CMP Associates Regulation Blog

Chart I-2 of the Bureau of Labor Statistics provides 12-month percentage changes of the number of people employed in the US from 2001 to 2013. There was recovery since 2010 but not sufficient to recover lost jobs. Many people in the US who had jobs before the global recession are not working now.

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

Source: Bureau of Labor Statistics

The foundation of the second approach derives from Chart II-3 of the Bureau of Labor Statistics providing the level of the civilian labor force in the US. The civilian labor force consists of people who are available and willing to work and who have searched for employment recently. The labor force of the US grew 9.4 percent from 142.828 million in Jan 2001 to 156.255 million in Jul 2009 but is lower at 155.536 million in Aug 2013, all numbers not seasonally adjusted. Chart I-3 shows the flattening of the curve of expansion of the labor force and its decline in 2010 and 2011. The ratio of the labor force of 154.871 million in Jul 2007 to the noninstitutional population of 231.958 million in Jul 2007 was 66.8 percent while the ratio of the labor force of 155.536 million in Sep 2013 to the noninstitutional population of 246.168 million in Sep 2013 was 63.2 percent. The labor force of the US in Sep 2013 corresponding to 66.8 percent of participation in the population would be 164.440 million (0.668 x 246.168). The difference between the measured labor force in Sep 2013 of 155.536 million and the labor force in Sep 2013 with participation rate of 66.8 percent (as in Jul 2007) of 164.440 million is 8.904 million. The level of the labor force in the US has stagnated and is 8.904 million lower than what it would have been had the same participation rate been maintained. Millions of people have abandoned their search for employment because they believe there are no jobs available for them. The key issue is whether the decline in participation of the population in the labor force is the result of people giving up on finding another job.

Chart I-3, US, Civilian Labor Force, Thousands, SA, 2001-2013

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

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

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

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

Chart I-5 of the Bureau of Labor Statistics provides the labor force participation rate in the US or labor force as percent of the population. The labor force participation rate of the US fell from 66.8 percent in Jan 2001 to 63.4 percent NSA in Aug 2013, all numbers not seasonally adjusted. The annual labor force participation rate for 1979 was 63.7 percent and also 63.7 percent in Nov 1980 during sharp economic contraction. This comparison is further elaborated below. Chart I-5 shows an evident downward trend beginning with the global recession that has continued throughout the recovery beginning in IIIQ2009. The critical issue is whether people left the workforce of the US because they believe there is no longer a job for them.

Chart I-5, Civilian Labor Force Participation Rate, Percent of Population in Labor Force SA, 2001-2013

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

Chart I-6 of the Bureau of Labor Statistics provides the level of unemployed in the US. The number unemployed rose from the trough of 6.272 million in Oct 2006 to the peak of 16.147 million in Jan 2010, declining to 13.400 million in Jul 2012, 12.696 million in Aug 2012 and 11.742 million in Sep 2012. The level unemployed fell to 11.741 million in Oct 2012, 11.404 million in Nov 2012, 11.844 million in Dec 2012, 13.181 million in Jan 2013, 12.500 million in Feb 2013 and 10.885 million in Sep 2013, all numbers not seasonally adjusted.

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

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

Chart I-7 of the Bureau of Labor Statistics provides the rate of unemployment in the US or unemployed as percent of the labor force. The rate of unemployment of the US rose from 4.7 percent in Jan 2001 to 6.5 percent in Jun 2003, declining to 4.1 percent in Oct 2006. The rate of unemployment jumped to 10.6 percent in Jan 2010 and declined to 7.6 percent in Dec 2012 but increased to 8.5 percent in Jan 2013 and 8.1 percent in Feb 2013, falling back to 7.1 percent in Apr 2013 and 7.8 percent in Jun 2013, all numbers not seasonally adjusted. The rate of unemployment not seasonally adjusted stabilized at 7.7 percent in Jul 2013 and fell to 7.0 percent in Sep 2013.

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

Source: Bureau of Labor Statistics

Chart I-8 of the Bureau of Labor Statistics provides 12-month percentage changes of the level of unemployed. There was a jump of 81.8 percent in Apr 2009 with subsequent decline and negative rates since 2010. On an annual basis, the level of unemployed rose 59.8 percent in 2009 and 26.1 percent in 2008 with increase of 3.9 percent in 2010, decline of 7.3 percent in 2011, decrease of 9.0 percent in 2012 and decrease of 7.3 percent in Sep 2013 relative to Sep 2012.

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

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

Chart I-9 of the Bureau of Labor Statistics provides the number of people in part-time occupations because of economic reasons, that is, because they cannot find full-time employment. The number underemployed in part-time occupations not seasonally adjusted rose from 3.732 million in Jan 2001 to 5.270 million in Jan 2004, falling to 3.787 million in Apr 2006. The number underemployed seasonally adjusted jumped to 9.103 million in Nov 2009, falling to 8.168 million in Dec 2011 but increasing to 8.220 million in Jan 2012 and 8.127 million in Feb 2012 but then falling to 7.918 million in Dec 2012 and increasing to 8.245 million in Jul 2013. The number employed part-time for economic reasons seasonally adjusted reached 7.926 million in Sep 2013. Without seasonal adjustment, the number employed part-time for economic reasons reached 9.354 million in Dec 2009, declining to 8.918 million in Jan 2012 and 8.166 million in Dec 2012 but increasing to 8.324 million in Jul 2013. The number employed part-time for economic reasons NSA stood at 7.522 million in Sep 2013. The longer the period in part-time jobs the lower are the chances of finding another full-time job.

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

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

Chart I-10 of the Bureau of Labor Statistics repeats the behavior of unemployment. The 12-month percentage change of the level of people at work part-time for economic reasons jumped 84.7 percent in Mar 2009 and declined subsequently. The declines have been insufficient to reduce significantly the number of people who cannot shift from part-time to full-time employment. On an annual basis, the number of part-time for economic reasons increased 33.5 percent in 2008 and 51.7 percent in 2009, declining 0.4 percent in 2010, 3.5 percent in 2011 and 5.1 percent in 2012. The number of part-time for economic reasons decreased 7/3 percent in Sep 2013 relative to Sep 2012.

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

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

Chart II-11 of the Bureau of Labor Statistics provides the same pattern of the number marginally attached to the labor force jumping to significantly higher levels during the global recession and remaining at historically high levels. The number marginally attached to the labor force not seasonally adjusted increased from 1.295 million in Jan 2001 to 1.691 million in Feb 2004. The number of marginally attached to the labor force fell to 1.299 million in Sep 2006 and increased to 2.609 million in Dec 2009 and 2.800 million in Jan 2011. The number marginally attached to the labor force was 2.540 million in Dec 2011, increasing to 2.809 million in Jan 2012, falling to 2.608 million in Feb 2012, 2.352 million in Mar 2012, 2.363 million in Apr 2012, 2.423 million in May 2012, 2.483 million in Jun 2012, 2.529 million in Jul 2012, 2.561 million in Aug 2012, 2.517 million in Sep 2012, 2.433 million in Oct 2012, 2.505 million in Nov 2012 and 2.614 million in Dec 2012. The number marginally attached to the labor force fell to 2.302 million in Sep 2013.

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

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

Chart I-12 provides 12-month percentage changes of the marginally attached to the labor force from 2001 to 2013. There was a jump of 56.1 percent in May 2009 during the global recession followed by declines in percentage changes but insufficient negative changes. On an annual basis, the number of marginally attached to the labor force increased in four consecutive years: 15.7 percent in 2008, 37.9 percent in 2009, 11.7 percent in 2010 and 3.5 percent in 2011. The number marginally attached to the labor force fell 2.2 percent on annual basis in 2012 but increased 2.9 percent in the 12 months ending in Dec 2012, fell 13.0 percent in the 12 months ending in Jan 2013, falling 10.7 percent in the 12 months ending in May 2013. The number marginally attached to the labor force increased 4.0 percent in the 12 months ending in Jun 2013 and fell 4.5 percent in the 12 months ending in Jul 2013 and 8.6 percent in the 12 months ending in Aug 2013. The number marginally attached to the labor force fell 8.5 percent in the 12 months ending in Sep 2013.

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

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

Table I-4 consists of data and additional calculations using the BLS household survey, illustrating the possibility that the actual rate of unemployment could be 11.2 percent and the number of people in job stress could be around 28.1 million, which is 17.3 percent of the effective labor force. The first column provides for 2006 the yearly average population (POP), labor force (LF), participation rate or labor force as percent of population (PART %), employment (EMP), employment population ratio (EMP/POP %), unemployment (UEM), the unemployment rate as percent of labor force (UEM/LF Rate %) and the number of people not in the labor force (NLF). All data are unadjusted or not-seasonally-adjusted (NSA). The numbers in column 2006 are averages in millions while the monthly numbers for Sep 2012, Aug 2013 and Sep 2013 are in thousands, not seasonally adjusted. The average yearly participation rate of the population in the labor force was in the range of 66.0 percent minimum to 67.1 percent maximum between 2000 and 2006 with the average of 66.4 percent (ftp://ftp.bls.gov/pub/special.requests/lf/aa2006/pdf/cpsaat1.pdf). Table I-4b provides the yearly labor force participation rate from 1979 to 2013. The objective of Table I-4 is to assess how many people could have left the labor force because they do not think they can find another job. Row “LF PART 66.2 %” applies the participation rate of 2006, almost equal to the rates for 2000 to 2006, to the noninstitutional civilian population in Aug 2012, Jul 2013 and Aug 2013 to obtain what would be the labor force of the US if the participation rate had not changed. In fact, the participation rate fell to 63.6 percent by Sep 2012 and was 63.4 percent in Aug 2013 and 63.2 percent in Sep 2013, suggesting that many people simply gave up on finding another job. Row “∆ NLF UEM” calculates the number of people not counted in the labor force because they could have given up on finding another job by subtracting from the labor force with participation rate of 66.2 percent (row “LF PART 66.2%”) the labor force estimated in the household survey (row “LF”). Total unemployed (row “Total UEM”) is obtained by adding unemployed in row “∆NLF UEM” to the unemployed of the household survey in row “UEM.” The row “Total UEM%” is the effective total unemployed “Total UEM” as percent of the effective labor force in row “LF PART 66.2%.” The results are that:

there are an estimated 7.427 million unemployed in Sep 2013 who are not counted because they left the labor force on their belief they could not find another job (∆NLF UEM), that is, they dropped out of their job searches
the total number of unemployed is effectively 18.312 million (Total UEM) and not 10.885 million (UEM) of whom many have been unemployed long term
the rate of unemployment is 11.2 percent (Total UEM%) and not 7.0 percent, not seasonally adjusted, or 7.2 percent seasonally adjusted
the number of people in job stress is close to 28.1 million by adding the 7.427 million leaving the labor force because they believe they could not find another job.

The row “In Job Stress” in Table I-4 provides the number of people in job stress not seasonally adjusted at 28.136 million in Sep 2013, adding the total number of unemployed (“Total UEM”), plus those involuntarily in part-time jobs because they cannot find anything else (“Part Time Economic Reasons”) and the marginally attached to the labor force (“Marginally attached to LF”). The final row of Table I-4 shows that the number of people in job stress is equivalent to 17.3 percent of the labor force in Sep 2013. The employment population ratio “EMP/POP %” dropped from 62.9 percent on average in 2006 to 58.8 percent in Sep 2012, 58.8 percent in Aug 2013 and 58.8 percent in Sep 2013. The number employed in Sep 2013 was 144.651 million (NSA) or 2.664 million fewer people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population increased from 231.958 million in Jul 2007 to 246.168 million in Sep 2013 or by 14.210 million. The number employed fell 1.8 percent from Jul 2007 to Sep 2013 while population increased 6.1 percent. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs. What really matters for labor input in production and wellbeing is the number of people with jobs or the employment/population ratio, which has declined and does not show signs of increasing. There are several million fewer people working in 2013 than in 2006 and the number employed is not increasing while population increased 14.210 million. The number of hiring relative to the number unemployed measures the chances of becoming employed. The number of hiring in the US economy has declined by 17 million and does not show signs of increasing in an unusual recovery without hiring (Section IC and earlier http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html).

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

	2006	Sep 2012	Aug 2013	Sep 2013
POP	229	243,772	245,959	246.168
LF	151	155,075	155,971	155,536
PART%	66.2	63.6	63.4	63.2
EMP	144	143,333	144,509	145,651
EMP/POP%	62.9	58.8	58.8	58.8
UEM	7	11,742	11,462	10,885
UEM/LF Rate%	4.6	7.6	7.3	7.0
NLF	77	88,697	89,988	90,362
LF PART 66.2%		161,377	162,825	162,963
∆NLF UEM		5,986	6,854	7,427
Total UEM		17,728	18,316	18,312
Total UEM%		11.0	11.2	11.2
Part Time Economic Reasons		8,110	7,690	7,522
Marginally Attached to LF		2,517	2,342	2,302
In Job Stress		28,355	28,348	28,136
People in Job Stress as % Labor Force		17.6	17.4	17.3

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

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

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

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

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

Y = ∑_is_iy_i (1)

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

∆Y = ∑_i∆s_iy*_i+ ∑_i∆y_is*_i (2)

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

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

Table I-4b and Chart I-12-b provide the US labor force participation rate or percentage of the labor force in population. It is not likely that simple demographic trends caused the sharp decline during the global recession and failure to recover earlier levels. The civilian labor force participation rate dropped from the peak of 66.9 percent in Jul 2006 to 63.2 percent in Sep 2013. The civilian labor force participation rate was 63.7 percent on an annual basis in 1979 and 63.4 percent in Dec 1980 and Dec 1981, reaching even 62.9 percent in both Apr and May 1979. The civilian labor force participation rate jumped with the recovery to 64.8 percent on an annual basis in 1985 and 65.9 percent in Jul 1985. Structural factors cannot explain these sudden changes vividly shown visually in the final segment of Chart I-12b. Seniors would like to delay their retiring especially because of the adversities of financial repression on their savings. Labor force statistics are capturing the disillusion of potential workers with their chances in finding a job in what Lazear and Spletzer (2012JHJul22) characterize as accentuated cyclical factors.

