Fluctuating Financial Valuations, Mediocre Cyclical United States Economic Growth with GDP Two Trillion Dollars below Trend, Stagnating Real Disposable Income, Twenty Seven Million Unemployed or Underemployed, Stagnating Real Wages, World Cyclical Slow Growth and Global Recession Risk: Part III

 

Fluctuating Financial Valuations, Mediocre Cyclical United States Economic Growth with GDP Two Trillion Dollars below Trend, Stagnating Real Disposable Income, Twenty Seven Million Unemployed or Underemployed, Stagnating Real Wages, World Cyclical Slow Growth and Global Recession Risk

Carlos M Pelaez

©Carlos M Pelaez, 2009, 2010, 2011, 2012, 2013, 2014

I Mediocre Cyclical United States Economic Growth with GDP Two Trillion Dollars Below Trend

IA Mediocre Cyclical United States Economic Growth

IA1 Contracting Real Private Fixed Investment

IA2 Swelling Undistributed Corporate Profits

IB Stagnating Real Disposable Income and Consumption Expenditures

IB1 Stagnating Real Disposable Income and Consumption Expenditures

IB2 Financial Repression

II Twenty Seven Million Unemployed or Underemployed

IA1 Summary of the Employment Situation

IA2 Number of People in Job Stress

IA3 Long-term and Cyclical Comparison of Employment

IA4 Job Creation

IIB Stagnating Real Wages

III World Financial Turbulence

IIIA Financial Risks

IIIE Appendix Euro Zone Survival Risk

IIIF Appendix on Sovereign Bond Valuation

IV Global Inflation

V World Economic Slowdown

VA United States

VB Japan

VC China

VD Euro Area

VE Germany

VF France

VG Italy

VH United Kingdom

VI Valuation of Risk Financial Assets

VII Economic Indicators

VIII Interest Rates

IX Conclusion

References

Appendixes

Appendix I The Great Inflation

IIIB Appendix on Safe Haven Currencies

IIIC Appendix on Fiscal Compact

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

IIIG Appendix on Deficit Financing of Growth and the Debt Crisis

IIIGA Monetary Policy with Deficit Financing of Economic Growth

IIIGB Adjustment during the Debt Crisis of the 1980s

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

IA1 Summary of the Employment Situation. Table I-1 provides summary statistics of the employment situation report of the BLS. The first four rows provide the data from the establishment report of creation of nonfarm payroll jobs and remuneration of workers (for analysis of the differences in employment between the establishment report and the household survey see Abraham, Haltiwanger, Sandusky and Spletzer 2009). Total nonfarm payroll employment seasonally adjusted (SA) increased 209,000 in Jul 2014 and private payroll employment increased 198,000. The average monthly number of nonfarm jobs created from Jul 2012 to Jul 2013 was 193,583 using seasonally adjusted data, while the average number of nonfarm jobs created from Jul 2013 to Jul 2014 was 214,167, or increase by 10.6 percent. The average number of private jobs created in the US from Jul 2012 to Jul 2013 was 200,250, using seasonally adjusted data, while the average from Jul 2013 to Jul 2014 was 206,583, or increase by 3.2 percent. This blog calculates the effective labor force of the US at 162.690 million in Jul 2013 and 164.191 million in Jul 2014 (Table I-4), for growth of 1.501 million at average 125,083 per month. The difference between the average increase of 206,583 new private nonfarm jobs per month in the US from Jul 2013 to Jul 2014 and the 125,083 average monthly increase in the labor force from Jul 2013 to Jul 2014 is 81,500 monthly new jobs net of absorption of new entrants in the labor force. There are 26.768 million in job stress in the US currently. Creation of 81,500 new jobs per month net of absorption of new entrants in the labor force would require 328 months to provide jobs for the unemployed and underemployed (26.768 million divided by 81,500) or 27 years (328 divided by 12). The civilian labor force of the US in Jul 2014 not seasonally adjusted stood at 157.573 million with 10.307 million unemployed or effectively 16.925 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 164.191 million. Reduction of one million unemployed at the current rate of job creation without adding more unemployment requires 1.1 years (1 million divided by product of 81,500 by 12, which is 978,000). Reduction of the rate of unemployment to 5 percent of the labor force would be equivalent to unemployment of only 7.879 million (0.05 times labor force of 157.573 million) for new net job creation of 2.437 million (10.307 million unemployed minus 7.870 million unemployed at rate of 5 percent) that at the current rate would take 2.5 years (2.437 million divided by 0.978000). Under the calculation in this blog, there are 16.925 million unemployed by including those who ceased searching because they believe there is no job for them and effective labor force of 164.191 million. Reduction of the rate of unemployment to 5 percent of the labor force would require creating 11.257 million jobs net of labor force growth that at the current rate would take 8.9 years (16.925 million minus 0.05(164.191 million) = 8.715 million divided by 0.978000, 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 Jul 2014 was 147.265 million (NSA) or 0.050 million fewer people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population of ages 16 years and over increased from 231.958 million in Jul 2007 to 248.023 million in Jul 2014 or by 16.065 million. The number employed fell 0.03 percent from Jul 2007 to Jul 2014 while the noninstitutional civilian population of ages of 16 years and over, or those available for work, increased 6.9 percent. The ratio of employment to population in Jul 2007 was 63.5 percent (147.315 million employment as percent of population of 231.958 million). The same ratio in Jul 2014 would result in 157.495 million jobs (0.635 multiplied by noninstitutional civilian population of 248.023 million). There are effectively 10.230 million fewer jobs in Jul 2014 than in Jul 2007, or 157.495 million minus 147.265 million. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs.

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

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

The argument that anemic population growth causes “secular stagnation” in the US (Hansen 1938, 1939, 1941) is as misplaced currently as in the late 1930s (for early dissent see Simons 1942). There is currently population growth in the ages of 16 to 24 years but not enough job creation and discouragement of job searches for all ages (http://cmpassocregulationblog.blogspot.com/2014/06/financialgeopolitical-risks-recovery.html). The proper explanation is not in secular stagnation but in cyclically slow growth. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IIQ2014 would have accumulated to 22.1 percent. GDP in IIQ2014 would be $18,305.0 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2,319.3 billion than actual $15,985.7 billion. There are about two trillion dollars of GDP less than at trend, explaining the 26.8 million unemployed or underemployed equivalent to actual unemployment of 16.3 percent of the effective labor force (Section II and earlier http://cmpassocregulationblog.blogspot.com/2014/07/financial-valuations-twenty-seven.html). US GDP in IIQ2014 is 12.7 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $15,985.7 billion in IIQ2014 or 6.6 percent at the average annual equivalent rate of 1.0 percent. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. The long-term trend is growth at average 3.3 percent per year from Jan 1919 to Jun 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 111.7242 in Dec 2007 to 120.3775 in Jun 2014. The actual index NSA in Jun 2014 is 101.9337, which is 15.3 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 113.0017 in Jun 2014. The output of manufacturing at 101.9337 in Jun 2014 is 9.8 percent below trend under this alternative calculation. This is merely another case of theory without reality with dubious policy proposals. Subsection IA4 Job Creation analyzes the types of jobs created, which are lower paying than earlier. Average hourly earnings in Jul 2014 were $24.45 seasonally adjusted (SA), increasing 2.0 percent not seasonally adjusted (NSA) relative to Jul 2013 and changing 0.0 percent relative to Jun 2014 seasonally adjusted. In Jun 2014, average hourly earnings seasonally adjusted were $24.44, increasing 2.0 percent relative to Jun 2013 not seasonally adjusted and increasing 0.2 percent seasonally adjusted relative to May 2014. These are nominal changes in workers’ wages. The following row “average hourly earnings in constant dollars” provides hourly wages in constant dollars calculated by the BLS or what is called “real wages” adjusted for inflation. Data are not available for Jul 2013 because the prices indexes of the BLS for Jul 2014 will only be released on Aug 19, 2014 (http://www.bls.gov/cpi/), which will be covered in this blog’s comment on Aug 24, 2014, together with world inflation. The second column provides changes in real wages for Jun 2014. Average hourly earnings adjusted for inflation or in constant dollars decreased 0.1 percent in Jun 2014 relative to Jun 2013 but have been decreasing during multiple months. World inflation waves in bouts of risk aversion (http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html) mask declining trend of real wages. The fractured labor market of the US is characterized by high levels of unemployment and underemployment together with falling real wages or wages adjusted for inflation (Section II and earlier http://cmpassocregulationblog.blogspot.com/2014/07/financial-valuations-twenty-seven.html). The following section IB Stagnating Real Wages provides more detailed analysis. Average weekly hours of US workers seasonally adjusted remained virtually unchanged at 34.5. Another headline number widely followed is the unemployment rate or number of people unemployed as percent of the labor force. The unemployment rate calculated in the household survey increased from 6.1 percent in Jun 2014 to 6.2 percent in Jul 2014, seasonally adjusted. This blog provides with every employment situation report the number of people in the US in job stress or unemployed plus underemployed calculated without seasonal adjustment (NSA) at 26.8 million in Jul 2014 and 26.8 million in Jun 2014. The final row in Table I-1 provides the number in job stress as percent of the actual labor force calculated at 16.3 percent in Jul 2014 and 16.3 percent in Jun 2014. Almost one in every five workers in the US is unemployed or underemployed. There is socio-economic stress in the combination of adverse events and cyclical performance:

