods Services Income	-72	-123	-106	-98	-140	-148
DIA MV	5274	3102	4287	4767	4499	5191
DIUS MV	3551	2486	2995	3397	3509	3931
Fiscal Balance	-161	-459	-1413	-1294	-1296	-1087
Fiscal Balance % GDP	-1.2	-3.2	-10.1	-9.0	-8.7	-7.0
Federal   Debt	5035	5803	7545	9019	10128	11281
Federal Debt % GDP	36.3	40.5	54.0	62.9	67.8	72.6
Federal Outlays	2729	2983	3518	3456	3598	3537
∆%	2.8	9.3	17.9	-1.8	4.1	-1.7
% GDP	19.7	20.8	25.2	24.1	24.1	22.7
Federal Revenue	2568	2524	2105	2162	2302	2450
∆%	6.7	-1.7	-16.6	2.7	6.5	6.4
% GDP	18.5	17.6	15.1	15.1	15.4	15.8

Notes: UT: unilateral transfers; NGDP: nominal GDP or in current dollars; NIIP: Net International Investment Position; DIA MV: US Direct Investment Abroad at Market Value; DIUS MV: Direct Investment in the US at Market Value. There are minor discrepancies in the decimal point of percentages of GDP between the balance of payments data and federal debt, outlays, revenue and deficits in which the original number of the CBO source is maintained. These discrepancies do not alter conclusions.

Sources: http://www.cbo.gov/ budget http://www.bea.gov/international/index.htm#bop Balance of Payments and NIIP, Bureau of Economic Analysis (BEA)

Gross Domestic Product, Bureau of Economic Analysis (BEA) http://www.bea.gov/iTable/index_nipa.cfm

Chart IIA-5 of the Bureau of Economic Analysis shows the US balance on current account from 1960 to 2012. The sharp devaluation of the dollar resulting from unconventional monetary policy of zero interest rates and elimination of auctions of 30-year Treasury bonds did not adjust the US balance of payments. Partial adjustment only occurred after the contraction of economic activity during the global recession.

Chart IIA-5, US, Balance on Current Account, 1960-2012, Millions of Dollars

Source: Bureau of Economic Analysis

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

Chart IIA-6 provides the quarterly balance of current account of the United States in millions of dollars from 1995 to IQ2013. The global recession appeared to be adjusting the current account deficit that rises to lower dollar values. Recovery of the economy worsened again the current account deficit. Growth at trend worsens the external imbalance of the US that combines now with unsustainable Treasury deficits/debt.

Chart IIA-6, US, Balance on Current Account, Quarterly 1979-2013, Millions of Dollars, SA

Source: Bureau of Economic Analysis

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

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

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013