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

Year	Mar	Apr	May	Jun	Jul	Aug	Sep	Dec	Annual
1979	63.2	62.9	62.9	64.5	64.9	64.5	63.8	63.8	63.7
1980	63.2	63.2	63.5	64.6	65.1	64.5	63.6	63.4	63.8
1981	63.5	63.6	63.9	64.6	65.0	64.6	63.5	63.4	63.9
1982	63.4	63.3	63.9	64.8	65.3	64.9	64.0	63.8	64.0
1983	63.3	63.2	63.4	65.1	65.4	65.1	64.3	63.8	64.0
1984	63.6	63.7	64.3	65.5	65.9	65.2	64.4	64.3	64.4
1985	64.4	64.3	64.6	65.5	65.9	65.4	64.9	64.6	64.8
1986	64.6	64.6	65.0	66.3	66.6	66.1	65.3	65.0	65.3
1987	65.0	64.9	65.6	66.3	66.8	66.5	65.5	65.5	65.6
1988	65.2	65.3	65.5	66.7	67.1	66.8	65.9	65.9	65.9
1989	65.7	65.9	66.2	67.4	67.7	67.2	66.3	66.3	66.5
1990	66.2	66.1	66.5	67.4	67.7	67.1	66.4	66.1	66.5
1991	65.9	66.0	66.0	67.2	67.3	66.6	66.1	65.8	66.2
1992	66.0	66.0	66.4	67.6	67.9	67.2	66.3	66.1	66.4
1993	65.8	65.6	66.3	67.3	67.5	67.0	66.1	66.2	66.3
1994	66.1	66.0	66.5	67.2	67.5	67.2	66.5	66.5	66.6
1995	66.4	66.4	66.4	67.2	67.7	67.1	66.5	66.2	66.6
1996	66.4	66.2	66.7	67.4	67.9	67.2	66.8	66.7	66.8
1997	66.9	66.7	67.0	67.8	68.1	67.6	67.0	67.0	67.1
1998	67.0	66.6	67.0	67.7	67.9	67.3	67.0	67.0	67.1
1999	66.9	66.7	67.0	67.7	67.9	67.3	66.8	67.0	67.1
2000	67.1	67.0	67.0	67.7	67.6	67.2	66.7	67.0	67.1
2001	67.0	66.7	66.6	67.2	67.4	66.8	66.6	66.6	66.8
2002	66.6	66.4	66.5	67.1	67.2	66.8	66.6	66.2	66.6
2003	66.2	66.2	66.2	67.0	66.8	66.3	65.9	65.8	66.2
2004	65.8	65.7	65.8	66.5	66.8	66.2	65.7	65.8	66.0
2005	65.6	65.8	66.0	66.5	66.8	66.5	66.1	65.9	66.0
2006	65.8	65.8	66.0	66.7	66.9	66.5	66.1	66.3	66.2
2007	65.9	65.7	65.8	66.6	66.8	66.1	66.0	65.9	66.0
2008	65.7	65.7	66.0	66.6	66.8	66.4	65.9	65.7	66.0
2009	65.4	65.4	65.5	66.2	66.2	65.6	65.0	64.4	65.4
2010	64.8	64.9	64.8	65.1	65.3	65.0	64.6	64.1	64.7
2011	64.0	63.9	64.1	64.5	64.6	64.3	64.2	63.8	64.1
2012	63.6	63.4	63.8	64.3	64.3	63.7	63.6	63.4	63.7
2013	63.1	63.1	63.5	64.0	64.0	63.4	63.2

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

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

Source: Bureau of Labor Statistics

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

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

Sources: US Bureau of Labor Statistics

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

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

Sources: US Bureau of Labor Statistics

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

IA3 Long-term and Cyclical Comparison of Employment. There is initial discussion here of long-term employment trends followed by cyclical comparison. Growth and employment creation have been mediocre in the expansion beginning in Jul IIIQ2009 from the contraction between Dec IVQ2007 and Jun IIQ2009 (http://www.nber.org/cycles.html). A series of charts from the database of the Bureau of Labor Statistics (BLS) provides significant insight. Chart I-13 provides the monthly employment level of the US from 1948 to 2013. The number of people employed has trebled. There are multiple contractions throughout the more than six decades but followed by resumption of the strong upward trend. The contraction after 2007 is deeper and followed by a flatter curve of job creation. The United States missed this opportunity of high growth in the initial phase of recovery that historically eliminated unemployment and underemployment created during the contraction. Inferior performance of the US economy and labor markets is the critical current issue of analysis and policy design. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. 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) and the second estimate of GDP for IIQ2013 (http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_3rd.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.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/2013/09/twenty-eight-million-unemployed-or.html). Zero interest rates and quantitative easing have not provided the impulse for growth and were not required in past successful cyclical expansions.

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

Source: US Bureau of Labor Statistics

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

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

Source: US Bureau of Labor Statistics

Chart I-15 for the period from 1948 to 2013. The labor force participation rate is influenced by numerous factors such as the age of the population. There is no comparable episode in the postwar economy to the sharp collapse of the labor force participation rate in Chart I-15 during the contraction and subsequent expansion after 2007. Aging can reduce the labor force participation rate as many people retire but many may have decided to work longer as their wealth and savings have been significantly reduced. There is an important effect of many people just exiting the labor force because they believe there is no job available for them.

Chart I-15, US, Civilian Labor Force Participation Rate, SA, 1948-2013, %

Source: US Bureau of Labor Statistics

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

Chart I-16, US, Unemployed, SA, 1948-2013, Thousands

Source: US Bureau of Labor Statistics

Chart I-17 provides the rate of unemployment of the US from 1948 to 2012. The peak of the series is 10.8 percent in both Nov and Dec 1982. The second highest rates are 10.0 percent in Oct 2009 and 9.9 percent in both Nov and Dec 2009. The unadjusted rate of unemployment reached 10.6 percent in Jan 2010.

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

Source: US Bureau of Labor Statistics

Chart I-18 provides the number unemployed for 27 weeks and over from 1948 to 2013. The number unemployed for 27 weeks and over jumped from 510,000 in Dec 1978 to 2.885 million in Jun 1983, by 2.4 million, or 465.7 percent. The number of unemployed 27 weeks or over jumped from 1.132 million in May 2007 to 6.607 million in Jun 2010, by 5.475 million, or 483.7 percent.

Chart I-18, US, Unemployed for 27 Weeks or More, 1948-2013, Thousands

Source: US Bureau of Labor Statistics

The employment-population ratio in Chart I-19 is an important indicator of wellbeing in labor markets, measuring the number of people with jobs. The US employment-population ratio fell from 63.5 in Dec 2006 to 58.6 in Jul 2011 and stands at 58.8 NSA in Sep 2013. There is no comparable decline followed by stabilization during an expansion in Chart I-19.

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

Source: US Bureau of Labor Statistics

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

Chart I-20, US, Part-Time for Economic Reasons, NSA, 1955-2013, Thousands

Source: US Bureau of Labor Statistics

Table I-5 provides percentage change of real GDP in the United States in the 1930s, 1980s and 2000s. The recession in 1981-1982 is quite similar on its own to the 2007-2009 recession. In contrast, during the Great Depression in the four years of 1930 to 1933, GDP in constant dollars fell 26.3 percent cumulatively and fell 45.3 percent in current dollars (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 150-2, Pelaez and Pelaez, Globalization and the State, Vol. II (2009b), 205-7 and revisions in http://bea.gov/iTable/index_nipa.cfm). Data are available for the 1930s only on a yearly basis. US GDP fell 4.7 percent in the two recessions (1) from IQ1980 to IIIQ1980 and (2) from III1981 to IVQ1981 to IVQ1982 and 4.3 percent cumulatively in the recession from IVQ2007 to IIQ2009. It is instructive to compare the first three years of the expansions in the 1980s and the current expansion. GDP grew at 4.6 percent in 1983, 7.3 percent in 1984 and 4.2 percent in 1985 while GDP grew, 2.5 percent in 2010, 1.8 percent in 2011 and 2.8 percent in 2012. Actual annual equivalent GDP growth in the four quarters of 2012 and first two quarters of 2013 is 1.9 percent and 1.8 percent in the first two quarters of 2013. GDP grew at 4.2 percent in 1985 and 3.5 percent in 1986 while the forecasts of the central tendency of participants of the Federal Open Market Committee (FOMC) are in the range of 1.8 to 2.4 percent in 2013 (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20130918.pdf).

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

Year	GDP ∆%	Year	GDP ∆%	Year	GDP ∆%
1930	-8.5	1980	-0.2	2000	4.1
1931	-6.4	1981	2.6	2001	1.0
1932	-12.9	1982	-1.9	2002	1.8
1933	-1.3	1983	4.6	2003	2.8
1934	10.8	1984	7.3	2004	3.8
1935	8.9	1985	4.2	2005	3.4
1936	12.9	1986	3.5	2006	2.7
1937	5.1	1987	3.5	2007	1.8
1938	-3.3	1988	4.2	2008	-0.3
1930	8.0	1989	3.7	2009	-2.8
1940	8.8	1990	1.9	2010	2.5
1941	17.7	1991	-0.1	2011	1.8
1942	18.9	1992	3.6	2012	2.8

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

Characteristics of the four cyclical contractions are provided in Table I-6 with the first column showing the number of quarters of contraction; the second column the cumulative percentage contraction; and the final column the average quarterly rate of contraction. There were two contractions from IQ1980 to IIIQ1980 and from IIIQ1981 to IVQ1982 separated by three quarters of expansion. The drop of output combining the declines in these two contractions is 4.7 percent, which is almost equal to the decline of 4.3 percent in the contraction from IVQ2007 to IIQ2009. In contrast, during the Great Depression in the four years of 1930 to 1933, GDP in constant dollars fell 26.3 percent cumulatively and fell 45.3 percent in current dollars (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 150-2, Pelaez and Pelaez, Globalization and the State, Vol. II (2009b), 205-7 and revisions in http://bea.gov/iTable/index_nipa.cfm). The comparison of the global recession after 2007 with the Great Depression is entirely misleading.

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

	Number of Quarters	Cumulative Percentage Contraction	Average Percentage Rate
IIQ1953 to IIQ1954	3	-2.4	-0.8
IIIQ1957 to IIQ1958	3	-3.0	-1.0
IVQ1973 to IQ1975	5	-3.1	-0.6
IQ1980 to IIIQ1980	2	-2.2	-1.1
IIIQ1981 to IVQ1982	4	-2.5	-0.64
IVQ2007 to IIQ2009	6	-4.3	-0.72

Sources: Source: Bureau of Economic Analysis http://bea.gov/iTable/index_nipa.cfm Reference Cycles National Bureau of Economic Research http://www.nber.org/cycles/cyclesmain.html

Cycles National Bureau of Economic Research http://www.nber.org/cycles/cyclesmain.html

Table I-7 shows the extraordinary contrast between the mediocre average annual equivalent growth rate of 2.2 percent of the US economy in the sixteen quarters of the current cyclical expansion from IIIQ2009 to IIQ2013 and the average of 5.7 percent in the first thirteen quarters of expansion from IQ1983 to IQ1986, 5.3 percent in the first fifteen quarters of expansion from IQ1983 to IIIQ1986 and 5.2 percent in the first sixteen quarters of expansion from IQ1983 to IVQ1986. The line “average first four quarters in four expansions” provides the average growth rate of 7.7 percent with 7.8 percent from IIIQ1954 to IIQ1955, 9.2 percent from IIIQ1958 to IIQ1959, 6.1 percent from IIIQ1975 to IIQ1976 and 7.8 percent from IQ1983 to IVQ1983. The United States missed this opportunity of high growth in the initial phase of recovery. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). Table I-5 provides an average of 7.7 percent in the first four quarters of major cyclical expansions while the rate of growth in the first four quarters of the expansion from IIIQ2009 to IIQ2010 is only 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. 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/2013/09/twenty-eight-million-unemployed-or.html). BEA data show the US economy in standstill with annual growth of 2.4 percent in 2010 decelerating to 1.8 percent annual growth in 2011 and 2.8 percent in 2012 (http://www.bea.gov/iTable/index_nipa.cfm) 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. GDP growth in the first two quarters of 2013 accumulated to 0.9 percent that is equivalent to 1.8 percent in a year. This is obtained by dividing GDP in IIQ2013 of $15,679.7 by GDP in IVQ2012 of $15,539.6 and compounding by 4/2: {[($15,679.7/$15,539.6)^4/2 -1]100 =1.8%}. The US economy grew 1.6 percent in IIQ2013 relative to the same quarter a year earlier in IIQ2012. Another important revelation of the revisions and enhancements is that GDP was flat in IVQ2012, just at the borderline of contraction.

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

	Number of Quarters	Cumulative Growth ∆%	Average Annual Equivalent Growth Rate
IIIQ 1954 to IQ1957	11	12.8	4.5
First Four Quarters IIIQ1954 to IIQ1955	4	7.8
IIQ1958 to IIQ1959	5	10.0	7.9
First Four Quarters IIIQ1958 to IIQ1959	4	9.2
IIQ1975 to IVQ1976	8	8.3	4.1
First Four Quarters IIIQ1975 to IIQ1976	4	6.1
IQ1983 to IQ1986 IQ1983 to IIIQ1986 IQ1983 to IVQ1986	13 15 16	19.9 21.6 22.3	5.7 5.4 5.2
First Four Quarters IQ1983 to IVQ1983	4	7.8
Average First Four Quarters in Four Expansions*		7.7
IIIQ2009 to IIQ2013	16	9.2	2.2
First Four Quarters IIIQ2009 to IIQ2010		2.7

*First Four Quarters: 7.8% IIIQ1954-IIQ1955; 9.2% IIIQ1958-IIQ1959; 6.1% IIIQ1975-IIQ1976; 7.8% IQ1983-IVQ1983

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

A group of charts from the database of the Bureau of Labor Statistics facilitate the comparison of employment in the 1980s and 2000s. The long-term charts and tables from I-5 to I-7 in the discussion above confirm the view that the comparison of the current expansion should be with that in the 1980s because of similar dimensions. Chart I-21 provides the level of employment in the US between 1979 and 1989. Employment surged after the contraction and grew rapidly during the decade.

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

Source: US Bureau of Labor Statistics

There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs. Chart I-22 shows tepid recovery early in 2010 followed by near stagnation and marginal expansion. The number employed in Sep 2013 was 144.651 million (NSA) or 2.664 million fewer people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population increased from 231.958 million in Jul 2007 to 246.168 million in Sep 2013 or by 14.210 million. The number employed fell 1.8 percent from Jul 2007 to Sep 2013 while population increased 6.1 percent.

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

Source: US Bureau of Labor Statistics

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

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

Source: US Bureau of Labor Statistics

The civilian labor force in Chart I-24 grew steadily on an upward trend in the 2000s until it contracted together with the economy after 2007. There has not been recovery during the expansion but rather decline and marginal turn of the year 2011 into expansion in 2012 followed by stability and oscillation into 2013.

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

Source: US Bureau of Labor Statistics

The rate of participation of the labor force in population stagnated during the stagflation and conquest of inflation in the late 1970s and early 1980s, as shown in Chart I-25. Recovery was vigorous during the expansion and lasted through the remainder of the decade.

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

Source: US Bureau of Labor Statistics

The rate of participation in the labor force declined after the recession of 2001 and stagnated until 2007, as shown in Chart I-26. The rate of participation in the labor force continued to decline both during the contraction after 2007 and the expansion after 2009 with marginal expansion at the turn of the year into 2012 followed by trend of decline and stability.

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

Source: US Bureau of Labor Statistics

Chart I-27 provides the number unemployed during the 1980s. The number unemployed peaked at 12.051 million in Dec 1982 seasonally adjusted and 12.517 in Jan 1983 million not seasonally adjusted, declining to 8.358 million in Dec 1984 seasonally adjusted and 7.978 in Dec 1984 million not seasonally adjusted during the first two years of expansion from the contraction. The number unemployed then fell to 6.667 million in Dec 1989 seasonally adjusted and 6.300 million not seasonally adjusted.

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

Source: US Bureau of Labor Statistics

Chart I-28 provides the number unemployed from 2001 to 2013. Using seasonally adjusted data, the number unemployed rose from 6.727 million in Oct 2006 to 15.382 million in Oct 2009, declining to 13.049 million in Dec 2011 and to 11.255 million in Sep 2013. Using data not seasonally adjusted, the number unemployed rose from 6.272 million in Oct 2006 to 16.147 million in Jan 2010, declining to 11.844 million in Dec 2012, increasing to 13.181 million in Jan 2013 and declining to 10.885 million in Sep 2013.

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

Source: US Bureau of Labor Statistics

The rate of unemployment peaked at 10.8 percent in both Nov and Dec 1982 seasonally adjusted, as shown in Chart I-29. The rate of unemployment dropped sharply during the expansion after 1984 and continued to decline during the rest of the decade to 5.4 percent in Dec 1989. Using not seasonally adjusted data, the rate of unemployment peaked at 11.4 percent in Jan 1983, declining to 7.0 percent in Dec 1984 and 5.1 percent in Dec 1989.