• Mediocre economic growth below potential and long-term trend, resulting in idle productive resources with GDP two trillion dollars below trend (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html). US GDP grew at the average rate of 3.3 percent per year from 1929 to 2013 with similar performance in whole cycles of contractions and expansions but only at 0.9 percent per year on average from 2007 to 2013. GDP in IIQ2014 is 12.7 percent than what it would have been had it grown at trend of 3.0 percent
• Private fixed investment declining 0.5 percent in the entire cycle from IVQ2007 to IQ2014 (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html)
• Twenty seven million or 16.3 percent of the effective labor force unemployed or underemployed in involuntary part-time jobs with stagnating or declining real wages (Section II and earlier http://cmpassocregulationblog.blogspot.com/2014/07/financial-valuations-twenty-seven.html)
• Stagnating real disposable income per person or income per person after inflation and taxes (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html)
• Depressed hiring that does not afford an opportunity for reducing unemployment/underemployment and moving to better-paid jobs (http://cmpassocregulationblog.blogspot.com/2014/07/financial-risk-recovery-without-hiring.html)
• Productivity growth fell from 2.2 percent per year on average from 1947 to 2013 to 1.6 percent per year on average from 2007 to 2013 deteriorating future growth and prosperity (http://cmpassocregulationblog.blogspot.com/2014/06/financial-risks-rules-discretionary.html)
• Output of manufacturing in Jun at 15.3 percent below long-term trend since 1919 and at 9.8 percent below trend since 1986 (http://cmpassocregulationblog.blogspot.com/2014/07/financial-irrational-exuberance.html)
• Unsustainable government deficit/debt and balance of payments deficit (http://cmpassocregulationblog.blogspot.com/2014/06/valuation-risks-world-inflation-waves.html http://cmpassocregulationblog.blogspot.com/2014/02/theory-and-reality-of-cyclical-slow.html http://cmpassocregulationblog.blogspot.com/2014/03/interest-rate-risks-world-inflation.html http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html and earlier http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html)
• Worldwide waves of inflation (http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html and earlier (http://cmpassocregulationblog.blogspot.com/2014/06/valuation-risks-world-inflation-waves.html)
• Deteriorating terms of trade and net revenue margins of production across countries in squeeze of economic activity by carry trades induced by zero interest rates (http://cmpassocregulationblog.blogspot.com/2014/07/financial-irrational-exuberance.html and earlier http://cmpassocregulationblog.blogspot.com/2014/06/valuation-risks-world-inflation-waves.html)
• Financial repression of interest rates and credit affecting the most people without means and access to sophisticated financial investments with likely adverse effects on income distribution and wealth disparity (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html)
• 47 million in poverty and 48 million without health insurance with family income adjusted for inflation regressing to 1995 levels (http://cmpassocregulationblog.blogspot.com/2013/09/duration-dumping-and-peaking-valuations.html
• Net worth of households and nonprofits organizations increasing by 7.1 percent after adjusting for inflation in the entire cycle from IVQ2007 to IQ2014 when it would have been over 22.0 percent at trend of 3.1 percent per year in real terms from 1945 to 2013 (Section II and earlier http://cmpassocregulationblog.blogspot.com/2014/03/global-financial-risks-recovery-without.html and earlier http://cmpassocregulationblog.blogspot.com/2013/12/collapse-of-united-states-dynamism-of.html). Financial assets increased $13.2 trillion while nonfinancial assets increased $120.8 billion with likely concentration of wealth in those with access to sophisticated financial investments. Real estate assets adjusted for inflation fell 13.3 percent from 2007 to IQ2014.

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

	Jul 2014	Jun 2014
New Nonfarm Payroll Jobs	209,000	298,000
New Private Payroll Jobs	198,000	279,000
Average Hourly Earnings	Jul 14 $24.45 SA ∆% Jul 14/Jul 13 NSA: 2.0 ∆% Jul 14/Jun 13 SA: 0.0	Jun 14 $24.44 SA ∆% Jun 14/ Jun 13 NSA: 2.0 ∆% Jun 14/May 14 SA: 0.2
Average Hourly Earnings in Constant Dollars		∆% Jun 2014/Jun 2013 NSA: -0.1
Average Weekly Hours	34.5 SA 34.5 NSA	34.5 SA 34.9 NSA
Unemployment Rate Household Survey % of Labor Force SA	6.2	6.1
Number in Job Stress Unemployed and Underemployed Blog Calculation	26.8 million NSA	26.8 million NSA
In Job Stress as % Labor Force	16.3 NSA	16.3 NSA

Source: US Bureau of Labor Statistics Source: US Bureau of Labor Statistics

http://www.bls.gov/

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

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

Requirements of using best available information and updating seasonality factors affect the comparability over time of United States employment data. In the first month of the year, the BLS revises data for several years by adjusting benchmarks and seasonal factors (page 4 at http://www.bls.gov/news.release/pdf/empsit.pdf ), which is the case of the data for Jan 2014 released on Feb 7, 2014:

“In accordance with annual practice, the establishment survey data released today [Feb 7, 2014] have been benchmarked to reflect comprehensive counts of payroll jobs for March 2013. These counts are derived principally from the Quarterly Census of Employment and Wages (QCEW), which enumerates jobs covered by the UI tax system. The benchmark process results in revisions to not seasonally adjusted data from April 2012 forward. Seasonally adjusted data from January 2009 forward are subject to revision. In addition, data for some series prior to 2009, both seasonally adjusted and unadjusted, incorporate revisions.”

The range of differences in total nonfarm employment in revisions in Table A of the employment situation report for Jan 2014 (page 5 at http://www.bls.gov/news.release/pdf/empsit.pdf) is from minus 1,000 for Mar 2013 to 274,000 for Nov 2013. There are also adjustments of population that affect comparability of labor statistics over time (page 6 at http://www.bls.gov/news.release/pdf/empsit.pdf):

“Effective with data for January 2014, updated population estimates have been used in the household survey. Population estimates for the household survey are developed by the U.S. Census Bureau. Each year, the Census Bureau updates the estimates to reflect new information and assumptions about the growth of the population since the previous decennial census. The change in population reflected in the new estimates results from adjustments for net international migration, updated vital statistics and other information, and some methodological changes in the estimation process.

In accordance with usual practice, BLS will not revise the official household survey estimates for

December 2013 and earlier months. To show the impact of the population adjustments, however, differences in selected December 2013 labor force series based on the old and new population estimates are shown in table B.

The adjustments increased the estimated size of the civilian noninstitutional population in December by 2,000, the civilian labor force by 24,000, employment by 22,000, and unemployment by 2,000. The number of persons not in the labor force was reduced by 22,000. The total unemployment rate, employment-population ratio, and labor force participation rate were unaffected.

Data users are cautioned that these annual population adjustments can affect the comparability of household data series over time. Table C shows the effect of the introduction of new population estimates on the comparison of selected labor force measures between December 2013 and January 2014. Additional information on the population adjustments and their effect on national labor force estimates is available at www.bls.gov/cps/cps14adj.pdf (emphasis added).”

There are also adjustments of benchmarks and seasonality factors for establishment data that affect comparability over time (page 1 at http://www.bls.gov/news.release/pdf/empsit.pdf):

“Establishment survey data have been revised as a result of the annual benchmarking process and the updating of seasonal adjustment factors. Also, household survey data for January 2014 reflect updated population estimates. See the notes beginning on page 4 for more information about these changes.”

All comparisons over time are affected by yearly adjustments of benchmarks and seasonality factors. All data in this blog comment use revised data released by the BLS on Feb 7, 2014 (http://www.bls.gov/).

IA2 Number of People in Job Stress. There are two approaches to calculating the number of people in job stress. The first approach consists of calculating the number of people in job stress unemployed or underemployed with the raw data of the employment situation report as in Table I-2. The data are seasonally adjusted (SA). The first three rows provide the labor force and unemployed in millions and the unemployment rate of unemployed as percent of the labor force. There is decrease in the number unemployed from 9.799 million in May 2014 to 9.474 million in Jun 2014 and increase to 9.671 million in Jul 2014. The rate of unemployment decreased from 6.3 percent in May 2014 and 6.1 percent in June 2014 and increase to 6.2 percent in Jul 2014. An important aspect of unemployment is its persistence for more than 27 weeks with 3.155 million in Jul 2014, corresponding to 32.6 percent of the unemployed. The longer the period of unemployment the lower are the chances of finding another job with many long-term unemployed ceasing to search for a job. Another key characteristic of the current labor market is the high number of people trying to subsist with part-time jobs because they cannot find full-time employment or part-time for economic reasons. The BLS explains as follows: “these individuals were working part time because their hours had been cut back or because they were unable to find full-time work” (http://www.bls.gov/news.release/pdf/empsit.pdf 2). The number of part-time for economic reasons increased from 7.269 million in May 2014 to 7.544 million in Jun 2014 and decreased to 7.511 million in Jul 2014. Another important fact is the marginally attached to the labor force. The BLS explains as follows: “these individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey” (http://www.bls.gov/news.release/pdf/empsit.pdf 2). The number in job stress unemployed or underemployed of 19.360 million in Jul 2014 is composed of 9.671 million unemployed (of whom 3.155 million, or 32.6 percent, unemployed for 27 weeks or more) compared with 9.474 million unemployed in Jun 2014 (of whom 3.081 million, or 32.5 percent, unemployed for 27 weeks or more), 7.511 million employed part-time for economic reasons in Jul 2014 (who suffered reductions in their work hours or could not find full-time employment) compared with 7.544 million in Jun 2014 and 2.178 million who were marginally attached to the labor force in Jul 2014 (who were not in the labor force but wanted and were available for work) compared with 2.028 million in Jun 2014. The final row in Table I-2 provides the number in job stress as percent of the labor force: 12.4 percent in Jul 2014, which is close to 12.2 percent in Jun 2014 and 12.3 percent in May 2014.