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

Source: US Bureau of Labor Statistics

The rate of unemployment in the US seasonally adjusted jumped from 4.4 percent in May 2007 to 10.0 percent in Oct 2009 and 9.9 percent in both Nov and Dec 2009, as shown in Chart I-30. The rate of unemployment fluctuated at around 9.0 percent in 2011, declining to 7.8 percent in Dec 2012 and 7.2 percent in Aug 2013.

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

Source: US Bureau of Labor Statistics

The employment population ratio seasonally adjusted fell from around 60.1 in Dec 1979 to 57.1 in both Feb and Mar 1983, as shown in Chart I-31. The employment population ratio seasonally adjusted rose back to 59.9 in Dec 1984 and reached 63.0 later in the decade in Dec 1989. Using not seasonally adjusted data, the employment population ratio dropped from 60.4 percent in Oct 1979 to 56.1 percent in Jan 1983, increasing to 59.8 in Dec 1984 and to 62.9 percent in Dec 1989.

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

Source: US Bureau of Labor Statistics

The US employment-population ratio seasonally adjusted has fallen from 63.4 in Dec 2006 to 58.6 in Dec 2011, 58.6 in Dec 2012 and 58.6 in Sep 2013, as shown in Chart I-32. The employment population-ratio has stagnated during the expansion. Using not seasonally adjusted data, the employment population ratio fell from 63.6 percent in Jul 2006 to 57.6 percent in Jan 2011, 58.5 percent in Dec 2012 and 58.8 percent in Sep 2013.

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

Source: US Bureau of Labor Statistics

The number unemployed for 27 weeks or over peaked at 2.885 million SA in Jun 1983 as shown in Chart I-33. The number unemployed for 27 weeks or over fell sharply during the expansion to 1.393 million in Dec 1984 and continued to decline throughout the 1980s to 0.635 million in Dec 1989 SA and 0.598 million NSA.

Chart I-33, US, Number Unemployed for 27 Weeks or More 1979-1989, SA, Thousands

Source: US Bureau of Labor Statistics

The number unemployed for 27 weeks or over, seasonally adjusted, increased sharply during the contraction as shown in Chart I-34 from 1.131 million in Nov 2006 to 6.704 million in Apr 2010 not seasonally adjusted. The number of unemployed for 27 weeks remained at around 6 million during the expansion compared with somewhat above 1 million before the contraction, falling to 4.146 million in Sep 2013 seasonally adjusted and 4.087 million not seasonally adjusted.

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

Source: US Bureau of Labor Statistics

The number of persons working part-time for economic reasons because they cannot find full-time work peaked during the contraction at 6.857 million SA in Oct 1982, as shown in Chart I-35. The number of persons at work part-time for economic reasons fell sharply during the expansion to 5.797 million in Dec 1984 and continued to fall throughout the decade to 4.817 million in Dec 1989 SA and 4.709 million NSA.

Chart I-35, US, Part-Time for Economic Reasons, 1979-1989, Thousands

Source: US Bureau of Labor Statistics

The number of people working part-time because they cannot find full-time employment, not seasonally adjusted, increased sharply during the contraction from 3.787 million in Apr 2006, not seasonally adjusted, to 9.354 million in Dec 2009, as shown in Chart I-36. The number of people working part-time because of failure to find an alternative occupation stagnated at a very high level during the expansion, declining to 7.522 million not seasonally adjusted in Sep 2013.

Chart I-36, US, Part-Time for Economic Reasons, 2001-2013, Thousands

Source: US Bureau of Labor Statistics

The number marginally attached to the labor force in Chart I-37 jumped from 1.252 million in Dec 2006 to 2.800 million in Jan 2011, remaining at a high level of 2.540 million in Dec 2011, 2.809 million in Jan 2012, 2.614 million in Dec 2012 and 2.302 million in Sep 2013.

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

Source: US Bureau of Labor Statistics

What is striking about the data in Table I-8 is that the numbers of monthly increases in jobs in 1983 and 1984 are several times higher than in 2010 to 2013. The civilian noninstitutional population grew by 39.6 percent from 174.215 million in 1983 to 243.284 million in 2012 and labor force higher by 38.9 percent, growing from 111.550 million in 1983 to 154.975 million in 2012. Total nonfarm payroll employment seasonally adjusted (SA) increased 148,000 in Sep 2013 and private payroll employment rose 126,000. The average number of nonfarm jobs created in Jan-Sep 2012 was 174,111 while the average number of private jobs created in Jan-Sep 2013 was 177,667, or increase by 2.0 percent. The average number of private jobs created in the US in Jan-Sep 2012 was 174,667 while the average in Jan-Sep 2013 was 177,000, or increase by 1.3 percent. The US labor force increased from 153.617 million in 2011 to 154.975 million in 2012 by 1.358 million or 113,167 per month. The average increase of nonfarm jobs in the eight months from Jan to Sep 2013 was 177,667, which is a rate of job creation inadequate to reduce significantly unemployment and underemployment in the United States because of 113,167 new entrants in the labor force per month with 28.1 million unemployed or underemployed. The difference between the average increase of 177,667 new private nonfarm jobs per month in the US from Jan to Sep 2013 and the 113,167 average monthly increase in the labor force from 2011 to 2012 is 64,500 monthly new jobs net of absorption of new entrants in the labor force. There are 28.1 million in job stress in the US currently. Creation of 64,500 new jobs per month net of absorption of new entrants in the labor force would require 436 months to provide jobs for the unemployed and underemployed (28.136 million divided by 64,500) or 36 years (436 divided by 12). The civilian labor force of the US in Sep 2013 not seasonally adjusted stood at 155.536 million with 10.885 million unemployed or effectively 18.312 million unemployed in this blog’s calculation by inferring those who are not searching because they believe there is no job for them for effective labor force of 162.963 million. Reduction of one million unemployed at the current rate of job creation without adding more unemployment requires 1.3 years (1 million divided by product of 64,500 by 12, which is 774,000). Reduction of the rate of unemployment to 5 percent of the labor force would be equivalent to unemployment of only 7.777 million (0.05 times labor force of 155.536 million) for new net job creation of 3.108 million (10.885 million unemployed minus 7.777 million unemployed at rate of 5 percent) that at the current rate would take 4.0 years (3.108 million divided by 0.774000). Under the calculation in this blog, there are 18.312 million unemployed by including those who ceased searching because they believe there is no job for them and effective labor force of 162.963 million. Reduction of the rate of unemployment to 5 percent of the labor force would require creating 10.164 million jobs net of labor force growth that at the current rate would take 13.1 years (18.312 million minus 0.05(162.963 million) = 10.164 million divided by 0.774000, using LF PART 66.2% and Total UEM in Table I-4). These calculations assume that there are no more recessions, defying United States economic history with periodic contractions of economic activity when unemployment increases sharply. The number employed in Sep 2013 was 144.651 million (NSA) or 2.664 million fewer people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population increased from 231.958 million in Jul 2007 to 246.168 million in Sep 2013 or by 14.210 million. The number employed fell 1.8 percent from Jul 2007 to Sep 2013 while population increased 6.1 percent. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs. The United States economy has grown at the average yearly rate of 3 percent per year and 2 percent per year in per capita terms from 1870 to 2010, as measured by Lucas (2011May). An important characteristic of the economic cycle in the US has been rapid growth in the initial phase of expansion after recessions.

Inferior performance of the US economy and labor markets is the critical current issue of analysis and policy design. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. 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) and the second estimate of GDP for IIQ2013 (http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_3rd.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.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/2013/09/mediocre-and-decelerating-united-states.html). As a result, there are 28.1 million unemployed or underemployed in the United States for an effective unemployment rate of 17.3 percent (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html). Zero interest rates and quantitative easing have not provided the impulse for growth and were not required in past successful cyclical expansions.

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

Month	1981	1982	1983	2008	2009	2010	Private
Jan	95	-327	225	14	-794	-13	-17
Feb	67	-6	-78	-85	-695	-40	-26
Mar	104	-129	173	-79	-830	154	111
Apr	74	-281	276	-215	-704	229	170
May	10	-45	277	-186	-352	521	102
Jun	196	-243	378	-169	-472	-130	94
Jul	112	-343	418	-216	-351	-86	103
Aug	-36	-158	-308	-270	-210	-37	129
Sep	-87	-181	1114	-459	-233	-43	113
Oct	-100	-277	271	-472	-170	228	188
Nov	-209	-124	352	-775	-21	144	154
Dec	-278	-14	356	-705	-220	95	114
			1984			2011	Private
Jan			447			69	80
Feb			479			196	243
Mar			275			205	223
Apr			363			304	303
May			308			115	183
Jun			379			209	177
Jul			312			78	206
Aug			241			132	129
Sep			311			225	256
Oct			286			166	174
Nov			349			174	197
Dec			127			230	249
			1985			2012	Private
Jan			266			311	323
Feb			124			271	265
Mar			346			205	208
Apr			195			112	120
May			274			125	152
Jun			145			87	78
Jul			189			153	177
Aug			193			165	131
Sep			204			138	118
Oct			187			160	217
Nov			209			247	256
Dec			168			219	224
			1985			2013	Private
Jan			123			148	164
Feb			107			332	319
Mar			93			142	154
Apr			188			199	188
May			125			176	187
Jun			-93			172	194
Jul			318			89	100
Aug			113			193	161
Sep			346			148	126
Oct			187
Nov			186
Dec			204

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

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

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

Source: US Bureau of Labor Statistics

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

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

Source: US Bureau of Labor Statistics

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

Chart I-40, US, Total Private Payroll Jobs SA 2001-2013

Source: US Bureau of Labor Statistics

In contrast, growth of private payroll jobs in the US recovered vigorously during the expansion in 1983 through 1985, as shown in Chart I-41. Rapid growth of creation of private jobs continued throughout the 1980s.

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

Source: US Bureau of Labor Statistics

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

IA4 Creation of Jobs. Types of jobs created, and not only the pace of job creation, may be important. Aspects of growth of payroll jobs from Sep 2012 to Sep 2013, not seasonally adjusted (NSA), are provided in Table I-9. Total nonfarm employment increased by 2,226,000 (row A, column Change), consisting of growth of total private employment by 2,248,000 (row B, column Change) and decrease by 22,000 of government employment (row C, column Change). Monthly average growth of private payroll employment has been 187,333, which is mediocre relative to 24 to 30 million in job stress, while total nonfarm employment has grown on average by only 185,500 per month, which barely keeps with 113,167 new entrants per month in the labor force. These monthly rates of job creation are insufficient to meet the demands of new entrants in the labor force and thus perpetuate unemployment and underemployment. Manufacturing employment increased by 15,000, at the monthly rate of 1,250 while private service providing employment grew by 2,004,000, at the monthly rate of 167,000. An important feature in Table I-9 is that jobs in professional and business services increased by 647,000 with temporary help services increasing by 234,000. This episode of jobless recovery is characterized by part-time jobs and creation of jobs that are inferior to those that have been lost. Monetary and fiscal stimuli fail to increase consumption in a fractured job market. The segment leisure and hospitality added 350,000 jobs in 12 months. An important characteristic is that the loss of government jobs has stabilized in federal government with loss of 87,000 jobs while states reduced 8,000 jobs and local government added 73,000 jobs. Local government provides the bulk of government jobs, 13.958 million, while federal government provides 2.729 million and states government 5.084 million.

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

	Sep 2012	Sep 2013	Change
A Total Nonfarm	134,374	136,600	2,226
B Total Private	112,581	114,829	2,248
B1 Goods Producing	18,744	18,988	244
B1a Manufacturing	12,048	12,063	15
B2 Private service providing	93,837	95,841	2,004
B2a Wholesale Trade	5,689	5,793	104
B2b Retail Trade	14,787	15,147	360
B2c Transportation & Warehousing	4,463	4,513	50
B2d Financial Activities	7,810	7,904	94
B2e Professional and Business Services	18,082	18,729	647
B2e1 Temporary help services	2,590	2,824	234
B2f Health Care & Social Assistance	17,016	17,344	328
B2g Leisure & Hospitality	14,018	14,368	350
C Government	21,793	21,771	-22
C1 Federal	2,816	2,729	-87
C2 State	5,092	5,084	-8
C3 Local	13,885	13,958	73

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

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

Greater detail on the types of jobs created is provided in Table I-10 with data for Aug and Sep 2013. Strong seasonal effects are shown by the significant difference between seasonally adjusted (SA) and not-seasonally-adjusted (NSA) data. The purpose of adjusting for seasonality is to isolate nonseasonal effects. The 148,000 SA total nonfarm jobs created in Sep 2013 relative to Aug 2013 actually correspond to increase of 612,000 jobs NSA, as shown in row A. The 126,000 total private payroll jobs SA created in Sep 2013 relative to Aug 2013 actually correspond to decrease of 404,000 jobs NSA. The analysis of NSA job creation in the prior Table I-9 does show improvement over the 12 months ending in Sep 2013 that is not clouded by seasonal variations but is inadequate number of jobs created. In fact, the 12-month rate of job creation without seasonal adjustment is stronger indication of marginal improvement in the US job market but that is insufficient in even making a dent in about 30 million people unemployed or underemployed. Benchmark and seasonal adjustments affect comparability of data over time.

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

	Aug 2013 SA	Sep 2013 SA	∆	Aug 2013 NSA	Sep 2013 NSA	∆
A Total Nonfarm	136,142	136,290	148	135,988	136,600	612
B Total Private	114,284	114,410	126	115,233	114,829	-404
B1 Goods Producing	18,643	18,669	26	19,041	18,988	-53
B1a Constr.	5,806	5,826	20	6,087	6,061	-26
B Mfg	11,961	11,963	2	12,059	12,035	-24
B2 Private Service Providing	95,641	95,741	100	96,192	95,841	-351
B2a Wholesale Trade	5,778	5,794	16	5,798	5,793	-5
B2b Retail Trade	15,223	15,244	21	15,228	15,147	-81
B2c Couriers & Mess.	535	535	0	523	525	2
B2d Health-care & Social Assistance	17,359	17,373	14	17,328	17,268	60
B2De Profess. & Business Services	18,618	18,650	32	18,760	18,729	-31
B2De1 Temp Help Services	2,729	2,749	20	2,759	2,824	65
B2f Leisure & Hospit.	14,190	14,177	-13	14,836	14,368	-468

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

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

Chart I-42 of the Board of Governors of the Federal Reserve System shows that output of durable manufacturing accelerated in the 1980s and 1990s with slower growth in the 2000s perhaps because processes matured. Growth was robust after the major drop during the global recession but appears to vacillate in the final segment.

Chart I-42, US, Output of Durable Manufacturing, 1972-2013

Source: Board of Governors of the Federal Reserve

Manufacturing jobs increased 2,000 in Sep 2013 relative to Aug 2013, seasonally adjusted (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html). Manufacturing jobs not seasonally adjusted increased 15,000 from Sep 2012 to Sep 2013 or at the average monthly rate of 1,250. There are effects of the weaker economy and international trade together with the yearly adjustment of labor statistics. Industrial production increased 0.4 percent in Aug 2013 after changing 0.0 percent in Jul 2013 and increasing 0.1 percent in Jun 2013, as shown in Table II-1, with all data seasonally adjusted. The report of the Board of Governors of the Federal Reserve System states (http://www.federalreserve.gov/releases/g17/Current/default.htm):

“Industrial production advanced 0.4 percent in August after having been unchanged in July; the gains in August were broadly based. Following a decrease in July of 0.4 percent, which was steeper than previously reported, manufacturing production rose 0.7 percent in August. The output of mines moved up 0.3 percent, its fifth consecutive monthly increase, and the production of utilities fell 1.5 percent, its fifth consecutive monthly decrease. At 99.4 percent of its 2007 average, total industrial production in August was 2.7 percent above its year-earlier level. “

In the six months ending in Aug 2013, United States national industrial production accumulated increase of 0.6 percent at the annual equivalent rate of 1.2 percent, which is much lower than growth of 2.7 percent in the 12 months ending in Aug 2013. Excluding growth of 0.4 percent in Aug 2013, growth in the remaining five months from Mar 2012 to Jul 2013 accumulated to 0.2 percent or 0.5 percent annual equivalent. Industrial production stagnated in three of the past six months and fell in one. Business equipment accumulated growth of 0.4 percent in the six months from Mar to Aug 2013 at the annual equivalent rate of 0.8 percent, which is much lower than growth of 2.5 percent in the 12 months ending in Aug 2013. Growth of business equipment accumulated minus 0.5 percent from Mar to July 2013 at the annual equivalent rate of minus 1.2 percent. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “Capacity utilization for the industrial sector increased 0.2 percentage point in August to 77.8 percent, a rate 0.6 percentage point above its level of a year earlier and 2.4 percentage points below its long-run (1972-2012) average.” United States industry is apparently decelerating.

Manufacturing increased 0.7 percent in Aug 2013 after decreasing 0.4 percent in Jul 2013 and increasing 0.3 percent in Jul 2013 seasonally adjusted, increasing 2.5 percent not seasonally adjusted in 12 months ending in Aug 2013, as shown in Table II-2. Manufacturing grew cumulatively 0.2 percent in the six months ending in Jul 2013 or at the annual equivalent rate of 0.4 percent. Excluding the increase of 0.7 percent in Aug 2013, manufacturing accumulated growth of minus 0.5 percent from Mar 2013 to Jul 2013 or at the annual equivalent rate of minus 1.2 percent.

Table I-11 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 86.7 percent in IIQ2013. Most of US national income is in the form of services. In Sep 2013, there were 135.600 million nonfarm jobs NSA in the US, according to estimates of the establishment survey of the Bureau of Labor Statistics (BLS) (http://www.bls.gov/news.release/empsit.nr0.htm Table B-1). Total private jobs of 114.829 million NSA in Sep 2013 accounted for 84.1 percent of total nonfarm jobs of 136,600 million, of which 12.035 million, or 10.5 percent of total private jobs and 8.8 percent of total nonfarm jobs, were in manufacturing. Private service-producing jobs were 95.841 million NSA in Sep 2013, or 70.2 percent of total nonfarm jobs and 83.5 percent of total private-sector jobs. Manufacturing has share of 10.8 percent in US national income in IIQ2013, as shown in Table I-11. Most income in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.

Table I-11, US, National Income without Capital Consumption Adjustment by Industry, Seasonally Adjusted Annual Rates, Billions of Dollars, % of Total

	SAAR IQ2013	% Total	SAAR IIQ2013	% Total
National Income WCCA	14,354.5	100.0	14,471.3	100.0
Domestic Industries	14,117.1	98.3	14,224.4	98.3
Private Industries	12,432.9	86.6	12,544.3	86.7
Agriculture	226.4	1.6	220.3	1.5
Mining	247.6	1.7	252.6	1.7
Utilities	209.1	1.5	216.5	1.5
Construction	618.2	4.3	626.4	4.3
Manufacturing	1568.1	10.9	1561.1	10.8
Durable Goods	878.8	6.1	890.3	6.2
Nondurable Goods	689.2	4.8	670.1	4.6
Wholesale Trade	870.0	6.1	875.3	6.0
Retail Trade	971.4	6.8	994.5	6.9
Transportation & WH	434.0	3.0	437.7	3.0
Information	496.0	3.5	504.8	3.5
Finance, Insurance, RE	2418.9	16.8	2437.1	16.8
Professional, BS	1973.6	13.7	1998.1	13.8
Education, Health Care	1423.7	9.9	1439.4	9.9
Arts, Entertainment	569.7	4.0	575.0	4.0
Other Services	406.1	2.8	408.3	2.8
Government	1684.3	11.7	1680.1	11.6
Rest of the World	237.4	1.7	246.8	1.7

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

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

The NBER dates recessions in the US from peaks to troughs as: IQ80 to IIIQ80, IIIQ81 to IV82 and IVQ07 to IIQ09 (http://www.nber.org/cycles/cyclesmain.html). Table I-12 provides total annual level nonfarm employment in the US for the 1980s and the 2000s, which is different from 12 months comparisons. Nonfarm jobs rose by 4.853 million from 1982 to 1984, or 5.4 percent, and continued rapid growth in the rest of the decade. In contrast, nonfarm jobs are down by 7.728 million in 2010 relative to 2007 and fell by 959,000 in 2010 relative to 2009 even after six quarters of GDP growth. Monetary and fiscal stimuli have failed in increasing growth to rates required for mitigating job stress. The initial growth impulse reflects a flatter growth curve in the current expansion. Nonfarm jobs declined from 137.645 million in 2007 to 133.739 million in 2012, by 3.906 million or 2.8 percent.

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

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

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

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

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

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

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

Table I-13, US, Total Nonfarm and Total Private Jobs Destroyed and Subsequently Created in

Two Recessions IIIQ1981-IVQ1982 and IVQ2007-IIQ2009, Thousands and Percent

	Total Nonfarm Jobs	Total Private Jobs
06/1981 #	92,288	75,969
11/1982 #	89,482	73,260
Change #	-2,806	-2,709
Change ∆%	-3.0	-3.6
12/1982 #	89,383	73,185
05/1984 #	94,471	78,049
Change #	5,088	4,864
Change ∆%	5.7	6.6
11/2007 #	139,090	116,291
05/2009 #	131,626	108,601
Change %	-7,464	-7,690
Change ∆%	-5.4	-6.6
12/2009 #	130,178	107,338
05/2011 #	131,753	108,494
Change #	1,575	1,156
Change ∆%	1.2	1.1
05/1983 #	90,005	73,667
05/1984 #	94,471	78,049
Change #	4,466	4,382
Change ∆%	4.9	5.9
05/2010 #	130,801	107,405
05/2011 #	131,753	109,203
Change #	952	1,798
Change ∆%	0.7	1.7
Change # by ∆% as in 05/1984 to 05/1985	6,409*	6,337**
Difference in Jobs that Would Have Been Created	5,457 = 6,409-952	4,539 = 6,337-1,798

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

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

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

IB Stagnating Real Wages. The wage bill is the product of average weekly hours times the earnings per hour. Table IB-1 provides the estimates by the Bureau of Labor Statistics (BLS) of earnings per hour seasonally adjusted, increasing from $24.06/hour in Aug 2012 to $24.09/hour in Sep 2013, or by 0.2 percent. There has been disappointment about the pace of wage increases because of rising food and energy costs that inhibit consumption and thus sales and similar concern about growth of consumption that accounts for about 68.6 percent of GDP (Table I-10 http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html). Growth of consumption by decreasing savings by means of controlling interest rates in what is called financial repression may not be lasting and sound for personal finances (See Pelaez and Pelaez, Globalization and the State, Vol. II (2008c), 81-6, Pelaez (1975), http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html

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

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

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

{[($23.81x34.6)/($23.30x34.5)]-1]}100

= {[($823.83/$803.85)]-1}100 = 2.5%

CPI inflation was 1.5 percent in the 12 months ending in Aug 2013 (http://www.bls.gov/cpi/) for an inflation-adjusted wage-bill change of 1.0 percent :{[(1.0.25/1.015)-1]100} (see Table IB-5 below for Jun 2013). The wage bill for Sep 2013 before inflation adjustment increased 2.0 percent relative to the wage bill for Sep 2012:

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

{[($24.18x34.9)/23.70x34.9)]-1]}100

= {[($843.88/$827.13)]-1}100 = 2.0%

Average hourly earnings increased 2.0 percent from Sep 2012 to Sep 2013 {[($24.18/23.70) – 1]100 = 2.0%} while hours worked changed 0.0 percent {[(34.9/34.9) – 1]100 = 0.0%}. The increase of the wage bill is the product of the increase of hourly earnings of 2.0 percent and change of hours worked of 0.0 percent {[(1.020x1.00) -1]100 = 2.0%}.

Energy and food price increases are similar to a “silent tax” that is highly regressive, harming the most those with lowest incomes. There are concerns that the wage bill would deteriorate in purchasing power because of renewed raw materials shocks in the form of increases in prices of commodities such as the 31.1 percent steady increase in the DJ-UBS Commodity Index from Jul 2, 2010 to Sep 2, 2011. The charts of four commodity price indexes by Bloomberg show steady increase since Jul 2, 2010 that was interrupted briefly only in Nov 2010 with the sovereign issues in Europe triggered by Ireland; in Mar 2011 by the earthquake and tsunami in Japan; and in the beginning of May 2011 by the decline in oil prices and sovereign risk difficulties in Europe (http://www.bloomberg.com/markets/commodities/futures/). Renewed risk aversion because of the sovereign risks in Europe had reduced the rate of increase of the DJ UBS commodity index to 1.4 percent on Aug 2, 2013, relative to Jul 2, 2010 (see Table VI-4) but there has been a shift in investor preferences into equities. Inflation has been rising in waves with carry trades driven by zero interest rates to commodity futures during periods of risk appetite with interruptions during risk aversion (http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html). Inflation-adjusted wages fall sharply during carry trades from zero interest rates to long positions in commodity futures during periods of risk appetite.

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

Earnings per Hour	Sep 2012	Jul 2013	Aug 2013	Sep 2013
Total Private	$23.60	$23.99	$24.06	$24.09
Goods Producing	$24.77	$25.19	$25.27	$25.33
Service Providing	$23.32	$23.70	$23.77	$23.80
Average Weekly Earnings
Total Private	$814.20	$825.26	$830.07	$831.11
Goods Producing	$995.75	$1,015.16	$1,023.44	$1,025.87
Service Providing	$776.56	$789.21	$791.54	$792.54
Average Weekly Hours
Total Private	34.5	34.4	34.5	34.5
Goods Producing	40.2	40.3	40.5	40.5
Service Providing	33.3	33.3	33.3	33.3

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

Average weekly hours in Table IB-2 fell from 35.0 in Dec 2007 at the beginning of the contraction to 33.8 in Jun 2009, which was the last month of the contraction. Average weekly hours rose to 34.4 in Dec 2011 and oscillated to 34.9 in Dec 2012 and 34.9 in Sep 2013.

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

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

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

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

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

Source: US Bureau of Labor Statistics

Calculations using BLS data of inflation-adjusted average hourly earnings are in Table IB-3. The final column of Table IB-3 (“12 Month Real ∆%”) provides inflation-adjusted average hourly earnings of all employees in the US. Average hourly earnings rose above inflation throughout the first nine months of 2007 just before the global recession that began in the final quarter of 2007 when average hourly earnings lost to inflation. In contrast, average hourly earnings of all US workers have risen less than inflation in five months in 2010 and in all but the first month in 2011 and the loss accelerated at 1.8 percent in Sep 2011, declining to a real loss of 1.1 percent in Feb 2012 and 0.6 percent in Mar 2012. There was a gain of 0.6 percent in Apr 2012 in inflation-adjusted average hourly earnings but another fall of 0.5 percent in May 2012 followed by increases of 0.3 percent in Jun and 1.0 percent in Jul 2012. Real hourly earnings stagnated in the 12 months ending in Aug 2012 with increase of only 0.1 percent and increased 0.7 percent in the 12 months ending in Sep 2012. Real hourly earnings fell 1.3 percent in Oct 2012 and gained 1.1 percent in Dec 2012 but declined 0.2 percent in Jan 2012 and stagnated at change of 0.1 percent in Feb 2013. Real hourly earnings increased 0.4 percent in the 12 months ending in Mar 2013 and stagnated at 0.1 percent in Apr 2013, increasing 0.5 percent in May 2013. In Jun 2013, real hourly earnings increased 1.0 percent relative to Jun 2012. Real hourly earnings fell 0.7 percent in the 12 months ending in Jul 2013 and increased 0.7 percent in the 12 months ending in Aug 2013. Real hourly earnings are oscillating in part because of world inflation waves caused by carry trades from zero interest rates to commodity futures (http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html) and in part because of the collapse of hiring (Section IC and earlier http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html) originating in weak economic growth (http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html).

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

	AHE ALL	12 Month Nominal ∆%	∆% 12 Month CPI	12 Month Real ∆%
2007
Jan*	$20.70*	4.2*	2.1	2.1*
Feb*	$20.79*	4.1*	2.4	1.7*
Mar	$20.82	3.7	2.8	0.9
Apr	$21.05	3.3	2.6	0.7
May	$20.83	3.7	2.7	1.0
Jun	$20.82	3.8	2.7	1.1
Jul	$20.99	3.4	2.4	1.0
Aug	$20.85	3.5	2.0	1.5
Sep	$21.19	4.1	2.8	1.3
Oct	$21.07	2.7	3.5	-0.8
Nov	$21.13	3.3	4.3	-0.9
Dec	$21.37	3.7	4.1	-0.4
2010
Jan	$22.55	1.9	2.6	-0.7
Feb	$22.61	1.4	2.1	-0.7
Mar	$22.52	1.2	2.3	-1.1
Apr	$22.57	1.8	2.2	-0.4
May	$22.64	2.5	2.0	0.5
Jun	$22.38	1.8	1.1	0.7
Jul	$22.44	1.8	1.2	0.6
Aug	$22.58	1.7	1.1	0.6
Sep	$22.63	1.8	1.1	0.7
Oct	$22.73	1.9	1.2	0.7
Nov	$22.72	1.0	1.1	-0.1
Dec	$22.79	1.7	1.5	0.2
2011
Jan	$23.20	2.9	1.6	1.3
Feb	$23.03	1.9	2.1	-0.2
Mar	$22.93	1.8	2.7	-0.9
Apr	$22.99	1.9	3.2	-1.3
May	$23.09	2.0	3.6	-1.5
Jun	$22.84	2.1	3.6	-1.4
Jul	$22.97	2.4	3.6	-1.2
Aug	$22.88	1.3	3.8	-2.4
Sep	$23.08	2.0	3.9	-1.8
Oct	$23.33	2.6	3.5	-0.9
Nov	$23.18	2.0	3.4	-1.4
Dec	$23.25	2.0	3.0	-1.0
2012
Jan	$23.59	1.7	2.9	-1.2
Feb	$23.44	1.8	2.9	-1.1
Mar	$23.42	2.1	2.7	-0.6
Apr	$23.65	2.9	2.3	0.6
May	$23.36	1.2	1.7	-0.5
Jun	$23.30	2.0	1.7	0.3
Jul	$23.52	2.4	1.4	1.0
Aug	$23.30	1.8	1.7	0.1
Sep	$23.70	2.7	2.0	0.7
Oct	$23.55	0.9	2.2	-1.3
Nov	$23.62	1.9	1.8	0.1
Dec	$23.89	2.8	1.7	1.1
2013
Jan	$23.92	1.4	1.6	-0.2
Feb	$23.94	2.1	2.0	0.1
Mar	$23.86	1.9	1.5	0.4
Apr	$23.94	1.2	1.1	0.1
May	$23.81	1.9	1.4	0.5
Jun	$23.95	2.8	1.8	1.0
Jul	$23.83	1.3	2.0	-0.7
Aug	$23.81	2.2	1.5	0.7
Sep	$24.18	2.0