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

2014	Jul 2014	Jun 2014	May 2014
Labor Force Millions	156.023	155.694	155.613
Unemployed Millions	9.671	9.474	9.799
Unemployment Rate (unemployed as % labor force)	6.2	6.1	6.3
Unemployed ≥27 weeks Millions	3.155	3.081	3.374
Unemployed ≥27 weeks %	32.6	32.5	34.4
Part Time for Economic Reasons Millions	7.511	7.544	7.269
Marginally Attached to Labor Force Millions	2.178	2.028	2.130
Job Stress Millions	19.360	19.046	19.198
In Job Stress as % Labor Force	12.4	12.2	12.3

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

Source: US Bureau of Labor Statistics

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

Table I-3 repeats the data in Table I-2 but including Apr and additional data. What really matters is the number of people with jobs or the total employed, representing the opportunity for exit from unemployment. The final row of Table I-3 provides people employed as percent of the population or employment to population ratio. The number has remained relatively constant around 59 percent, reaching 58.9 in Apr 2014, 58.9 in May 2014, 59.0 in Jun 2014 and 59.0 in Jul 2014. The employment to population ratio fell from an annual level of 63.1 percent in 2006 to 58.6 percent in 2012 and 58.6 percent in 2013 with the lowest level at 58.4 percent in 2011.

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

	Jul 2014	Jun 2014	May 2014	Apr 2014
Labor Force	156.023	155.694	155.613	155.421
Participation Rate	62.9	62.8	62.8	62.8
Unemployed	9.671	9.474	9.799	9.753
UNE Rate %	6.2	6.1	6.3	6.3
Part Time Economic Reasons	7.511	7.544	7.269	7.465
Marginally Attached to Labor Force	2.178	2.028	2.130	2.160
In Job Stress	19.360	19.046	19.198	19.378
In Job Stress % Labor Force	12.4	12.2	12.3	12.5
Employed	146.352	146.221	145.814	145.669
Employment % Population	59.0	59.0	58.9	58.9

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

Source: US Bureau of Labor Statistics

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

The balance of this section considers the second approach. Charts I-1 to I-12 explain the reasons for considering another approach to calculating job stress in the US. Chart I-1 of the Bureau of Labor Statistics provides the level of employment in the US from 2001 to 2014. There was a big drop of the number of people employed from 147.315 million at the peak in Jul 2007 (NSA) to 136.809 million at the trough in Jan 2010 (NSA) with 10.506 million fewer people employed. Recovery has been anemic compared with the shallow recession of 2001 that was followed by nearly vertical growth in jobs. There was a big drop of the number of people employed from 147.315 million at the peak in Jul 2007 (NSA) to 136.809 million at the trough in Jan 2010 (NSA) with 10.506 million fewer people employed. Recovery has been anemic compared with the shallow recession of 2001 that was followed by nearly vertical growth in jobs. The number employed in Jul 2014 was 147.265 million (NSA) or 0.050 million fewer people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population of ages 16 years and over increased from 231.958 million in Jul 2007 to 248.023 million in Jul 2014 or by 16.065 million. The number employed fell 0.03 percent from Jul 2007 to Jul 2014 while the noninstitutional civilian population of ages of 16 years and over, or those available for work, increased 6.9 percent. The ratio of employment to population in Jul 2007 was 63.5 percent (147.315 million employment as percent of population of 231.958 million). The same ratio in Jul 2014 would result in 157.495 million jobs (0.635 multiplied by noninstitutional civilian population of 248.023 million). There are effectively 10.230 million fewer jobs in Jul 2014 than in Jul 2007, or 157.495 million minus 147.265 million. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs.

Chart I-1, US, Employed, Thousands, SA, 2001-2014

Source: Bureau of Labor Statistics

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

Chart I-2 of the Bureau of Labor Statistics provides 12-month percentage changes of the number of people employed in the US from 2001 to 2014. 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, 2001-2014

Source: Bureau of Labor Statistics

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

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 only 0.8 percent higher at 157.573 million in Jul 2014, 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 157.573 million in Jul 2014 to the noninstitutional population of 248.023 million in Jul 2014 was 63.5 percent. The labor force of the US in Jul 2014 corresponding to 66.8 percent of participation in the population would be 165.679 million (0.668 x 248.023). The difference between the measured labor force in Jul 2014 of 157.573 million and the labor force in Jul 2014 with participation rate of 66.8 percent (as in Jul 2007) of 165.679 million is 8.106 million. The level of the labor force in the US has stagnated and is 8.106 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, 2001-2014

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, 2001-2014

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 63.5 percent NSA in Jul 2014, 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, 2001-2014

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

Chart I-6 of the Bureau of Labor Statistics provides the level of unemployed in the US. The number unemployed rose from the trough of 6.272 million NSA in Oct 2006 to the peak of 16.147 million in Jan 2010, declining to 13.400 million in Jul 2012, 12.696 million in Aug 2012 and 11.741 million in Sep 2012. The level unemployed fell to 11.741 million in Oct 2012, 11.404 million in Nov 2012, 11.844 million in Dec 2012, 13.181 million in Jan 2013, 12.500 million in Feb 2013 and 9.984 million in Dec 2013. The level of unemployment reached 10.307 million in Jul 2014, all numbers not seasonally adjusted.

Chart I-6, US, Unemployed, Thousands, SA, 2001-2014

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

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

Chart I-7, US, Unemployment Rate, SA, 2001-2014

Source: Bureau of Labor Statistics

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

Chart I-8 of the Bureau of Labor Statistics provides 12-month percentage changes of the level of unemployed. There was a jump of 81.8 percent in Apr 2009 with subsequent decline and negative rates since 2010. On an annual basis, the level of unemployed rose 59.8 percent in 2009 and 26.1 percent in 2008 with increase of 3.9 percent in 2010, decline of 7.3 percent in 2011 and decrease of 9.0 percent in 2012. The annual level unemployment decreased 8.4 percent in 2013 and fell 14.7 percent in Jul 2014 relative to Jul 2013.

Chart I-8, US, Unemployed, 12-month Percentage Change, NSA, 2001-2014

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

Chart I-9 of the Bureau of Labor Statistics provides the number of people in part-time occupations because of economic reasons, that is, because they cannot find full-time employment. The number underemployed in part-time occupations not seasonally adjusted rose from 3.732 million in Jan 2001 to 5.270 million in Jan 2004, falling to 3.787 million in Apr 2006. The number underemployed seasonally adjusted jumped to 9.114 million in Nov 2009, falling to 8.177 million in Dec 2011 but increasing to 8.228 million in Jan 2012 and 8.133 million in Feb 2012 but then falling to 7.929 million in Dec 2012 and increasing to 8.180 million in Jul 2013. The number employed part-time for economic reasons seasonally adjusted reached 7.771 million in Dec 2013 and 7.511 million in Jul 2014. Without seasonal adjustment, the number employed part-time for economic reasons reached 9.354 million in Dec 2009, declining to 8.918 million in Jan 2012 and 8.166 million in Dec 2012 but increasing to 8.324 million in Jul 2013. The number employed part-time for economic reasons NSA stood at 7.990 million in Dec 2013 and 7.665 million in Jul 2014. 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, 2001-2014

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

Chart I-10 of the Bureau of Labor Statistics repeats the behavior of unemployment. The 12-month percentage change of the level of people at work part-time for economic reasons jumped 84.7 percent in Mar 2009 and declined subsequently. The declines have been insufficient to reduce significantly the number of people who cannot shift from part-time to full-time employment. On an annual basis, the number of part-time for economic reasons increased 33.5 percent in 2008 and 51.7 percent in 2009, declining 0.4 percent in 2010, 3.5 percent in 2011 and 5.1 percent in 2012. The annual number of part-time for economic reasons decreased 2.3 percent in 2013. The number of part-time for economic reasons fell 7.9 percent in Jul 2014 relative to a year earlier.

Chart I-10, US, Part-Time for Economic Reasons NSA 12-Month Percentage Change, 2001-2014

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

Chart I-11 of the Bureau of Labor Statistics provides the same pattern of the number marginally attached to the labor force jumping to significantly higher levels during the global recession and remaining at historically high levels. The number marginally attached to the labor force not seasonally adjusted increased from 1.295 million in Jan 2001 to 1.691 million in Feb 2004. The number of marginally attached to the labor force fell to 1.299 million in Sep 2006 and increased to 2.609 million in Dec 2010 and 2.800 million in Jan 2011. The number marginally attached to the labor force was 2.540 million in Dec 2011, increasing to 2.809 million in Jan 2012, falling to 2.608 million in Feb 2012. The number marginally attached to the labor force fell to 2.352 million in Mar 2012, 2.363 million in Apr 2012, 2.423 million in May 2012, 2.483 million in Jun 2012, 2.529 million in Jul 2012 and 2.561 million in Aug 2012. The number marginally attached to the labor force fell to 2.517 million in Sep 2012, 2.433 million in Oct 2012, 2.505 million in Nov 2012 and 2.427 million in in Dec 2013. The number marginally attached to the labor force reached 2.178 million in Jul 2014.

Chart I-11, US, Marginally Attached to the Labor Force, Thousands, NSA, 2001-2014

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 2014. There was a jump of 56.1 percent in May 2009 during the global recession followed by declines in percentage changes but insufficient negative changes. On an annual basis, the number of marginally attached to the labor force increased in four consecutive years: 15.7 percent in 2008, 37.9 percent in 2009, 11.7 percent in 2010 and 3.5 percent in 2011. The number marginally attached to the labor force fell 2.2 percent on annual basis in 2012 but increased 2.9 percent in the 12 months ending in Dec 2012, fell 13.0 percent in the 12 months ending in Jan 2013, falling 10.7 percent in the 12 months ending in May 2013. The number marginally attached to the labor force increased 4.0 percent in the 12 months ending in Jun 2013 and fell 4.5 percent in the 12 months ending in Jul 2013 and 8.6 percent in the 12 months ending in Aug 2013. The annual number of marginally attached to the labor force fell 6.2 percent in 2013. The number marginally attached to the labor force fell 7.2 percent in the 12 months ending in Dec 2013 and 9.8 percent in the 12 months ending in Jul 2014.

Chart I-12, US, Marginally Attached to the Labor Force 12-Month Percentage Change, NSA, 2001-2014

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 10.3 percent and the number of people in job stress could be around 26.8 million, which is 16.3 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 Jul 2013, Jun 2014 and Jul 2014 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 2014. 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 Jul 2013, Jun 2014 and Jul 2014 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 64.0 percent by Jul 2013 and was 63.4 percent in Jun 2014 and 63.5 percent in Jul 2014, 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 7.618 million unemployed in Jul 2014 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 16.925 million (Total UEM) and not 10.307 million (UEM) of whom many have been unemployed long term
• the rate of unemployment is 10.3 percent (Total UEM%) and not 6.5 percent, not seasonally adjusted, or 6.2 percent seasonally adjusted
• the number of people in job stress is close to 26.8 million by adding the 7.665 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 26.768 million in Jul 2014, 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 16.3 percent of the labor force in Jul 2014. The employment population ratio “EMP/POP %” dropped from 62.9 percent on average in 2006 to 59.0 percent in Jul 2013, 59.4 percent in Jun 2014 and 59.4 percent in Jul 2014. The number employed in Jul 2014 was 147.265 million (NSA) or 0.050 million fewer people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population of ages 16 years and over increased from 231.958 million in Jul 2007 to 248.023 million in Jul 2014 or by 16.065 million. The number employed fell 0.03 percent from Jul 2007 to Jul 2014 while the noninstitutional civilian population of ages of 16 years and over, or those available for work, increased 6.9 percent. The ratio of employment to population in Jul 2007 was 63.5 percent (147.315 million employment as percent of population of 231.958 million). The same ratio in Jul 2014 would result in 157.495 million jobs (0.635 multiplied by noninstitutional civilian population of 248.023 million). There are effectively 10.230 million fewer jobs in Jul 2014 than in Jul 2007, or 157.495 million minus 147.265 million. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs.

The argument that anemic population growth causes “secular stagnation” in the US (Hansen 1938, 1939, 1941) is as misplaced currently as in the late 1930s (for early dissent see Simons 1942). There is currently population growth in the ages of 16 to 24 years but not enough job creation and discouragement of job searches for all ages (http://cmpassocregulationblog.blogspot.com/2014/07/financial-risk-recovery-without-hiring.html). This is merely another case of theory without reality with dubious policy proposals. The number of hiring relative to the number unemployed measures the chances of becoming employed. The number of hiring in the US economy has declined by 10 million and does not show signs of increasing in an unusual recovery without hiring (http://cmpassocregulationblog.blogspot.com/2014/07/financial-risk-recovery-without-hiring.html). The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IIQ2014 would have accumulated to 22.1 percent. GDP in IIQ2014 would be $18,305.0 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2,319.3 billion than actual $15,985.7 billion. There are about two trillion dollars of GDP less than at trend, explaining the 26.8 million unemployed or underemployed equivalent to actual unemployment of 16.3 percent of the effective labor force (Section II and earlier http://cmpassocregulationblog.blogspot.com/2014/07/financial-valuations-twenty-seven.html). US GDP in IIQ2014 is 12.7 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $15,985.7 billion in IIQ2014 or 6.6 percent at the average annual equivalent rate of 1.0 percent. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. The long-term trend is growth at average 3.3 percent per year from Jan 1919 to Jun 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 111.7242 in Dec 2007 to 120.3775 in Jun 2014. The actual index NSA in Jun 2014 is 101.9337, which is 15.3 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 113.0017 in Jun 2014. The output of manufacturing at 101.9337 in Jun 2014 is 9.8 percent below trend under this alternative calculation.

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

	2006	Jul 2013	Jun 2014	Jul 2014
POP	229	245,756	247,814	248,023
LF	151	157,196	156,997	157,573
PART%	66.2	64.0	63.4	63.5
EMP	144	145,113	147,104	147,265
EMP/POP%	62.9	59.0	59.4	59.4
UEM	7	12,083	9,893	10,307
UEM/LF Rate%	4.6	7.7	6.3	6.5
NLF	77	88,560	90,817	90,451
LF PART 66.2%		162,690	164,053	164,191
∆NLF UEM		5,494	7,056	6,618
Total UEM		17,577	16,949	16,925
Total UEM%		10.8	10.3	10.3
Part Time Economic Reasons		8,324	7,805	7,665
Marginally Attached to LF		2,414	2,028	2,178
In Job Stress		28,315	26,782	26,768
People in Job Stress as % Labor Force		17.4	16.3	16.3

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/cps/

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

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

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

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

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

In revealing research, Edward P. Lazear and James R. Spletzer (2012JHJul22) use the wealth of data in the valuable database and resources of the Bureau of Labor Statistics (http://www.bls.gov/data/) in providing clear thought on the nature of the current labor market of the United States. The critical issue of analysis and policy currently is whether unemployment is structural or cyclical. Structural unemployment could occur because of (1) industrial and demographic shifts and (2) mismatches of skills and job vacancies in industries and locations. Consider the aggregate unemployment rate, Y, expressed in terms of share 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 62.6 percent in Dec 2013 and 63.5 percent in Jul 2014. The civilian labor force participation rate was 63.7 percent on an annual basis in 1979 and 63.4 percent in Dec 1980 and Dec 1981, reaching even 62.9 percent in both Apr and May 1979. The civilian labor force participation rate jumped with the recovery to 64.8 percent on an annual basis in 1985 and 65.9 percent in Jul 1985. Structural factors cannot explain these sudden changes vividly shown visually in the final segment of Chart I-12b. Seniors would like to delay their retiring especially because of the adversities of financial repression on their savings. Labor force statistics are capturing the disillusion of potential workers with their chances in finding a job in what Lazear and Spletzer (2012JHJul22) characterize as accentuated cyclical factors. The argument that anemic population growth causes “secular stagnation” in the US (Hansen 1938, 1939, 1941) is as misplaced currently as in the late 1930s (for early dissent see Simons 1942). There is currently population growth in the ages of 16 to 24 years but not enough job creation and discouragement of job searches for all ages (http://cmpassocregulationblog.blogspot.com/2014/07/financial-risk-recovery-without-hiring.html). “Secular stagnation” would be a process over many years and not from one year to another. This is merely another case of theory without reality with dubious policy proposals.

Table I-4b, US, Labor Force Participation Rate, Percent of Labor Force in Population, NSA, 1979-2014

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Nov	Dec	Annual
1979	62.9	63.0	63.2	62.9	62.9	64.5	64.9	63.8	63.8	63.7
1980	63.3	63.2	63.2	63.2	63.5	64.6	65.1	63.7	63.4	63.8
1981	63.2	63.2	63.5	63.6	63.9	64.6	65.0	63.8	63.4	63.9
1982	63.0	63.2	63.4	63.3	63.9	64.8	65.3	64.1	63.8	64.0
1983	63.3	63.2	63.3	63.2	63.4	65.1	65.4	64.1	63.8	64.0
1984	63.3	63.4	63.6	63.7	64.3	65.5	65.9	64.4	64.3	64.4
1985	64.0	64.0	64.4	64.3	64.6	65.5	65.9	64.9	64.6	64.8
1986	64.2	64.4	64.6	64.6	65.0	66.3	66.6	65.4	65.0	65.3
1987	64.7	64.8	65.0	64.9	65.6	66.3	66.8	65.7	65.5	65.6
1988	65.1	65.2	65.2	65.3	65.5	66.7	67.1	66.2	65.9	65.9
1989	65.8	65.6	65.7	65.9	66.2	67.4	67.7	66.7	66.3	66.5
1990	66.0	66.0	66.2	66.1	66.5	67.4	67.7	66.3	66.1	66.5
1991	65.5	65.7	65.9	66.0	66.0	67.2	67.3	66.0	65.8	66.2
1992	65.7	65.8	66.0	66.0	66.4	67.6	67.9	66.2	66.1	66.4
1993	65.6	65.8	65.8	65.6	66.3	67.3	67.5	66.3	66.2	66.3
1994	66.0	66.2	66.1	66.0	66.5	67.2	67.5	66.7	66.5	66.6
1995	66.1	66.2	66.4	66.4	66.4	67.2	67.7	66.5	66.2	66.6
1996	65.8	66.1	66.4	66.2	66.7	67.4	67.9	67.0	66.7	66.8
1997	66.4	66.5	66.9	66.7	67.0	67.8	68.1	67.1	67.0	67.1
1998	66.6	66.7	67.0	66.6	67.0	67.7	67.9	67.1	67.0	67.1
1999	66.7	66.8	66.9	66.7	67.0	67.7	67.9	67.0	67.0	67.1
2000	66.8	67.0	67.1	67.0	67.0	67.7	67.6	66.9	67.0	67.1
2001	66.8	66.8	67.0	66.7	66.6	67.2	67.4	66.6	66.6	66.8
2002	66.2	66.6	66.6	66.4	66.5	67.1	67.2	66.3	66.2	66.6
2003	66.1	66.2	66.2	66.2	66.2	67.0	66.8	66.1	65.8	66.2
2004	65.7	65.7	65.8	65.7	65.8	66.5	66.8	66.1	65.8	66.0
2005	65.4	65.6	65.6	65.8	66.0	66.5	66.8	66.1	65.9	66.0
2006	65.5	65.7	65.8	65.8	66.0	66.7	66.9	66.4	66.3	66.2
2007	65.9	65.8	65.9	65.7	65.8	66.6	66.8	66.1	65.9	66.0
2008	65.7	65.5	65.7	65.7	66.0	66.6	66.8	65.8	65.7	66.0
2009	65.4	65.5	65.4	65.4	65.5	66.2	66.2	64.9	64.4	65.4
2010	64.6	64.6	64.8	64.9	64.8	65.1	65.3	64.4	64.1	64.7
2011	63.9	63.9	64.0	63.9	64.1	64.5	64.6	63.9	63.8	64.1
2012	63.4	63.6	63.6	63.4	63.8	64.3	64.3	63.5	63.4	63.7
2013	63.3	63.2	63.1	63.1	63.5	64.0	64.0	62.9	62.6	63.2
2014	62.5	62.7	62.9	62.6	62.9	63.4	63.5