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

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

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

Average hourly earnings of all US employees in the US in constant dollars of 1982-1984 from the dataset of the US Bureau of Labor Statistics (BLS) are provided in Table IB-4. Average hourly earnings fell 0.5 percent after adjusting for inflation in the 12 months ending in Mar 2012 and gained 0.6 percent in the 12 months ending in Apr 2012 but then lost 0.6 percent in the 12 months ending in May 2012 with a gain of 0.3 percent in the 12 months ending in Jun 2012 and 1.0 percent in Jul 2012 followed by 0.1 percent in Aug 2012 and 0.7 percent in Sep 2012. Average hourly earnings adjusted by inflation fell 1.2 percent in the 12 months ending in Oct 2012. Average hourly earnings adjusted by inflation increased 0.1 percent in the 12 months ending in Nov 2012 and 1.1 percent in the 12 months ending in Dec 2012 but fell 0.2 percent in the 12 months ending in Jan 2013 and stagnated with gain of 0.1 percent in the 12 months ending in Feb 2013. Average hourly earnings adjusted for inflation increased 0.4 percent in the 12 months ending in Mar 2013 and increased 0.2 percent in the 12 months ending in Apr 2013. Average hourly earnings adjusted for inflation increased 0.6 percent in the 12 months ending in May 2013 and 1.1 percent in the 12 months ending in Jun 2013. Average hourly earnings of all employees adjusted for inflation fell 0.7 percent in the 12 months ending in Jul 2013 and increased 0.7 percent in the 12 months ending in Sep 2013. Table IB-4 confirms the trend of deterioration of purchasing power of average hourly earnings in 2011 and into 2012 with 12-month percentage declines in three of the first three months of 2012 (-1.1 percent in Jan, -1.1 percent in Feb and -0.5 percent in Mar), declines of 0.6 percent in May and 1.2 percent in Oct and increase in five (0.6 percent in Apr, 0.3 percent in Jun, 1.0 percent in Jul, 0.7 percent in Sep and 1.1 percent in Dec) and stagnation in two (0.1 percent in Aug and 0.1 percent in Nov). Average hourly earnings adjusted for inflation fell 0.2 percent in the 12 months ending in Jan 2013, stagnated with gain of 0.1 percent in the 12 months ending in Feb 2013 and gained 0.4 percent in the 12 months ending Mar 2013. Real average hourly earnings increased 0.2 percent in the 12 months ending in Apr 2013 and 0.6 percent in the 12 months ending in May 2013. Average hourly earnings increased 1.1 percent in the 12 months ending in Jun 2013 and fell 0.7 percent in the 12 months ending in Jul 2013. Annual data are revealing: -0.7 percent in 2008 during carry trades into commodity futures in a global recession, 3.2 percent in 2009 with reversal of carry trades, no change in 2010 and 2012 and decline by 1.1 percent in 2011. Annual average hourly earnings of all employees in the United States adjusted for inflation increased 1.4 percent from 2007 to 2012 at the yearly average rate of 0.3 percent (from $10.11 in 2007 to $10.25 in 2012 in dollars of 1982-1984 using data in http://www.bls.gov/data/). Those who still work bring back home a paycheck that buys fewer goods than a year earlier and savings in bank deposits do not pay anything because of financial repression (http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html).

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

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug
2006			10.05	10.11	9.92	9.89	9.97	9.88
2007	10.23	10.22	10.14	10.18	10.02	9.99	10.08	10.03
2008	10.11	10.12	10.11	10.00	9.91	9.84	9.77	9.83
2009	10.48	10.50	10.47	10.40	10.32	10.20	10.23	10.29
2010	10.41	10.43	10.35	10.35	10.38	10.27	10.29	10.34
2011	10.53	10.41	10.26	10.22	10.22	10.12	10.17	10.10
2012	10.41	10.30	10.21	10.28	10.16	10.15	10.27	10.11
∆%12M	-1.1	-1.1	-0.5	0.6	-0.6	0.3	1.0	0.1
2013	10.39	10.31	10.25	10.30	10.22	10.26	10.20	10.18
∆%12M	-0.2	0.1	0.4	0.2	0.6	1.1	-0.7	0.7

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

Chart IB-2 of the US Bureau of Labor Statistics plots average hourly earnings of all US employees in constant 1982-1984 dollars with evident decline from annual earnings of $10.36 in 2009 and $10.36 again in 2010 to $10.25 in 2011 and $10.25 again in 2012 or loss of 1.1 percent (data in http://www.bls.gov/data/). The economic welfare or wellbeing of United States workers deteriorated in a recovery without hiring (Section IC and earlier http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html), stagnating/declining real wages and 28 million unemployed or underemployed (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html) because of mediocre economic growth (http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.html).

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

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

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

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

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

Average weekly earnings of all US employees in the US in constant dollars of 1982-1984 from the dataset of the US Bureau of Labor Statistics (BLS) are provided in Table IB-5. Average weekly earnings fell 3.2 percent after adjusting for inflation in the 12 months ending in Aug 2011, decreased 0.9 percent in the 12 months ending in Sep 2011, increased 0.9 percent in the 12 months ending in Oct 2011, fell 1.0 percent in the 12 months ending in Nov 2011 and 0.3 in the 12 months ending in Dec 2011, declining 0.3 percent in the 12 months ending in Jan 2012 and 0.5 percent in the 12 months ending in Feb 2012. Average weekly earnings in constant dollars were virtually flat in Mar 2012 relative to Mar 2011, increasing 0.1 percent. Average weekly earnings in constant dollars increased 1.7 percent in Apr 2012 relative to Apr 2011 but fell 1.4 percent in May 2012 relative to May 2011, increasing 0.3 percent in the 12 months ending in Jun and 2.1 percent in Jul 2012. Real weekly earnings increased 0.4 percent in the 12 months ending in Aug 2012 and 2.1 percent in the 12 months ending in Sep 2012. Real weekly earnings fell 2.9 percent in the 12 months ending in Oct 2012 and increased 0.1 percent in the 12 months ending in Nov 2012 and 2.5 percent in the 12 months ending in Dec 2012. Real weekly earnings fell 1.6 percent in the 12 months ending in Jan 2013 and virtually stagnated with gain of 0.2 percent in the 12 months ending in Feb 2013, increasing 0.4 percent in the 12 months ending in Mar 2013. Real weekly earnings fell 1.0 percent in the 12 months ending in Apr 2013 and increased 0.6 percent in the 12 months ending in May 2013. Average weekly earnings increased 2.5 percent in the 12 months ending in Jun 2013 and fell 1.8 percent in the 12 months ending in Jul 2013. Real weekly earnings increased 1.0 percent in the 12 months ending in Aug 2013. Table I-5 confirms the trend of deterioration of purchasing power of average weekly earnings in 2011 and into 2012 with oscillations according to carry trades causing world inflation waves (http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html). On an annual basis, average weekly earnings in constant 1982-1984 dollars increased from $349.78 in 2007 to $353.66 in 2012, by 1.1 percent or at the average rate of 0.2 percent per year (data in http://www.bls.gov/data/). Annual average weekly earnings in constant dollars of $353.50 in 2010 were virtually unchanged at $353.66 in 2012. Those who still work bring back home a paycheck that buys fewer high-quality goods than a year earlier. The fractured US job market does not provide an opportunity for advancement as in past booms following recessions (Section IC and earlier http://cmpassocregulationblog.blogspot.com/2013/09/recovery-without-hiring-ten-million.html).

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

Year	Feb	Mar	Apr	May	Jun	Jul	Aug
2006		343.71	349.95	340.12	342.08	347.97	341.76
2007	349.40	347.76	353.41	344.58	346.74	351.68	347.98
2008	346.21	351.70	344.13	340.93	343.40	337.06	340.18
2009	360.31	355.81	349.33	347.94	344.59	345.92	352.80
2010	350.51	349.76	351.99	356.97	350.13	352.02	358.90
2011	353.81	349.90	350.62	353.56	348.08	349.75	347.42
2012	352.12	350.19	356.68	348.65	349.28	357.26	348.93
∆%12M	-0.5	0.1	1.7	-1.4	0.3	2.1	0.4
2013	352.66	351.59	353.13	350.59	357.96	350.93	352.25
∆%12M	0.2	0.4	-1.0	0.6	2.5	-1.8	1.0

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

Chart IB-4 provides average weekly earnings of all employees in constant dollars of 1982-1984. The same pattern emerges of sharp decline during the contraction, followed by recovery in the expansion and continuing fall with oscillations caused by carry trades from zero interest rates into commodity futures from 2010 to 2011 and into 2012 and 2013.

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

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

Chart IB-5 provides 12-month percentage changes of average weekly earnings of all employees in the US in constant dollars of 1982-1984. There is the same pattern of contraction during the global recession in 2008 and then again trend of deterioration in the recovery without hiring and inflation waves in 2011 and 2012. (http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html http://cmpassocregulationblog.blogspot.com/2013/08/duration-dumping-and-peaking-valuations.html http://cmpassocregulationblog.blogspot.com/2013/07/tapering-quantitative-easing-policy-and.html

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

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

IC 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 (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-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. IIA1 Hiring Collapse provides the data and analysis on the weakness of hiring in the United States economy. IIA2 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 IIA3 Ten Million Fewer Full-time Jobs. IIA4 Youth and Middle-Age Unemployment provides the data on high unemployment of ages 16 to 24 years and of ages 45 years or over.

IC1 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://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) and the second estimate of GDP for IIQ2013 (http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_3rd.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html). As a result, there are 28.1 million unemployed or underemployed in the United States for an effective unemployment rate of 17.3 percent (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html). Zero interest rates and quantitative easing have not provided the impulse for growth and were not required in past successful cyclical expansions.

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

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.

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

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

Source: US Bureau of Labor Statistics

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

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

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, Total Private Hiring, Annual, 2001-2013

Source: Bureau of Labor Statistics

Total nonfarm hiring (HNF), total private hiring (HP) and their respective rates are provided for the month of Aug in the years from 2001 to 2013 in Table I-3. Hiring numbers are in thousands. There is meager recovery in HNF from 4202 thousand (or 4.2 million) in Aug 2009 to 4285 thousand in Aug 2010, 4621 thousand in Aug 2011, 4907 thousand in Aug 2012 and 4993 thousand in Aug 2013 for cumulative gain of 18.8 percent. HP rose from 3731 thousand in Aug 2009 to 3885 thousand in Aug 2010, 4173 in Aug 2011, 4346 thousand in Aug 2012 and 4482 in Aug 2013 for cumulative gain of 20.1 percent. HNF has fallen from 5735 in Aug 2006 to 4993 in Aug 2013 or by 12.9 percent. HP has fallen from 5387 in Aug 2005 to 4482 in Aug 2013 or by 16.8 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 Aug	5450	4.1	4894	4.4
2002 Aug	5198	4.0	4677	4.3
2003 Aug	4948	3.8	4589	4.2
2004 Aug	5501	4.2	5019	4.5
2005 Aug	5881	4.4	5387	4.8
2006 Aug	5735	4.2	5119	4.4
2007 Aug	5662	4.1	5020	4.3
2008 Aug	5018	3.7	4550	3.9
2009 Aug	4202	3.2	3731	3.4
2010 Aug	4285	3.3	3885	3.6
2011 Aug	4621	3.5	4173	3.8
2012 Aug	4907	3.7	4346	3.8
2013 Aug	4993	3.7	4482	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 4993 in Aug 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 4488 in Aug 2013 for increase of 7.0 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

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. The rate fell to 3.1 in Jul 2012, increasing to 3.3 in Aug 2012 but falling to 3.1 in Dec 2012 and 3.3 in Aug 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 3.7 in Aug 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

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. The rate fell to 3934 in Sep 2012 or lower by 2.3 percent relative to Sep 2011, 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://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) and the second estimate of GDP for IIQ2013 (http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_3rd.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html). As a result, there are 28.1 million unemployed or underemployed in the United States for an effective unemployment rate of 17.3 percent (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html). Zero interest rates and quantitative easing have not provided the impulse for growth and were not required in past successful cyclical expansions. 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

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 3.7 in Aug 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 Aug 2013.

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

Source: Bureau of Labor Statistics

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 Aug 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 4591 in Aug 2007 to 3982 in Aug 2013 or by 13.3 percent while the rate dropped from 3.2 to 2.8. Nonfarm layoffs and discharges (TNF LD) rose from 1741 in Aug 207 to 2226 in Aug 2009 or by 27.9 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) and the second estimate of GDP for IIQ2013 (http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_3rd.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html). As a result, there are 28.1 million unemployed or underemployed in the United States for an effective unemployment rate of 17.3 percent (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html). Zero interest rates and quantitative easing have not provided the impulse for growth and were not required in past successful cyclical expansions. The US missed the opportunity to recover employment as in past cyclical expansions from contractions.

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
Aug 2001	4154	3.1	1971	24499
Aug 2002	3416	2.6	1930	22922
Aug 2003	3178	2.4	2159	23294
Aug 2004	3649	2.7	2139	22802
Aug 2005	4144	3.0	2016	22185
Aug 2006	4584	3.3	1741	21157
Aug 2007	4591	3.2	1990	22142
Aug 2008	3734	2.7	2244	24181
Aug 2009	2340	1.8	2226	26784
Aug 2010	2964	2.2	1948	21773
Aug 2011	3246	2.4	1853	20401
Aug 2012	3718	2.7	1989	20546
Aug 2013	3982	2.8	1790

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 relative to 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 3883 in Aug 2013 or by 7.5 percent. The high of job openings not seasonally adjusted 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 3982 in Aug 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 3982 in Aug 2013 NSA is lower by 15.3 percent relative to 4591 in Aug 2007. 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://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) and the second estimate of GDP for IIQ2013 (http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_3rd.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html). As a result, there are 28.1 million unemployed or underemployed in the United States for an effective unemployment rate of 17.3 percent (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html). Zero interest rates and quantitative easing have not provided the impulse for growth and were not required in past successful cyclical expansions. 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

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 Aug 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 Aug 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 Aug 2013.

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

Source: US Bureau of Labor Statistics

Total separations are shown in Chart I-12. Separations are much lower in 2012-13 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

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

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

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/2013/09/mediocre-and-decelerating-united-states.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://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) and the second estimate of GDP for IIQ2013 (http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_3rd.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html). As a result, there are 28.1 million unemployed or underemployed in the United States for an effective unemployment rate of 17.3 percent (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html). Zero interest rates and quantitative easing have not provided the impulse for growth and were not required in past successful cyclical expansions. 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

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

Table 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://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html).

IC2 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 13.1 percent in Sep 2013.