Source: US Bureau of Labor Statistics

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

Chart I-12b, US, Labor Force Participation Rate, Percent of Labor Force in Population, NSA, 1979-2014

Source: Bureau of Labor Statistics

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

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, 1948-2014

Sources: US Bureau of Labor Statistics

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

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

Chart I-12d, US, Labor Force, Thousands, NSA, 1948-2014

Sources: US Bureau of Labor Statistics

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

The rate of labor force participation of the US is in Chart I-12E from 1948 to 2014. There is sudden decline during the global recession after 2007 without recovery explained by cyclic factors (Lazear and Spletzer 2012JHJul22) as many potential workers stopped their job searches disillusioned that there could be an opportunity for them in sharply contracted labor markets.

Chart I-12E, US, Labor Force Participation Rate, Percent of Labor Force in Population, NSA, 1948-2014

Sources: US Bureau of Labor Statistics

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

IA3 Long-term and Cyclical Comparison of Employment. There is initial discussion here of long-term employment trends followed by cyclical comparison. Growth and employment creation have been mediocre in the expansion beginning in Jul IIIQ2009 from the contraction between Dec IVQ2007 and Jun IIQ2009 (http://www.nber.org/cycles.html). A series of charts from the database of the Bureau of Labor Statistics (BLS) provides significant insight. Chart I-13 provides the monthly employment level of the US from 1948 to 2014. 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. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 19 quarters from IIIQ2009 to IIQ2014. Boskin (2010Sep) measures that the US economy grew at 6.2 percent in the first four quarters and 4.5 percent in the first 12 quarters after the trough in the second quarter of 1975; and at 7.7 percent in the first four quarters and 5.8 percent in the first 12 quarters after the trough in the first quarter of 1983 (Professor Michael J. Boskin, Summer of Discontent, Wall Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are new calculations using the revision of US GDP and personal income data since 1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) and the first estimate of GDP for IIQ2014 (http://www.bea.gov/newsreleases/national/gdp/2014/pdf/gdp2q14_adv.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 $14,745.9 billion in IIQ2010 by GDP of $14,355.6 billion in IIQ2009 {[$14,745.9/$14,355.6 -1]100 = 2.7%], or accumulating the quarter on quarter growth rates (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html). The expansion from IQ1983 to IVQ1985 was at the average annual growth rate of 5.9 percent, 5.4 percent from IQ1983 to IIIQ1986, 5.2 percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987 and at 7.8 percent from IQ1983 to IVQ1983 (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html). The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IIQ2014 would have accumulated to 22.1 percent. GDP in IIQ2014 would be $18,305.0 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2,319.3 billion than actual $15,985.7 billion. There are about two trillion dollars of GDP less than at trend, explaining the 26.8 million unemployed or underemployed equivalent to actual unemployment of 16.3 percent of the effective labor force (Section II and earlier http://cmpassocregulationblog.blogspot.com/2014/07/financial-valuations-twenty-seven.html). US GDP in IIQ2014 is 12.7 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $15,985.7 billion in IIQ2014 or 6.6 percent at the average annual equivalent rate of 1.0 percent. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. The long-term trend is growth at average 3.3 percent per year from Jan 1919 to Jun 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 111.7242 in Dec 2007 to 120.3775 in Jun 2014. The actual index NSA in Jun 2014 is 101.9337, which is 15.3 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 113.0017 in Jun 2014. The output of manufacturing at 101.9337 in Jun 2014 is 9.8 percent below trend under this alternative calculation.

Chart I-13, US, Employment Level, Thousands, SA, 1948-2014

Source: US Bureau of Labor Statistics

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

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

Chart I-14, US, Civilian Labor Force, SA, 1948-2014, Thousands

Source: US Bureau of Labor Statistics

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

Chart I-15 for the period from 1948 to 2014. 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, 1948-2014, %

Source: US Bureau of Labor Statistics

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

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

Chart I-16, US, Unemployed, SA, 1948-2014, Thousands

Source: US Bureau of Labor Statistics

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

Chart I-17 provides the rate of unemployment of the US from 1948 to 2014. 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, 1948-2014

Source: US Bureau of Labor Statistics

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

Chart I-18 provides the number unemployed for 27 weeks and over from 1948 to 2014. 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 SA jumped from 1.132 million in May 2007 to 6.604 million in Jun 2010, by 5.472 million, or 483.4 percent.

Chart I-18, US, Unemployed for 27 Weeks or More, SA, 1948-2014, Thousands

Source: US Bureau of Labor Statistics

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

The employment-population ratio in Chart I-19 is an important indicator of wellbeing in labor markets, measuring the number of people with jobs. The US employment-population ratio fell from 63.5 in Dec 2006 to 58.6 in Jul 2011 and stands at 59.4 NSA in Jul 2014. There is no comparable decline followed by stabilization during an expansion in Chart I-19.

Chart I-19, US, Employment-Population Ratio, 1948-2014

Source: US Bureau of Labor Statistics

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

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

Chart I-20, US, Part-Time for Economic Reasons, NSA, 1955-2014, Thousands

Source: US Bureau of Labor Statistics

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

Table I-5 provides percentage change of real GDP in the United States in the 1930s, 1980s and 2000s. The recession in 1981-1982 is quite similar on its own to the 2007-2009 recession. In contrast, during the Great Depression in the four years of 1930 to 1933, GDP in constant dollars fell 26.4 percent cumulatively and fell 45.3 percent in current dollars (Pelaez and Pelaez, Financial Regulation after the Global Recession (2009a), 150-2, Pelaez and Pelaez, Globalization and the State, Vol. II (2009b), 205-7 and revisions in http://bea.gov/iTable/index_nipa.cfm). Data are available for the 1930s only on a yearly basis. US GDP fell 4.7 percent in the two recessions (1) from IQ1980 to IIIQ1980 and (2) from III1981 to 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, 4.2 percent in 1985, 3.5 percent in 1986 and 3.5 percent in 1987. In contrast, GDP grew, 2.5 percent in 2010, 1.6 percent in 2011, 2.3 percent in 2012 and 2.2 percent in 2013. Actual annual equivalent GDP growth in the four quarters of 2012, and six quarters from IQ2013 to IIQ2014 is 2.4 percent and 2.4 percent in the four quarters ending in IQ2014. GDP grew at 4.2 percent in 1985, 3.5 percent in 1986 and 3.5 percent in 1987 while the forecasts of the central tendency of participants of the Federal Open Market Committee (FOMC) are in the range of 2.1 to 2.3 percent in 2014 (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20140618.pdf) with less reliable forecast of 3.0 to 3.2 percent in 2015 (http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20140618.pdf). Growth of GDP in the expansion from IIIQ2009 to IIQ2014 has been at average 2.2 percent in annual equivalent.

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

Year	GDP ∆%	Year	GDP ∆%	Year	GDP ∆%
1930	-8.5	1980	-0.2	2000	4.1
1931	-6.4	1981	2.6	2001	1.0
1932	-12.9	1982	-1.9	2002	1.8
1933	-1.3	1983	4.6	2003	2.8
1934	10.8	1984	7.3	2004	3.8
1935	8.9	1985	4.2	2005	3.3
1936	12.9	1986	3.5	2006	2.7
1937	5.1	1987	3.5	2007	1.8
1938	-3.3	1988	4.2	2008	-0.3
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	1.6
1942	18.9	1992	3.6	2012	2.3
1943	17.0	1993	2.7	2013	2.2

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

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

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

	Number of Quarters	Cumulative Percentage Contraction	Average Percentage Rate
IIQ1953 to IIQ1954	3	-2.4	-0.8
IIIQ1957 to IIQ1958	3	-3.0	-1.0
IVQ1973 to IQ1975	5	-3.1	-0.6
IQ1980 to IIIQ1980	2	-2.2	-1.1
IIIQ1981 to IVQ1982	4	-2.5	-0.64
IVQ2007 to IIQ2009	6	-4.2	-0.72

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

Table I-7 shows the mediocre average annual equivalent growth rate of 2.2 percent of the US economy in the nineteen quarters of the current cyclical expansion from IIIQ2009 to IIQ2014. In sharp contrast, the average growth rate of GDP was:

• 5.7 percent in the first thirteen quarters of expansion from IQ1983 to IQ1986
• 5.4 percent in the first fifteen quarters of expansion from IQ1983 to IIIQ1986
• 5.2 percent in the first sixteen quarters of expansion from IQ1983 to IVQ1986
• 5.0 percent in the first seventeen quarters of expansion from IQ1983 to IQ1987
• 5.0 percent in the first eighteen quarters of expansion from IQ1983 to IIQ1987
• 4.9 percent in the first nineteen quarters of expansion from IQ1983 to IIIQ1987
• 5.0 percent in the first twenty quarters of expansion from IQ1983 to IVQ1987