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

	U1	U2	U3	U4	U5	U6
2013
Sep	3.7	3.5	7.0	7.5	8.4	13.1
Aug	3.7	3.8	7.3	7.9	8.7	13.6
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/

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 13.6 percent in Sep 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 28.1 million in job stress of unemployment/underemployment in Sep 2013, not seasonally adjusted, corresponding to 17.3 percent of the labor force (Table I-4 and earlier

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

	U1	U2	U3	U4	U5	U6
Sep 2013	3.8	3.8	7.2	7.7	8.6	13.6
Aug	3.8	3.8	7.3	7.8	8.7	13.7
Jul	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

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

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

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

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 7.664 million in Mar 2012, seasonally adjusted, or decline of 1.437 million in six months, as shown in Table I-9. The number employed part-time for economic reasons rebounded to 8.607 million in Sep 2012 for increase of 564,000 in one month from Aug to Sep 2012. The number employed part-time for economic reasons declined 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. The number employed part-time for economic reasons fell to 7.911 million in Aug 2013 for decline of 334.000 in one month from 8.245 million in Jul 2013. The number employed part-time for economic reasons increased 15,000 from 7.911 million in Aug 2013 to 7.926 million in Sep 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 five 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, 116.208 million in Aug 2013 and 116.899 million in Sep 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 and 7.690 million in Aug 2013. The number employed part-time for economic reasons NSA fell to 7.522 million in Sep 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. The number employed full-time reached 117.868 million in Aug 2013 for increase of 180,000 in one month relative to Jul 2013. The number employed full-time fell to 117.308 million in Sep 2013 or by 560,000. 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 Sep 2013 is 117.308 million, which is lower by 5.911 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 246.168 million in Sep 2013 or by 14.210 million (http://www.bls.gov/data/) while in the same period the number of full-time jobs fell 5.911 million. The ratio of full-time jobs of 123.219 million Jul 2007 to civilian noninstitutional population of 231.958 million was 53.1 percent. If that ratio had remained the same, there would be 130.715 million full-time jobs with population of 246.168 million in Sep 2013 or 13.407 million fewer full-time jobs than actual 117.308 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://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) and the second estimate of GDP for IIQ2013 (http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_3rd.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html). As a result, there are 28.1 million unemployed or underemployed in the United States for an effective unemployment rate of 17.3 percent (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html). Zero interest rates and quantitative easing have not provided the impulse for growth and were not required in past successful cyclical expansions. 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
Sep 2013	7,926	116.899
Aug 2013	7,911	116.208
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
Sep 2013	7,522	117.308
Aug 2013	7,690	117.868
Jul 2013	8,324	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/

People lose their marketable job skills after prolonged unemployment and face 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

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

IC3 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 246.168 million in Sep 2013 or by 14.210 million (http://www.bls.gov/data/) while in the same period the number of full-time jobs fell 5.911 million. The ratio of full-time jobs of 123.219 million Jul 2007 to civilian noninstitutional population of 231.958 million was 53.1 percent. If that ratio had remained the same, there would be 130.715 million full-time jobs with population of 246.168 million in Sep 2013 or 13.407 million fewer full-time jobs than actual 117.308 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.

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

Sources: US Bureau of Labor Statistics

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

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

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

IC4 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 21.167 million in Aug 2006 to 18.636 million in Aug 2013 or by 2.531 million. The number of youth jobs fell from 19.604 million in Sep 2006 to 18.043 million in Sep 2013 or 1.561 million fewer youth jobs. 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. The civilian noninstitutional population for ages 16 to 24 years increased from 37.455 million in Aug 2007 to 38.841 million in Aug 2013 or by 1.386 million while the number of full-time jobs fell by 2.531 million. The civilian noninstitutional population increased from 37.467 million in Sep 2007 to 38.822 million in Sep 2013 or by 1.415 million while the number of full-time youth jobs fell by 1.561 million. 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	May	Jun	Jul	Aug	Sep	Annual
2001	19648	21212	22042	20529	19706	20088
2002	19484	20828	21501	20653	19466	19683
2003	19032	20432	20950	20181	18909	19351
2004	19237	20587	21447	20660	19158	19630
2005	19356	20949	21749	20814	19503	19770
2006	19769	21268	21914	21167	19604	20041
2007	19457	21098	21717	20413	19498	19875
2008	19254	20466	21021	20096	18818	19202
2009	17588	18726	19304	18270	16972	17601
2010	17039	17920	18564	18061	16874	17077
2011	17045	18180	18632	18067	17238	17362
2012	17681	18907	19461	18171	17687	17834
2013	17704	19125	19684	18636	18043

Sources: US Bureau of Labor Statistics

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

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. The civilian noninstitutional population for ages 16 to 24 years increased from 37.455 million in Aug 2007 to 38.841 million in Aug 2013, by 1.386 million or 3.7 percent, while the number of full-time jobs fell from 21.167 million in Aug 2006 to 18.636 million in Aug 2013, by 2.531 million or 12.0 percent. The civilian noninstitutional population increased from 37.467 million in Sep 2007 to 38.822 million in Sep 2013 or by 1.415 million while the number of full-time youth jobs fell by 1.561 million.

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. The US civilian labor force ages 16 to 24 fell from 22.801 million in Aug 2007 to 22.089 million in Aug 2013, by 0.712 million or 3.1 percent, while the noninstitutional population for ages 16 to 24 years increased from 37.455 million in Aug 2007 to 38.841 million in Aug 2013, by 1.386 million or 3.7 percent. The US civilian labor force ages 16 to 24 years fell from 21.917 million in Sep 2007 to 21.183 million in Sep 2013, by 0.734 million or 3.3 percent while the civilian noninstitutional youth population increased from 37.467 million in Sep 2007 to 38.822 million in Sep 2013 by 1.355 million or 3.6 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. The US labor force participation rate of young people fell from 63.9 in Aug 2006 to 56.9 in Aug 2013. The US labor force participation rate of young people fell from 59.1 percent in Sep 2006 to 54.6 percent in Sep 2013. Many young people abandoned searches for employment, dropping from the labor force.

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 for ages 16 to 24 years collapsed from 59.2 in Jul 2006 to 50.7 in Jul 2013. The employment population ratio for ages 16 to 24 years dropped from 57.2 in Aug 2006 to 48.0 in Aug 2013. The employment population ratio for ages to 16 to 24 years declined from 52.9 in Sep 2006 to 46.5 in Sep 2013. The 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 2.419 million in Sep 2007 to 3.139 million in Sep 2013 or by 0.720 million. This situation may persist for many years.

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

Year	Apr	May	Jun	Jul	Aug	Sep	Annual
2001	2095	2171	2775	2585	2461	2301	2371
2002	2515	2568	3167	3034	2688	2506	2683
2003	2572	2838	3542	3200	2724	2698	2746
2004	2387	2684	3191	3018	2585	2493	2638
2005	2398	2619	3010	2688	2519	2339	2521
2006	2092	2254	2860	2750	2467	2297	2353
2007	2074	2203	2883	2622	2388	2419	2342
2008	2196	2952	3450	3408	2990	2904	2830
2009	3321	3851	4653	4387	4004	3774	3760
2010	3803	3854	4481	4374	3903	3604	3857
2011	3365	3628	4248	4110	3820	3541	3634
2012	3175	3438	4180	4011	3672	3174	3451
2013	3129	3478	4198	3821	3453	3139

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

Chart I-22 provides the unemployment level for 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 with recent marginal improvement.

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. The rate of youth unemployment increased from 10.5 percent in Sep 2006 to 14.8 percent in Sep 2013. The actual rate is higher because of the difficulty in counting those dropping from the labor force because they believe there are no jobs available for them.

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

Year	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Annual
2001	10.3	10.2	9.6	10.0	11.6	10.5	10.7	10.5	10.6
2002	12.5	12.9	11.6	11.6	13.2	12.4	11.5	11.4	12.0
2003	12.7	12.2	12.0	13.0	14.8	13.3	11.9	12.5	12.4
2004	12.3	12.1	11.1	12.2	13.4	12.3	11.1	11.5	11.8
2005	13.0	11.7	11.2	11.9	12.6	11.0	10.8	10.7	11.3
2006	11.3	10.3	9.7	10.2	11.9	11.2	10.4	10.5	10.5
2007	10.3	9.7	9.7	10.2	12.0	10.8	10.5	11.0	10.5
2008	11.8	11.1	10.3	13.3	14.4	14.0	13.0	13.4	12.8
2009	16.4	16.1	15.8	18.0	19.9	18.5	18.0	18.2	17.6
2010	19.2	18.4	18.5	18.4	20.0	19.1	17.8	17.6	18.4
2011	18.2	17.2	16.5	17.5	18.9	18.1	17.5	17.0	17.3
2012	17.0	16.0	15.4	16.3	18.1	17.1	16.8	15.2	16.2
2013	16.7	15.9	15.1	16.4	18.0	16.3	15.6	14.8

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://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) and the second estimate of GDP for IIQ2013 (http://www.bea.gov/newsreleases/national/gdp/2013/pdf/gdp2q13_3rd.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.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/2013/09/mediocre-and-decelerating-united-states.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/increasing-interest-rate-risk.html). As a result, there are 28.1 million unemployed or underemployed in the United States for an effective unemployment rate of 17.3 percent (Section I and earlier http://cmpassocregulationblog.blogspot.com/2013/09/twenty-eight-million-unemployed-or.html). Zero interest rates and quantitative easing have not provided the impulse for growth and were not required in past successful cyclical expansions. 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, 16.3 percent in Jul 2013 and 15.6 percent in Aug 2013. In Sep 2006, the rate of youth unemployment was 10.5 percent, increasing to 14.8 percent in Sep 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 (http://cmpassocregulationblog.blogspot.com/2013/09/mediocre-and-decelerating-united-states.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 1.710 million in Sep 2006 to 4.640 million in Sep 2010 or by 171.3 percent. The number of unemployed ages 45 years and over declined to 3.899 million in Sep 2012 that is still higher by 128.0 percent than in Sep 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 3.535 million in Sep 2013 is higher by 1.825 million than 1.710 million in Sep 2006 or higher by 106.7 percent.

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

Year	Apr	May	Jun	Jul	Aug	Sep	Annual
2000	1062	1074	1163	1253	1339	1254	1249
2001	1421	1259	1371	1539	1640	1586	1576
2002	2101	1999	2190	2173	2114	1966	2114
2003	2287	2112	2212	2281	2301	2157	2253
2004	2160	2025	2182	2116	2082	1951	2149
2005	1939	1844	1868	2119	1895	1992	2009
2006	1843	1784	1813	1985	1869	1710	1848
2007	1871	1803	1805	2053	1956	1854	1966
2008	2104	2095	2211	2492	2695	2595	2540
2009	4172	4175	4505	4757	4683	4560	4500
2010	4770	4565	4564	4821	5128	4640	4879
2011	4373	4356	4559	4772	4592	4426	4537
2012	4037	4083	4084	4405	4179	3899	4133
2013	3689	3605	3648	3727	3607	3535

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/2013/10/world-inflation-waves-regional-economic.html). The Census Bureau revised data for 2012 and 2013. The US trade balance deteriorated from deficit of $39,519 million in Apr 2013 to deficit of $43,725 million in May 2013 and improved to lower deficit of $34,543million in Jun 2013. The trade account deteriorated again to $39,642 million in Jul 2013 with marginal improvement to deficit of $38,803 million in Aug 2013. Exports fell 0.1 percent in Aug 2013 while imports changed 0.0 percent. The deterioration in the trade account in Jul 2013 originated in decline of exports by 0.6 percent while imports increased 1.3 percent. Exports increased 2.2 percent in Jun 2013 while imports decreased 2.2 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 ∆%
Aug 2013	-38,803	189,221	-0.1	228,023	0.0
Jul	-39,642	189,332	-0.6	227,974	1.3
Jun	-34,543	190,528	2.2	225,071	-2.2
May	-43,725	186,487	-0.2	230,212	1.7
Apr	-39,519	186,941	1.3	226,460	2.3
Mar	-36,787	184,578	-1.1	221,365	-3.8
Feb	-43,481	186,698	0.0	230,180	0.5
Jan	-42,364	186,607	-1.1	228,971	0.9
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 $118.3 billion in IIQ2012, or 2.7 percent of GDP to $104.6 billion in IIQ2013, or 2.4 percent of GDP (http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.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/2013/10/world-inflation-waves-regional-economic.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 ∆%

Year	Balance	Exports	Imports
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

Chart IIA-2 of the US Census Bureau provides the US trade account in goods and services SA from Jan 1992 to Aug 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-Aug 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 Aug 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-Aug 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 Aug 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-Aug 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 $60,619 billion in Aug 2012 to $58,220 billion in Aug 2013. The relative improvement of the goods balance in Aug 2013 relative to Aug 2012 occurred mostly in the petroleum balance, exports less imports of petroleum goods, in the magnitude of decreasing the deficit by $4651 million, while there was deterioration in the nonpetroleum balance, exports less imports of nonpetroleum goods, in the magnitude of increasing the deficit by $2334 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 3.1 percent with nonpetroleum exports increasing 1.2 percent. Total imports increased 0.8 percent with petroleum imports declining 6.1 percent and nonpetroleum imports increasing 2.4 percent. Details do not add because of seasonal adjustment and rounding.

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

	Aug 2013	Aug 2012	∆%
Total Balance	-58,220	-60,619
Petroleum	-18,600	-23,251
Non Petroleum	-38,514	-36,180
Total Exports	132,435	128,446	3.1
Petroleum	12,188	9,252	31.7
Non Petroleum	119,260	117,855	1.2
Total Imports	190,655	189,064	0.8
Petroleum	30,788	32,772	-6.1
Non Petroleum	157,774	154,035	2.4

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-Jul 2013 and Jan-Jul 2012 are shown in Table IIA-4. The rate of growth of exports was 1.8 percent and minus 1.3 percent for imports. The US has partial hedge of commodity price increases in exports of agricultural commodities that changed 0.0 percent and of mineral fuels that increased 4.8 percent both because prices of raw materials and commodities increase and fall recurrently as a result of shocks of risk aversion and portfolio reallocations. 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 1.8 percent while manufactured imports rose 0.7 percent. Significant part of the US trade imbalance originates in imports of mineral fuels decreasing 12.4 percent and petroleum decreasing 13.3 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/2013/10/world-inflation-waves-regional-economic.html).

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

	Jan-Aug 2013 $ Millions	Jan-Aug 2012 $ Millions	∆%
Exports	1,041,006	1,022,972	1.8
Manufactured	786,143	772,355	1.8
Agricultural Commodities	88,329	88,291	0.0
Mineral Fuels	92,802	88,547	4.8
Petroleum	76,754	71,793	6.9
Imports	1,499,901	1,519,812	-1.3
Manufactured	1,205,487	1,196,615	0.7
Agricultural Commodities	71,083	70,314	1.1
Mineral Fuels	258,497	292,780	-11.7
Petroleum	247,005	282,576	-12.6

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

The current account of the US balance of payments is provided in Table IIA2-5 for IIQ2012 and IIQ2013. 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 not seasonally adjusted decreased from $118.3 billion in IIQ2012 to $104.6 billion in IIQ2013. The current account deficit seasonally adjusted at annual rate fell from 2.7 percent of GDP in IIQ2012 to 2.5 percent of GDP in IQ2013 and 2.4 percent of GDP in IIQ2013. 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 IIA2-5, US, Balance of Payments, Millions of Dollars NSA

	IIQ2012	IIQ2013	Difference
Goods Balance	-191,299	-178,171	13,128
X Goods	395,151	400,113	1.3 ∆%
M Goods	-586,450	-578,283	-1.4 ∆%
Services Balance	45,836	52,588	6,752
X Services	160,060	167,200	4.5 ∆%
M Services	-114,224	-114,612	0.3 ∆%
Balance Goods and Services	-145,464	-125,582	19,882
Balance Income	58,505	53,507	-4,998
Unilateral Transfers	-31,381	-32,493	-1,112
Current Account Balance	-118,340	-104,568	13,772
% GDP	IIQ2012	IIQ2013	IQ2013
	2.7	2.4	2.5

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

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, 2013Sep17) 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 IIA2-6 provides data on the US fiscal and balance of payments imbalances. In 2007, the federal deficit of the US was $161 billion corresponding to 1.1 percent of GDP while the Congressional Budget Office (CBO 2013Sep11) estimates the federal deficit in 2012 at $1087 billion or 6.8 percent of GDP. The combined record federal deficits of the US from 2009 to 2012 are $5090 billion or 31.6 percent of the estimate of GDP for fiscal year 2012 implicit in the CBO (CBO 2013Sep11) estimate of debt/GDP. 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 $5090 billion. Federal debt in 2012 was 70.1 percent of GDP (CBO 2013Sep11). This situation may worsen in the future (CBO 2013Sep17):

“Between 2009 and 2012, the federal government recorded the largest budget deficits relative to the size of the economy since 1946, causing federal debt to soar. Federal debt held by the public is now about 73 percent of the economy’s annual output, or gross domestic product (GDP). That percentage is higher than at any point in U.S. history except a brief period around World War II, and it is twice the percentage at the end of 2007. If current laws generally remained in place, federal debt held by the public would decline slightly relative to GDP over the next several years, CBO projects. After that, however, growing deficits would ultimately push debt back above its current high level. CBO projects that federal debt held by the public would reach 100 percent of GDP in 2038, 25 years from now, even without accounting for the harmful effects that growing debt would have on the economy. Moreover, debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely.