The line “average first four quarters in four expansions” provides the average growth rate of 7.7 percent with 7.8 percent from IIIQ1954 to IIQ1955, 9.2 percent from IIIQ1958 to IIQ1959, 6.1 percent from IIIQ1975 to IIQ1976 and 7.8 percent from IQ1983 to IVQ1983. The United States missed this opportunity of high growth in the initial phase of recovery. BEA data show the US economy in standstill with annual growth of 2.5 percent in 2010 decelerating to 1.6 percent annual growth in 2011, 2.3 percent in 2012 and 2.2 percent in 2013 (http://www.bea.gov/iTable/index_nipa.cfm) The expansion from IQ1983 to IQ1986 was at the average annual growth rate of 5.7 percent, 5.2 percent from IQ1983 to IVQ1986, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from IQ1983 to IVQ1987 and at 7.8 percent from IQ1983 to IVQ1983. GDP growth in the four quarters of 2012, the four quarters of 2013 and the first two quarters of 2014 accumulated to 5.2 percent. This growth is equivalent to 2.2 percent per year, obtained by dividing GDP in IIQ2014 of $15,985.7 billion by GDP in IVQ2011 of $15,190.3 billion and compounding by 4/10: {[($15,985.7/$15,190.3)^4/10 -1]100 = 2.1 percent. The rate of growth of GDP in the revision of the third estimate of IIIQ2013 is 4.5 percent in seasonally adjusted annual rate (SAAR). Inventory accumulation contributed 1.49 percentage points to this rate of growth. The actual rate without this impulse of unsold inventories would have been 3.0 percent, or 0.74 percent in IIIQ2013, such that annual equivalent growth in 2013 is closer to 2.8 percent {[(1.007)(1.004)(1.0074)(1.009)^4/4-1]100 = 2.8%}, compounding the quarterly rates and converting into annual equivalent. Inventory divestment deducted 1.16 percentage points from GDP growth in IQ2014. Without this deduction of inventory divestment, GDP growth would have been minus 0.9 percent in IQ2014, such that the actual growth rates in the four quarters ending in IQ2014 is closer to 2.2 percent {[(1.004)(1.011)(1.009)(0.9977)]^4/4 -1]100 = 2.2%}.

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

	Number of Quarters	Cumulative Growth ∆%	Average Annual Equivalent Growth Rate
IIIQ 1954 to IQ1957	11	12.8	4.5
First Four Quarters IIIQ1954 to IIQ1955	4	7.8
IIQ1958 to IIQ1959	5	10.0	7.9
First Four Quarters IIIQ1958 to IIQ1959	4	9.2
IIQ1975 to IVQ1976	8	8.3	4.1
First Four Quarters IIIQ1975 to IIQ1976	4	6.1
IQ1983-IQ1986 IQ1983-IIIQ1986 IQ1983-IVQ1986 IQ1983-IQ1987 IQ1983-IIQ1987 IQ1983 to IIIQ1987 IQ1983 to IVQ1987	13 15 16 17 18 19 20	19.9 21.6 22.3 23.1 24.5 25.6 27.7	5.7 5.4 5.2 5.0 5.0 4.9 5.0
First Four Quarters IQ1983 to IVQ1983	4	7.8
Average First Four Quarters in Four Expansions*		7.7
IIIQ2009 to IIQ2014	20	11.4	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://www.bea.gov/iTable/index_nipa.cfm

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

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

Source: US Bureau of Labor Statistics

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

Chart I-22 provides the level of employment in the US from 2001 to 2014. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs. Recovery has been anemic compared with the shallow recession of 2001 that was followed by nearly vertical growth in jobs. The number employed in Jul 2014 was 147.265 million (NSA) or 0.050 million fewer people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population of ages 16 years and over increased from 231.958 million in Jul 2007 to 248.023 million in Jul 2014 or by 16.065 million. The number employed fell 0.03 percent from Jul 2007 to Jul 2014 while the noninstitutional civilian population of ages of 16 years and over, or those available for work, increased 6.9 percent. The ratio of employment to population in Jul 2007 was 63.5 percent (147.315 million employment as percent of population of 231.958 million). The same ratio in Jul 2014 would result in 157.495 million jobs (0.635 multiplied by noninstitutional civilian population of 248.023 million). There are effectively 10.230 million fewer jobs in Jul 2014 than in Jul 2007, or 157.495 million minus 147.265 million. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs.

Chart I-22, US, Employed, Thousands, 2001-2014

Source: US Bureau of Labor Statistics

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

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

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

Source: US Bureau of Labor Statistics

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

The civilian labor force in Chart I-24 grew steadily on an upward trend in the 2000s until it contracted together with the economy after 2007. There has not been recovery during the expansion but rather decline and marginal turn of the year 2011 into expansion in 2012 followed by stability and oscillation into 2013-2014. 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 only 0.8 percent higher at 157.573 million in Jul 2014, all numbers not seasonally adjusted. Chart I-24 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 157.573 million in Jul 2014 to the noninstitutional population of 248.023 million in Jul 2014 was 63.5 percent. The labor force of the US in Jul 2014 corresponding to 66.8 percent of participation in the population would be 165.679 million (0.668 x 248.023). The difference between the measured labor force in Jul 2014 of 157.573 million and the labor force in Jul 2014 with participation rate of 66.8 percent (as in Jul 2007) of 165.679 million is 8.106 million. The level of the labor force in the US has stagnated and is 8.106 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 labor force is the result of people giving up on finding another job.

Chart I-24, US, Civilian Labor Force, Thousands, 2001-2014

Source: US Bureau of Labor Statistics

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

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

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

Source: US Bureau of Labor Statistics

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

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

Chart I-26, US, Civilian Labor Force Participation Rate, 2001-2014, %

Source: US Bureau of Labor Statistics

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

Chart I-27 provides the number unemployed during the 1980s. The number unemployed peaked at 12.051 million in Dec 1982 seasonally adjusted and 12.517 in Jan 1983 million not seasonally adjusted, declining to 8.358 million in Dec 1984 seasonally adjusted and 7.978 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

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

Chart I-28 provides the number unemployed from 2001 to 2014. Using seasonally adjusted data, the number unemployed rose from 6.727 million in Oct 2006 to 15.352 million in Oct 2009, declining to 13.090 million in Dec 2011 and to 9.671 million in Jul 2014. 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 20013 and declining to 9.984 million in Dec 2013. The level of unemployment was 10.307 million in Jul 2014.

Chart I-28, US, Unemployed Thousands 2001-2014

Source: US Bureau of Labor Statistics

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

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

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

Source: US Bureau of Labor Statistics

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

The rate of unemployment in the US seasonally adjusted jumped from 4.4 percent in May 2007 to 10.0 percent in Oct 2009 and 9.9 percent in both Nov and Dec 2009, as shown in Chart I-30. The rate of unemployment fluctuated at around 9.0 percent in 2011, declining to 7.9 percent in Dec 2012 and 6.7 percent in Dec 2013. The rate of unemployed eased to 6.2 percent in Jul 2014.

Chart I-30, US, Unemployment Rate, 2001-2014, %

Source: US Bureau of Labor Statistics

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

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

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

Source: US Bureau of Labor Statistics

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

The US employment-population ratio seasonally adjusted has fallen from 63.4 in Dec 2006 to 58.5 in Dec 2011, 58.6 in Dec 2012 and 58.6 in Dec 2013, as shown in Chart I-32. The employment-population ratio reached 59.0 in Jul 2014. 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 58.5 percent in Dec 2013. The employment population ratio eased to 59.4 in Jul 2014.

Chart I-32, US, Employment Population Ratio, 2001-2014, %

Source: US Bureau of Labor Statistics

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

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

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

The number unemployed for 27 weeks or over, seasonally adjusted, increased sharply during the contraction as shown in Chart I-34 from 1.131 million in Nov 2006 to 6.770 million in Apr 2010 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 3.155 million in Jul 2014 seasonally adjusted and 3.207 million not seasonally adjusted.

Chart I-34, US, Number Unemployed for 27 Weeks or More, 2001-2014, SA, Thousands

Source: US Bureau of Labor Statistics

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

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

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

Source: US Bureau of Labor Statistics

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

The number of people working part-time because they cannot find full-time employment, not seasonally adjusted, increased sharply during the contraction from 3.787 million in Apr 2006, not seasonally adjusted, to 9.354 million in Dec 2009, as shown in Chart I-36. The number of people working part-time because of failure to find an alternative occupation stagnated at a very high level during the expansion, declining to 7.665 million not seasonally adjusted in Jul 2014.

Chart I-36, US, Part-Time for Economic Reasons, 2001-2014, Thousands

Source: US Bureau of Labor Statistics

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

The number marginally attached to the labor force in Chart I-37 jumped from 1.252 million in Dec 2006 to 2.800 million in Jan 2011, remaining at a high level of 2.540 million in Dec 2011, 2.809 million in Jan 2012 and 2.614 million in Dec 2012. The number marginally attached to the labor force eased to 2.427 million in Dec 2013 and 2.178 million in Jul 2014.