The gap between federal spending and revenues would widen steadily after 2015 under the assumptions of the extended baseline, CBO projects. By 2038, the deficit would be 6½ percent of GDP, larger than in any year between 1947 and 2008, and federal debt held by the public would reach 100 percent of GDP, more than in any year except 1945 and 1946. With such large deficits, federal debt would be growing faster than GDP, a path that would ultimately be unsustainable.

Incorporating the economic effects of the federal policies that underlie the extended baseline worsens the long-term budget outlook. The increase in debt relative to the size of the economy, combined with an increase in marginal tax rates (the rates that would apply to an additional dollar of income), would reduce output and raise interest rates relative to the benchmark economic projections that CBO used in producing the extended baseline. Those economic differences would lead to lower federal revenues and higher interest payments. With those effects included, debt under the extended baseline would rise to 108 percent of GDP in 2038.”

Table IIA2-6, 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	14480	14720	14418	14958	15534	16245
Current Account % GDP	-4.9	-4.6	-2.6	-3.0	-2.9	-2.7
NIIP	-1796	-3260	-2275	-2250	-3730	-3863
US Owned Assets Abroad	18400	19464	18558	20555	21636	21638
Foreign Owned Assets in US	20196	22724	20833	22805	25366	25501
NIIP % GDP	-12.4	-22.1	-15.8	-15.0	-24.0	-23.8
Exports Goods Services Income	2487	2654	2185	2523	2874	2987
NIIP % Exports Goods Services Income	-72	-123	-104	-89	-130	-129
DIA MV	5274	3102	4322	4809	4514	5249
DIUS MV	3551	2486	2995	3422	3510	3924
Fiscal Balance	-161	-459	-1413	-1294	-1296	-1087
Fiscal Balance % GDP	-1.1	-3.1	-9.8	-8.7	-8.4	-6.8
Federal Debt	5035	5803	7545	9019	10128	11281
Federal Debt % GDP	35.1	39.3	52.3	61.0	65.8	70.1
Federal Outlays	2729	2983	3518	3456	3598	3537
∆%	2.8	9.3	17.9	-1.8	4.1	-1.7
% GDP	19.0	20.2	24.4	23.4	23.4	22.0
Federal Revenue	2568	2524	2105	2162	2302	2450
∆%	6.7	-1.7	-16.6	2.7	6.5	6.4
% GDP	17.9	17.1	14.6	14.6	15.0	15.2

Sources:

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. Budget http://www.cbo.gov/ Balance of Payments and NIIP http://www.bea.gov/international/index.htm#bop Gross Domestic Product, Bureau of Economic Analysis (BEA). http://www.bea.gov/iTable/index_nipa.cfm

Table IIA2-7 provides quarterly estimates NSA of the external and internal imbalances of the United States. The current account deficit seasonally adjusted falls from 3.0 percent of GDP in IQ2012 to 2.5 percent in IQ2013. The net international investment position increases from $3.9 trillion in IQ2012 to $4.3 trillion in IQ2013.

Table IIA2-7, US, Current Account, NIIP, Fiscal Balance, Nominal GDP, Federal Debt and Direct Investment, Dollar Billions and % NSA

	IQ2012	IIQ2012	IIIQ2012	IVQ2012	IQ2013
Goods & Services	-122	-145	-144	-122	-100
Income	55	58	55	55	52
UT	-33	-31	-33	-32	-34
Current Account	-100	-118	-122	-99	-82
Current Account % GDP	-3.0	-2.7	-2.6	-2.5	-2.5
NIIP	-3886	-4332	-4109	-3863	-4277
US Owned Assets Abroad	21349	20948	21551	21638	21619
Foreign Owned Assets in US	-25235	-25280	-25660	-25501	-25896
DIA MV	4976	4679	5059	5249	5518
DIUS MV	3856	3765	3962	3924	4261

Sources:

Notes: UT: unilateral transfers; NIIP: Net International Investment Position; DIA MV: US Direct Investment Abroad at Market Value; DIUS MV: Direct Investment in the US at Market Value..

Sources: US Bureau of Economic Analysis http://www.bea.gov/international/index.htm#bop

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 IIQ2013. 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

Risk aversion channels funds toward US long-term and short-term securities that finance the US balance of payments and fiscal deficits benefitting from risk flight to US dollar denominated assets. There are now temporary interruptions because of fear of rising interest rates that erode prices of US government securities because of mixed signals on monetary policy and exit from the Fed balance sheet of three trillion dollars of securities held outright. Net foreign purchases of US long-term securities (row C in Table IIA2-8) deteriorated $31.0 billion in Jul 2013 to minus $8.9 billion in Aug 2013. Foreign (residents) purchases minus sales of US long-term securities (row A in Table IIA2-8) in Jul 2013 of $46.6 billion decreased to minus $8.5 billion in Aug 2013. Net US (residents) purchases of long-term foreign securities (row B in Table IIA2-8) increased from minus $15.7 billion in Jul 2013 to minus $0.4 billion in Aug 2013. In Aug 2013,

C = A + B = -$8.5 billion - $0.4 billion = -$8.9 billion

There are minor rounding errors. There is decreasing demand in Table IIA2-8 in Jul in A1 private purchases by residents overseas of US long-term securities of minus $3.7 billion of which increases in A11 Treasury securities of $0.1 billion, increase in A12 of $8.7 billion in agency securities, increase by $1.4 billion of corporate bonds and decrease of $13.8 billion in equities. Worldwide risk aversion causes flight into US Treasury obligations with significant oscillations. Official purchases of securities in row A2 decreased $4.8 billion with decrease of Treasury securities of $10.9 billion in Aug 2013. Official purchases of agency securities increased $8.1 billion in Jul. Row D shows decrease in Aug 2013 of $5.8 billion in purchases of short-term dollar denominated obligations. Foreign private holdings of US Treasury bills increased $17.5 billion (row D11) with foreign official holdings increasing $10.0 billion while the category “other” decreased $23.3 billion. Foreign private holdings of US Treasury bills increased $7.5 billion in what could be decrease of duration exposures. Risk aversion of default losses in foreign securities dominates decisions to accept zero interest rates in Treasury securities with no perception of principal losses. In the case of long-term securities, investors prefer to sacrifice inflation and possible duration risk to avoid principal losses with significant oscillations in risk perceptions.

Table IIA2-8, Net Cross-Borders Flows of US Long-Term Securities, Billion Dollars, NSA

	Aug 2012 12 Months	Aug 2013 12 Months	Jul 2013	Aug 2013
A Foreign Purchases less Sales of US LT Securities	579.6	206.6	46.6	-8.5
A1 Private	343.3	70.5	41.7	-3.7
A11 Treasury	300.5	-7.1	49.8	0.1
A12 Agency	118.3	43.8	2.1	8.7
A13 Corporate Bonds	-65.1	1.6	-1.0	1.4
A14 Equities	-10.4	32.1	-9.2	-13.8
A2 Official	236.4	136.1	5.0	-4.8
A21 Treasury	231.5	32.4	-15.9	-10.9
A22 Agency	-4.3	80.4	20.1	8.1
A23 Corporate Bonds	0.8	18.3	0.0	1.0
A24 Equities	8.4	4.9	0.7	-3.1
B Net US Purchases of LT Foreign Securities	77.8	-180.8	-15.7	-0.4
B1 Foreign Bonds	102.7	-44.3	0.4	12.7
B2 Foreign Equities	-24.9	-136.5	-16.0	-13.2
C Net Foreign Purchases of US LT Securities	657.5	25.8	31.0	-8.9
D Increase in Foreign Holdings of Dollar Denominated Short-term	19.9	-14.6	-14.1	-5.8
D1 US Treasury Bills	23.5	16.1	-20.8	17.5
D11 Private	59.8	16.1	-21.1	7.5
D12 Official	-36.3	0.0	0.2	10.0
D2 Other	-3.6	-30.7	6.7	-23.3

C = A + B;

A = A1 + A2

A1 = A11 + A12 + A13 + A14

A2 = A21 + A22 + A23 + A24

B = B1 + B2

D = D1 + D2

Sources: United States Treasury http://www.treasury.gov/resource-center/data-chart-center/tic/Pages/index.aspx

Table IIA2-9 provides major foreign holders of US Treasury securities. China is the largest holder with $1268.1 billion in Aug 2013, increasing 9.8 percent from $1155.2 billion in Aug 2012 while decreasing $11.2 billion from Jul 2013 or 0.9 percent. Japan increased its holdings from $1119.8 billion in Jul 2012 to $1135.4 billion in Jul 2013 or by 1.4 percent. Japan increased its holdings from $1135.4 billion in Jul 2013 to $1149.1 billion in Aug 2013 by $13.7 billion or 1.2 percent. Total foreign holdings of Treasury securities rose from $5443.4 billion in Aug 2012 to $5588.8 billion in Aug 2013, or 2.7 percent. Foreign holdings of Treasury securities fell from $5721.8 in Mar 2013 to $5708.4 in Apr 2013 or 0.2 percent. Foreign holdings of US Treasury securities fell from $5595.7 billion in Jun 2013 to $5593.9 billion in Jul 2013, by $1.8 billion or 0.0 percent. The US continues to finance its fiscal and balance of payments deficits with foreign savings (see Pelaez and Pelaez, The Global Recession Risk (2007)). A point of saturation of holdings of US Treasury debt may be reached as foreign holders evaluate the threat of reduction of principal by dollar devaluation and reduction of prices by increases in yield, including possibly risk premium. Shultz et al (2012) find that the Fed financed three-quarters of the US deficit in fiscal year 2011, with foreign governments financing significant part of the remainder of the US deficit while the Fed owns one in six dollars of US national debt. Concentrations of debt in few holders are perilous because of sudden exodus in fear of devaluation and yield increases and the limit of refinancing old debt and placing new debt. 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):

Table IIA2-9, US, Major Foreign Holders of Treasury Securities $ Billions at End of Period

	Aug 2013	Jul 2013	Aug 2012
Total	5588.8	5593.9	5443.4
China	1268.1	1279.3	1155.2
Japan	1149.1	1135.4	1120.9
Caribbean Banking Centers	300.5	287.8	263.9
Brazil	252.9	256.4	259.8
Oil Exporters	246.4	257.7	259.1
Taiwan	183.6	185.8	199.5
Switzerland	179.7	178.2	191.7
Belgium	166.8	167.7	130.2
United Kingdom	159.1	157.0	137.1
Luxembourg	143.8	146.8	138.6
Russia	136.0	131.6	162.9
Hong Kong	126.5	120.0	141.7
Foreign Official Holdings	3973.5	3995.5	3957.1
A. Treasury Bills	373.0	363.0	373.0
B. Treasury Bonds and Notes	3600.5	3632.5	3584.1

Source: United States Treasury

http://www.treasury.gov/resource-center/data-chart-center/tic/Pages/index.aspx

Chart IIA2-1 provides prices of total US imports 2001-2013. Prices fell during the contraction of 2001. Import price inflation accelerated after unconventional monetary policy of near zero interest rates in 2003-2004 and quantitative easing by withdrawing supply with the suspension of 30-year Treasury bond auctions. Slow pace of adjusting fed funds rates from 1 percent by increments of 25 basis points in 17 consecutive meetings of the Federal Open Market Committee (FOMC) between Jun 2004 and Jun 2006 continued to give impetus to carry trades. The reduction of fed funds rates toward zero in 2008 fueled a spectacular global hunt for yields that caused commodity price inflation in the middle of a global recession. After risk aversion in 2009 because of the announcement of TARP (Troubled Asset Relief Program) creating anxiety on “toxic assets” in bank balance sheets (see Cochrane and Zingales 2009), prices collapsed because of unwinding carry trades. Renewed price increases returned with zero interest rates and quantitative easing. Monetary policy impulses in massive doses have driven inflation and valuation of risk financial assets in wide fluctuations over a decade.

Chart IIA2-1, US, Prices of Total US Imports 2001=100, 2001-2013

Source: Bureau of Labor Statistics

Chart IIA2-2 provides 12-month percentage changes of prices of total US imports from 2001 to 2013. The only plausible explanation for the wide oscillations is by the carry trade originating in unconventional monetary policy. Import prices jumped in 2008 during deep and protracted global recession driven by carry trades from zero interest rates to long, leveraged positions in commodity futures. Carry trades were unwound during the financial panic in the final quarter of 2008 that resulted in flight to government obligations. Import prices jumped again in 2009 with subdued risk aversion because US banks did not have unsustainable toxic assets. Import prices then fluctuated as carry trades were resumed during periods of risk appetite and unwound during risk aversion resulting from the European debt crisis.

Chart IIA2-2, US, Prices of Total US Imports, 12-Month Percentage Changes, 2001-2013

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

Chart IIA2-3 provides prices of US imports from 1982 to 2013. There is no similar episode to that of the increase of commodity prices in 2008 during a protracted and deep global recession with subsequent collapse during a flight into government obligations. Trade prices have been driven by carry trades created by unconventional monetary policy in the past decade.

Chart IIA2-3, US, Prices of Total US Imports, 2001=100, 1982-2013

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

Chart IIA2-4 provides 12-month percentage changes of US total imports from 1982 to 2013. There have not been wide consecutive oscillations as the ones during the global recession of IVQ2007 to IIQ2009.

Chart IIA2-4, US, Prices of Total US Imports, 12-Month Percentage Changes, 1982-2013

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

Chart IIA2-5 provides the index of US export prices from 2001 to 2013. Import and export prices have been driven by impulses of unconventional monetary policy in massive doses. The most recent segment in Chart IIA2-5 shows declining trend resulting from a combination of the world economic slowdown and the decline of commodity prices as carry trade exposures are unwound because of risk aversion to the sovereign debt crisis in Europe and slowdown in the world economy.

Chart IIA2-5, US, Prices of Total US Exports, 2001=100, 2001-2013

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

Chart IIA2-6 provides prices of US total exports from 1982 to 2013. The rise before the global recession from 2003 to 2008, driven by carry trades, is also unique in the series and is followed by another steep increase after risk aversion moderated in IQ2009.

Chart IIA2-6, US, Prices of Total US Exports, 2001=100, 1982-2013

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

Chart IIA2-7 provides 12-month percentage changes of total US exports from 1982 to 2013. The uniqueness of the oscillations around the global recession of IVQ2007 to IIQ2009 is clearly revealed.