Chart I-37, US, Marginally Attached to the Labor Force, 2001-2014

Source: US Bureau of Labor Statistics

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

IA4 Job Creation. What is striking about the data in Table I-8 is that the numbers of monthly increases in jobs in 1983 and 1984 are several times higher than in 2010 to 2013. The civilian noninstitutional population grew by 41.0 percent from 174.215 million in 1983 to 245.679 million in 2013 and labor force higher by 39.3 percent, growing from 111.550 million in 1983 to 155.389 million in 2013. Total nonfarm payroll employment seasonally adjusted (SA) increased 209,000 in Jul 2014 and private payroll employment increased 198,000. The average monthly number of nonfarm jobs created from Jul 2012 to Jul 2013 was 193,583 using seasonally adjusted data, while the average number of nonfarm jobs created from Jul 2013 to Jul 2014 was 214,167, or increase by 10.6 percent. The average number of private jobs created in the US from Jul 2012 to Jul 2013 was 200,250, using seasonally adjusted data, while the average from Jul 2013 to Jul 2014 was 206,583, or increase by 3.2 percent. This blog calculates the effective labor force of the US at 162.690 million in Jul 2013 and 164.191 million in Jul 2014 (Table I-4), for growth of 1.501 million at average 125,083 per month. The difference between the average increase of 206,583 new private nonfarm jobs per month in the US from Jul 2013 to Jul 2014 and the 125,083 average monthly increase in the labor force from Jul 2013 to Jul 2014 is 81,500 monthly new jobs net of absorption of new entrants in the labor force. There are 26.768 million in job stress in the US currently. Creation of 81,500 new jobs per month net of absorption of new entrants in the labor force would require 328 months to provide jobs for the unemployed and underemployed (26.768 million divided by 81,500) or 27 years (328 divided by 12). The civilian labor force of the US in Jul 2014 not seasonally adjusted stood at 157.573 million with 10.307 million unemployed or effectively 16.925 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 164.191 million. Reduction of one million unemployed at the current rate of job creation without adding more unemployment requires 1.1 years (1 million divided by product of 81,500 by 12, which is 978,000). Reduction of the rate of unemployment to 5 percent of the labor force would be equivalent to unemployment of only 7.879 million (0.05 times labor force of 157.573 million) for new net job creation of 2.437 million (10.307 million unemployed minus 7.870 million unemployed at rate of 5 percent) that at the current rate would take 2.5 years (2.437 million divided by 0.978000). Under the calculation in this blog, there are 16.925 million unemployed by including those who ceased searching because they believe there is no job for them and effective labor force of 164.191 million. Reduction of the rate of unemployment to 5 percent of the labor force would require creating 11.257 million jobs net of labor force growth that at the current rate would take 8.9 years (16.925 million minus 0.05(164.191 million) = 8.715 million divided by 0.978000, 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 Jul 2014 was 147.265 million (NSA) or 0.050 million fewer people with jobs relative to the peak of 147.315 million in Jul 2007 while the civilian noninstitutional population of ages 16 years and over increased from 231.958 million in Jul 2007 to 248.023 million in Jul 2014 or by 16.065 million. The number employed fell 0.03 percent from Jul 2007 to Jul 2014 while the noninstitutional civilian population of ages of 16 years and over, or those available for work, increased 6.9 percent. The ratio of employment to population in Jul 2007 was 63.5 percent (147.315 million employment as percent of population of 231.958 million). The same ratio in Jul 2014 would result in 157.495 million jobs (0.635 multiplied by noninstitutional civilian population of 248.023 million). There are effectively 10.230 million fewer jobs in Jul 2014 than in Jul 2007, or 157.495 million minus 147.265 million. There is actually not sufficient job creation in merely absorbing new entrants in the labor force because of those dropping from job searches, worsening the stock of unemployed or underemployed in involuntary part-time jobs.

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

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

The argument that anemic population growth causes “secular stagnation” in the US (Hansen 1938, 1939, 1941) is as misplaced currently as in the late 1930s (for early dissent see Simons 1942). There is currently population growth in the ages of 16 to 24 years but not enough job creation and discouragement of job searches for all ages (http://cmpassocregulationblog.blogspot.com/2014/07/financial-risk-recovery-without-hiring.html). The proper explanation is not in secular stagnation but in cyclically slow growth. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IIQ2014 would have accumulated to 22.1 percent. GDP in IIQ2014 would be $18,305.0 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2,319.3 billion than actual $15,985.7 billion. There are about two trillion dollars of GDP less than at trend, explaining the 26.8 million unemployed or underemployed equivalent to actual unemployment of 16.3 percent of the effective labor force (Section II and earlier http://cmpassocregulationblog.blogspot.com/2014/07/financial-valuations-twenty-seven.html). US GDP in IIQ2014 is 12.7 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $15,985.7 billion in IIQ2014 or 6.6 percent at the average annual equivalent rate of 1.0 percent. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. The long-term trend is growth at average 3.3 percent per year from Jan 1919 to Jun 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 111.7242 in Dec 2007 to 120.3775 in Jun 2014. The actual index NSA in Jun 2014 is 101.9337, which is 15.3 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 113.0017 in Jun 2014. The output of manufacturing at 101.9337 in Jun 2014 is 9.8 percent below trend under this alternative calculation.

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

Month	1981	1982	1983	2008	2009	2010	Private
Jan	94	-326	224	15	-798	18	20
Feb	68	-5	-75	-86	-701	-50	-38
Mar	105	-130	172	-80	-826	156	113
Apr	73	-280	276	-214	-684	251	192
May	10	-45	277	-182	-354	516	94
Jun	197	-243	379	-172	-467	-122	110
Jul	112	-342	418	-210	-327	-61	120
Aug	-36	-158	-308	-259	-216	-42	117
Sep	-87	-181	1115	-452	-227	-57	107
Oct	-99	-277	271	-474	-198	241	199
Nov	-209	-123	353	-765	-6	137	149
Dec	-278	-14	356	-697	-283	71	94
			1984			2011	Private
Jan			446			70	72
Feb			481			168	223
Mar			275			212	231
Apr			363			322	320
May			308			102	166
Jun			379			217	186
Jul			313			106	219
Aug			242			122	125
Sep			310			221	268
Oct			286			183	177
Nov			349			164	191
Dec			128			196	222
			1985			2012	Private
Jan			266			360	364
Feb			124			226	228
Mar			346			243	246
Apr			196			96	102
May			274			110	131
Jun			146			88	75
Jul			190			160	172
Aug			193			150	136
Sep			203			161	159
Oct			188			225	255
Nov			209			203	211
Dec			167			214	215
			1986			2013	Private
Jan			125			197	219
Feb			107			280	263
Mar			94			141	164
Apr			187			203	188
May			127			199	222
Jun			-94			201	201
Jul			318			149	170
Aug			114			202	180
Sep			347			164	153
Oct			186			237	247
Nov			186			274	272
Dec			205			84	86
			1987			2014	Private
Jan			172			144	166
Feb			232			222	201
Mar			249			203	200
Apr			338			304	278
May			226			229	228
Jun			172			298	270
Jul			347			209	198
Aug			171
Sep			228
Oct			492
Nov			232
Dec			294

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 2013-2014 while population growth continued.

Chart I-38, US, Total Nonfarm Payroll Jobs SA 2001-2014

Source: US Bureau of Labor Statistics

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

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

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

Source: US Bureau of Labor Statistics

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

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

Chart I-40, US, Total Private Payroll Jobs SA 2001-2014

Source: US Bureau of Labor Statistics

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

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

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

Source: US Bureau of Labor Statistics

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

Types of jobs created, and not only the pace of job creation, may be important. Aspects of growth of payroll jobs from Jul 2013 to Jul 2014, not seasonally adjusted (NSA), are in Table I-9. Total nonfarm employment increased by 2,616,000 (row A, column Change), consisting of growth of total private employment by 2,518,000 (row B, column Change) and increase by 98,000 of government employment (row C, column Change). Monthly average growth of private payroll employment has been 209,833, which is mediocre relative to 24 to 30 million in job stress, while total nonfarm employment has grown on average by only 218,000 per month, which barely keeps with 125,083 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 175,000, at the monthly rate of 14,583 while private service providing employment grew by 2,074,000, at the monthly rate of 172,833. An important feature in Table I-9 is that jobs in professional and business services increased by 656,000 with temporary help services increasing by 215,000. 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 388,000 jobs in 12 months. An important characteristic is that the loss of government jobs has stabilized in federal government with loss of 43,000 jobs while states added 37,000 jobs and local government added 104,000 jobs. Local government provides the bulk of government jobs, 13.158 million, while federal government provides 2.729 million and states government 4.748 million.