Chart IIA2-7, US, Prices of Total US Exports, 12-Month Percentage Changes, 1982-2013

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

Twelve-month percentage changes of US prices of exports and imports are provided in Table IIA2-1. Import prices have been driven since 2003 by unconventional monetary policy of near zero interest rates influencing commodity prices according to moods of risk aversion and portfolio reallocations. In a global recession without risk aversion until the panic of Sep 2008 with flight to government obligations, import prices increased 21.4 percent in the 12 months ending in Jul 2008, 18.1 percent in the 12 months ending in Aug 2008, 13.1 percent in the 12 months ending in Sep 2008, 4.9 percent in the twelve months ending in Oct 2008. Import prices fell 5.9 percent in the 12 months ending in Nov 2008 when risk aversion developed in 2008 until mid 2009 (http://www.bls.gov/mxp/data.htm). Import prices rose again sharply in Nov 2010 by 4.1 percent and in Nov 2011 by 0.1 percent in the presence of zero interest rates with relaxed mood of risk aversion until carry trades were unwound in May 2011 and following months as shown by decrease of import prices by 1.4 percent in the 12 months ending in Nov 2012 and 1.8 percent in Dec 2012 and decrease of 0.3 percent in prices of exports in the 12 months ending in Dec 2012. Import prices increased 15.2 percent in the 12 months ending in Mar 2008, fell 14.9 percent in the 12 months ending in Mar 2009 and increased 11.2 percent in the 12 months ending in Mar 2010. Fluctuations are much sharper in imports because of the high content of oil that as all commodities futures contracts increases sharply with zero interest rates and risk appetite, contracting under risk aversion. There is similar behavior of prices of imports ex fuels, exports and exports ex agricultural goods but less pronounced than for commodity-rich prices dominated by carry trades from zero interest rates. A critical event resulting from unconventional monetary policy driving higher commodity prices by carry trades is the deterioration of the terms of trade, or export prices relative to import prices, that has adversely affected US real income growth relative to what it would have been in the absence of unconventional monetary policy. Europe, Japan and other advanced economies have experienced similar deterioration of their terms of trade. Because of unwinding carry trades of commodity futures because of risk aversion and portfolio reallocations, import prices decreased 1.0 percent in the 12 months ending in Sep 2013, export prices decreased 1.6 percent and prices of nonagricultural exports fell 0.9 percent. Imports excluding fuel fell 1.2 percent in the 12 months ending in Sep 2013. At the margin, price changes over the year in world exports and imports are decreasing or increasing moderately because of unwinding carry trades in a temporary mood of risk aversion that reverses exposures in commodity futures.

Table IIA2-1, US, Twelve-Month Percentage Rates of Change of Prices of Exports and Imports

	Imports	Imports Ex Fuels	Exports	Exports Non-Ag
Sep 2013	-1.0	-1.2	-1.6	-0.9
Sep 2012	-0.6	-0.4	-0.6	-1.5
Sep 2011	12.7	5.4	9.4	7.9
Sep 2010	3.6	2.5	4.9	4.3
Sep 2009	-12.0	-4.2	-5.6	-4.4
Sep 2008	13.1	6.1	7.0	5.8
Sep 2007	4.8	2.1	4.5	2.9
Sep 2006	1.6	2.9	3.9	3.8
Sep 2005	9.9	1.4	3.6	3.6
Sep 2004	8.2	2.8	4.0	4.3
Sep 2003	0.7	0.5	1.0	0.6
Sep 2002	-0.4	NA	-0.2	-0.6
Sep 2001	-5.6	NA	-1.4	-1.9

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

Table IIA2-2 provides 12-month percentage changes of the import price index all commodities from 2001 to 2013. Interest rates moving toward zero during unconventional monetary policy in 2008 induced carry trades into highly leveraged commodity derivatives positions that caused increases in 12-month percentage changes of import prices of around 20 percent. The flight into dollars and Treasury securities by fears of toxic assets in banks in the proposal of TARP (Cochrane and Zingales 2009) caused reversion of carry trades and collapse of commodity futures explaining sharp declines in trade prices in 2009. Twelve-month percentage changes of import prices at the end of 2012 and into 2013 occurred during another bout of risk aversion and portfolio reallocation.

Table IIA2-2, US, Twelve-Month Percentage Changes of Import Price Index All Commodities, 2001-2013

Year	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Dec
2001	0.2	-1.6	-0.7	-0.8	-2.6	-4.1	-4.4	-5.6	-9.1
2002	-8.3	-5.6	-3.6	-3.7	-3.6	-1.7	-1.3	-0.4	4.2
2003	7.5	6.8	1.8	1.0	2.2	2.3	2.0	0.7	2.4
2004	0.9	1.1	4.6	6.9	5.7	5.6	7.1	8.2	6.7
2005	6.1	7.6	8.4	5.9	7.4	8.2	8.2	9.9	8.0
2006	6.9	4.5	5.8	8.6	7.4	7.0	6.0	1.6	2.5
2007	1.2	2.8	2.1	1.2	2.3	2.8	1.9	4.8	10.6
2008	13.5	15.2	16.9	19.1	21.3	21.4	18.1	13.1	-10.1
2009	-12.7	-14.9	-16.4	-17.3	-17.5	-19.1	-15.3	-12.0	8.6
2010	11.3	11.2	11.2	8.5	4.3	4.9	3.8	3.6	5.3
2011	7.6	10.3	11.9	12.9	13.6	13.7	12.9	12.7	8.5
2012	5.1	3.5	0.8	-0.8	-2.5	-3.3	-1.8	-0.6	-2.0
2013	-0.6	-2.1	-2.7	-1.8	0.1	0.8	-0.2	-1.0

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

There is finer detail in one-month percentage changes of imports of the US in Table IIA2-3. Carry trades into commodity futures induced by interest rates moving to zero in unconventional monetary policy caused sharp monthly increases in import prices for cumulative increase of 13.8 percent from Mar to Jul 2008 at average rate of 2.6 percent per month or annual equivalent in five months of 36.4 percent (3.1 percent in Mar 2008, 2.8 percent in Apr 2008, 2.8 percent in May 2008, 3.0 percent in Jun 2008 and 1.4 percent in Jul 2008, data from http://www.bls.gov/mxp/data.htm). There is no other explanation for increases in import prices during sharp global recession and contracting world trade. Import prices then fell 23.4 percent from Aug 2008 to Jan 2009 or at the annual equivalent rate of minus 41.4 percent in the flight to US government securities in fear of the need to buy toxic assets from banks in the TARP program (Cochrane and Zingales 2009). Risk aversion during the first sovereign debt crisis of the euro area in May-Jun 2010 caused decline of US import prices at the annual equivalent rate of 11.4 percent. US import prices have been driven by combinations of carry trades induced by unconventional monetary policy and bouts of risk aversion and portfolio reallocation (http://cmpassocregulationblog.blogspot.com/2013/10/world-inflation-waves-regional-economic.html). US import prices increased 0.5 percent in Jan 2013 and 0.9 percent in Feb 2013 for annual equivalent rate of 8.7 percent, similar to those in national price indexes worldwide, originating in carry trades from zero interest rates to commodity futures. Import prices fell 0.1 percent in Mar 2013, 0.7 percent in Apr 2013, 0.6 percent in May 2013 and 0.4 percent in Jun 2013. Import prices changed 0.2 percent in Jul 2013, increased 0.2 percent in Aug 2013 and increased 0.2 percent in Sep 2013.

Table IIA2-3, US, One-Month Percentage Changes of Import Price Index All Commodities, 2001-2013

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Dec
2001	0.0	-0.6	-1.6	-0.5	0.2	-0.4	-1.5	-0.1	-0.1	-1.0
2002	0.2	0.0	1.3	1.6	0.1	-0.3	0.4	0.3	0.7	0.6
2003	1.8	1.7	0.6	-3.1	-0.7	0.9	0.5	0.0	-0.5	0.7
2004	1.5	0.4	0.8	0.2	1.5	-0.2	0.4	1.5	0.5	-1.4
2005	0.6	0.9	2.2	0.9	-0.8	1.2	1.2	1.4	2.1	0.0
2006	1.2	-0.8	-0.1	2.1	1.8	0.1	0.8	0.5	-2.2	1.1
2007	-1.2	0.4	1.6	1.4	0.9	1.2	1.3	-0.3	0.6	-0.2
2008	1.5	0.2	3.1	2.8	2.8	3.0	1.4	-3.1	-3.6	-4.6
2009	-1.3	0.0	0.5	1.1	1.7	2.7	-0.6	1.5	0.2	0.2
2010	1.2	-0.1	0.4	1.1	-0.8	-1.2	0.0	0.4	0.0	1.4
2011	1.5	1.7	3.0	2.6	0.1	-0.6	0.1	-0.4	-0.1	0.0
2012	0.0	0.0	1.4	-0.1	-1.5	-2.3	-0.7	1.2	1.0	-0.6
2013	0.5	0.9	-0.1	-0.7	-0.6	-0.4	0.0	0.2	0.2

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

Chart IIA2-8 shows the US monthly import price index of all commodities excluding fuels from 2001 to 2013. All curves of nominal values follow the same behavior under the influence of unconventional monetary policy. Zero interest rates without risk aversion result in jumps of nominal values while under strong risk aversion even with zero interest rates there are declines of nominal values.

Chart IIA2-8, US, Import Price Index All Commodities Excluding Fuels, 2001=100, 2001-2013

Source: US Bureau of Labor Statistics

Chart IIA2-9 provides 12-month percentage changes of the US import price index excluding fuels between 2001 and 2013. There is the same behavior of carry trades driving up without risk aversion and down with risk aversion prices of raw materials, commodities and food in international trade during the global recession of IVQ2007 to IIQ2009 and in previous and subsequent periods.

Chart IIA2-9, US, Import Price Index All Commodities Excluding Fuels, 12-Month Percentage Changes, 2002-2013

Source: US Bureau of Labor Statistics

Chart IIA2-10 provides the monthly US import price index ex petroleum from 2001 to 2013. Prices including or excluding commodities follow the same fluctuations and trends originating in impulses of unconventional monetary policy of zero interest rates.

Chart IIA2-10, US, Import Price Index ex Petroleum, 2001=100, 2000-2013

Source: US Bureau of Labor Statistics

Chart IIA2-11 provides the US import price index ex petroleum from 1985 to 2013. There is the same unique hump in 2008 caused by carry trades from zero interest rates to prices of commodities and raw materials.

Chart IIA2-11, US, Import Price Index ex Petroleum, 2001=100, 1985-2013

Source: US Bureau of Labor Statistics

Chart IIA2-12 provides 12-month percentage changes of the import price index ex petroleum from 1986 to 2013. The oscillations caused by the carry trade in increasing prices of commodities and raw materials without risk aversion and subsequently decreasing them during risk aversion are unique.

Chart IIA2-12, US, Import Price Index ex Petroleum, 12-Month Percentage Changes, 1986-2013

Source: US Bureau of Labor Statistics

http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=RCLC1&f=D

Chart IIA2-13 of the US Energy Information Administration shows the price of WTI crude oil since the 1980s. Chart IA2-13 captures commodity price shocks during the past decade. The costly mirage of deflation was caused by the decline in oil prices during the recession of 2001. The upward trend after 2003 was promoted by the carry trade from near zero interest rates. The jump above $140/barrel during the global recession in 2008 at $145.29/barrel on Jul 3, 2008, can only be explained by the carry trade promoted by monetary policy of zero fed funds rate. After moderation of risk aversion, the carry trade returned with resulting sharp upward trend of crude prices. Risk aversion resulted in another drop in recent weeks followed by some recovery and renewed deterioration/increase.

Chart IIA2-13, US, Crude Oil Futures Contract

Source: US Energy Information Administration

The price index of US imports of petroleum and petroleum products in shown in Chart IIA2-14. There is similar behavior of the curves all driven by the same impulses of monetary policy.

Chart IIA2-14, US, Import Price Index of Petroleum and Petroleum Products, 2001=100, 2001-2013

Source: US Bureau of Labor Statistics

Chart IIA2-15 provides the price index of petroleum and petroleum products from 1982 to 2013. The rise in prices during the global recession in 2008 and the decline after the flight to government obligations is unique in the history of the series. Increases in prices of trade in petroleum and petroleum products were induced by carry trades and declines by unwinding carry trades in flight to government obligations.

Chart IIA2-15, US, Import Price Index of Petroleum and Petroleum Products, 2001=100, 1982-2013

Source: US Bureau of Labor Statistics

Chart IIA2-16 provides 12-month percentage changes of the price index of US imports of petroleum and petroleum products from 1982 to 2013. There were wider oscillations in this index from 1999 to 2001 (see Barsky and Killian 2004 for an explanation).

Chart IIA2-16, US, Import Price Index of Petroleum and Petroleum Products, 12-Month Percentage Changes, 1982-2013

Source: US Bureau of Labor Statistics

The price index of US exports of agricultural commodities is in Chart IIA2-17 from 2001 to 2013. There are similar fluctuations and trends as in all other price index originating in unconventional monetary policy repeated over a decade. The most recent segment in 2011 has declining trend in a new flight from risk resulting from the sovereign debt crisis in Europe followed by declines in Jun 2012 and Nov 2012 with stability in Dec 2012 into 2013.

Chart IIA2-17, US, Exports Price Index of Agricultural Commodities, 2001=100, 2001-2013

Source: US Bureau of Labor Statistics

Chart IIA2-18 provides the price index of US exports of agricultural commodities from 1982 to 2013. The increase in 2008 in the middle of deep, protracted contraction was induced by unconventional monetary policy. The decline from 2008 into 2009 was caused by unwinding carry trades in a flight to government obligations. The increase into 2011 and current pause were also induced by unconventional monetary policy in waves of increases during relaxed risk aversion and declines during unwinding of positions because of aversion to financial risk.

Chart IIA2-18, US, Exports Price Index of Agricultural Commodities, 2001=100, 1982-2013

Source: US Bureau of Labor Statistics

Chart IIA2-19 provides 12-month percentage changes of the index of US exports of agricultural commodities from 1986 to 2013. The wide swings in 2008, 2009 and 2011 are only explained by unconventional monetary policy inducing carry trades from zero interest rates to commodity futures and reversals during risk aversion.

Chart IIA2-19, US, Exports Price Index of Agricultural Commodities, 12-Month Percentage Changes, 1986-2013

Source: US Bureau of Labor Statistics

Chart IIA2-20 shows the export price index of nonagricultural commodities from 2001 to 2013. Unconventional monetary policy of zero interest rates drove price behavior during the past decade. Policy has been based on the myth of stimulating the economy by climbing the negative slope of an imaginary short-term Phillips curve.

Chart IIA2-20, US, Exports Price Index of Nonagricultural Commodities, 2001=100, 2001-2013

Source: US Bureau of Labor Statistics

Chart IIA2-21 provides a longer perspective of the price index of US nonagricultural commodities from 1982 to 2013. Increases and decreases around the global contraction after 2007 were caused by carry trade induced by unconventional monetary policy.

Chart IIA2-21, US, Exports Price Index of Nonagricultural Commodities, 2001=100, 1982-2013

Source: US Bureau of Labor Statistics

Finally, Chart IIA2-22 provides 12-month percentage changes of the price index of US exports of nonagricultural commodities from 1986 to 2013. The wide swings before, during and after the global recession beginning in 2007 were caused by carry trades induced by unconventional monetary policy.

Chart IIA2-22, US, Exports Price Index of Nonagricultural Commodities, 12-Month Percentage Changes, 1986-2013

Source: US Bureau of Labor Statistics