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

	Jul 2013	Jul 2014	Change
A Total Nonfarm	136,050	138,666	2,616
B Total Private	115,513	118,031	2,518
B1 Goods Producing	19,010	19,454	444
B1a Manufacturing	12,040	12,215	175
B2 Private service providing	96,503	98,577	2,074
B2a Wholesale Trade	5,784	5,912	128
B2b Retail Trade	15,090	15,393	303
B2c Transportation & Warehousing	4,421	4,567	146
B2d Financial Activities	7,967	8,022	55
B2e Professional and Business Services	18,718	19,374	656
B2e1 Temporary help services	2,641	2,856	215
B2f Health Care & Social Assistance	17,698	18,038	340
B2g Leisure & Hospitality	14,965	15,353	388
C Government	20,537	20,635	98
C1 Federal	2,772	2,729	-43
C2 State	4,711	4,748	37
C3 Local	13,054	13,158	104

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 Jun 2014 and Jul 2014. 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 209,000 SA total nonfarm jobs created in Jul 2014 relative to Jun 2014 actually correspond to decrease of 1,100,000 jobs NSA, as shown in row A. Most of this difference in Jan 2014 is due to the necessary benchmark and seasonal adjustments in the beginning of every year. The 198,000 total private payroll jobs SA created in Jul 2014 relative to Jun 2014 actually correspond to increase of 127,000 jobs NSA. The analysis of NSA job creation in the prior Table I-9 does show improvement over the 12 months ending in Jun 2014 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

	Jun       2014 SA	Jul  2014 SA	∆	Jun     2014 NSA	Jul   2014 NSA	∆
A Total Nonfarm	138,795	139,004	209	139,776	138,666	-1,100
B Total Private	116,884	117,082	198	117,904	118,031	127
B1 Goods Producing	19,059	19,117	58	19,336	19,454	118
B1a Constr.	6,019	6,041	22	6,212	6,309	97
B Mfg	12,132	12,160	28	12,209	12,215	6
B2 Private Service Providing	97,825	97,965	140	98,568	98,577	9
B2a Wholesale Trade	5,874	5,876	2	5,915	5,912	-3
B2b Retail Trade	15,360	15,386	26	15,352	15,393	41
B2c Couriers     & Mess.	567	569	2	551	548	-3
B2d Health-care & Social Assistance	18,064	18,089	25	18,062	18,038	-24
B2De Profess. & Business Services	19,222	19,269	47	19,351	19,374	23
B2De1 Temp Help Services	2,872	2,881	9	2,890	2,856	34
B2f Leisure & Hospit.	14,626	14,647	21	15,264	15,353	89

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, 1972-2014

Source: Board of Governors of the Federal Reserve

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

Manufacturing jobs not seasonally adjusted increased 175,000 from Jul 2013 to
Jul 2014 or at the average monthly rate of 14,583. There are effects of the weaker economy and international trade together with the yearly adjustment of labor statistics. Industrial production increased 0.2 percent in Jun 2014 after increasing 0.5 percent in May 2014 and changing 0.0 percent in Apr 2014 with all data seasonally adjusted. The Federal Reserve completed its annual revision of industrial production and capacity utilization on Mar 28, 2014 (http://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm). The report of the Board of Governors of the Federal Reserve System states (http://www.federalreserve.gov/releases/g17/Current/default.htm):

“Industrial production increased 0.2 percent in June and advanced at an annual rate of 5.5 percent for the second quarter of 2014. In June, manufacturing output edged up 0.1 percent for its fifth consecutive monthly gain, while the production at mines moved up 0.8 percent and the output of utilities declined 0.3 percent. For the second quarter as a whole, manufacturing production rose at an annual rate of 6.7 percent, while mining output increased at an annual rate of 18.8 percent because of gains in the extraction of oil and gas; by contrast, the output of utilities fell at an annual rate of 21.4 percent following a weather-related increase of 15.6 percent in the first quarter. At 103.9 percent of its 2007 average, total industrial production in June was 4.3 percent above its level of a year earlier. The capacity utilization rate for total industry was unchanged in June at 79.1 percent, a rate that is 1.0 percentage point below its long-run (1972–2013) average.”

In the six months ending in Jun 2014, United States national industrial production accumulated increase of 2.3 percent at the annual equivalent rate of 4.7 percent, which is higher than growth of 4.3 percent in the 12 months ending in Jun 2014. Excluding growth of 0.9 percent in Feb 2014, growth in the remaining five months from Jan to Jun 2014 accumulated to 1.4 percent or 3.4 percent annual equivalent. Industrial production fell in one of the past six months and stagnated in another. Industrial production expanded at annual equivalent 2.8 percent in the most recent quarter from Apr to Jun 2014 and at 6.6 percent in the prior quarter Jan-Mar 2014. Business equipment accumulated growth of 4.1 percent in the six months from Jan 2013 to Jun 2014 at the annual equivalent rate of 8.5 percent, which is higher than growth of 4.7 percent in the 12 months ending in Jun 2014. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “The capacity utilization rate for total industry was unchanged in June at 79.1 percent, a rate that is 1.0 percentage point below its long-run (1972–2013) average.” United States industry apparently decelerated to a lower growth rate with possible acceleration in past months. Manufacturing fell 21.9 from the peak in Jun 2007 to the trough in Apr 2009 and increase by 19.9 percent from the trough in Apr 2009 to Dec 2013. Manufacturing grew 26.7 percent from the trough in Apr 2009 to Jun 2014. Manufacturing output in May 2014 is 1.1 percent below the peak in Jun 2007. Growth at trend in the entire cycle from IVQ2007 to IQ2014 would have accumulated to 21.2 percent. GDP in IQ2014 would be $18,172.7 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2,348.5 billion than actual $15,824.2 billion. There are about two trillion dollars of GDP less than at trend, explaining the 26.8 million unemployed or underemployed equivalent to actual unemployment of 16.3 percent of the effective labor force (Section II and earlier http://cmpassocregulationblog.blogspot.com/2014/07/financial-valuations-twenty-seven.html and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-risks-rules-discretionary.html). US GDP in IQ2014 is 12.9 percent lower than at trend. US GDP grew from $14,996.1 billion in IVQ2007 in constant dollars to $15,842.2 billion in IQ2014 or 5.5 percent at the average annual equivalent rate of 0.8 percent. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. The long-term trend is growth at average 3.3 percent per year from Jan 1919 to Jun 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 111.7242 in Dec 2007 to 120.3775 in Jun 2014. The actual index NSA in Jun 2014 is 101.9337, which is 15.3 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 113.0017 in Jun 2014. The output of manufacturing at 101.9337 in Jun 2014 is 9.8 percent below trend under this alternative calculation.

Table I-11 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 87.0 percent in IQ2014. Most of US national income is in the form of services. In Jul 2014, there were 138,666 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 118.031 million NSA in Jul 2014 accounted for 85.1 percent of total nonfarm jobs of 138.666 million, of which 12.215 million, or 10.3 percent of total private jobs and 8.8 percent of total nonfarm jobs, were in manufacturing. Private service-producing jobs were 98.577 million NSA in Jul 2014, or 71.1 percent of total nonfarm jobs and 83.5 percent of total private-sector jobs. Manufacturing has share of 10.9 percent in US national income in IQ2014, 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 IV2013	% Total	SAAR IQ2014	% Total
National Income WCCA	14,761.8	100.0	14,986.0	100.0
Domestic Industries	14,518.9	98.4	14,775.0	98.6
Private Industries	12,810.3	86.8	13,059.8	87.1
Agriculture	168.7	1.1	161.4	1.1
Mining	244.8	1.7	273.1	1.8
Utilities	171.8	1.2	209.1	1.4
Construction	641.5	4.3	661.2	4.4
Manufacturing	1630.5	11.0	1641.1	10.9
Durable Goods	914.0	6.2	948.7	6.3
Nondurable Goods	716.5	4.9	692.5	4.6
Wholesale Trade	890.1	6.0	905.5	6.0
Retail Trade	1017.5	6.9	1029.0	6.9
Transportation & WH	447.0	3.0	463.4	3.1
Information	540.0	3.7	573.7	3.8
Finance, Insurance, RE	2650.1	17.9	2633.9	17.6
Professional & Business Services	1973.7	13.4	2028.7	13.5
Education, Health Care	1439.9	9.8	1461.1	9.7
Arts, Entertainment	574.9	3.9	595.1	4.0
Other Services	419.9	2.8	423.6	2.8
Government	1708.6	11.6	1715.1	11.4
Rest of the World	242.9	1.6	211.0	1.4

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

Source: US Bureau of Economic Analysis

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

The NBER dates recessions in the US from peaks to troughs as: IQ80 to IIIQ80, IIIQ81 to IV82 and IVQ07 to IIQ09 (http://www.nber.org/cycles/cyclesmain.html). Table I-12 provides total annual level nonfarm employment in the US for the 1980s and the 2000s, which is different from 12-month comparisons. Nonfarm jobs rose by 4.859 million from 1982 to 1984, or 5.4 percent, and continued rapid growth in the rest of the decade. In contrast, nonfarm jobs are down by 7.661 million in 2010 relative to 2007 and fell by 958,000 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 137.936 million in 2007 to 136.368 million in 2013, by 1.568 million or 1.1 percent. The US noninstitutional population or in condition to work increased from 231.867 million in 2007 to 245.679 million in 2013, by 13.812 million or 6.0 percent. The ratio of nonfarm jobs in 2007 or 137.936 million in 2007 to the noninstitutional population of 231.867 was 59.5. Nonfarm jobs in 2013 corresponding to the ratio of 59.5 of nonfarm jobs/noninstitutional population would be 146.179 million (0.595x245.679). The difference between actual nonfarm jobs of 136.368 million in 2013 and nonfarm jobs of 146.179 million that are equivalent to 59.5 percent of the noninstitutional population as in 2007 is 9.811 million. The proper explanation for this loss of work opportunities is not in secular stagnation but in cyclically slow growth. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. Growth at trend in the entire cycle from IVQ2007 to IIQ2014 would have accumulated to 22.1 percent. GDP in IIQ2014 would be $18,305.0 billion (in constant dollars of 2009) if the US had grown at trend, which is higher by $2,319.3 billion than actual $15,985.7 billion. There are about two trillion dollars of GDP less than at trend, explaining the 26.8 million unemployed or underemployed equivalent to actual unemployment of 16.3 percent of the effective labor force (Section II and earlier http://cmpassocregulationblog.blogspot.com/2014/07/financial-valuations-twenty-seven.html). US GDP in IIQ2014 is 12.7 percent lower than at trend. US GDP grew from $14,991.8 billion in IVQ2007 in constant dollars to $15,985.7 billion in IIQ2014 or 6.6 percent at the average annual equivalent rate of 1.0 percent. Cochrane (2014Jul2) estimates US GDP at more than 10 percent below trend. The US missed the opportunity to grow at higher rates during the expansion and it is difficult to catch up because growth rates in the final periods of expansions tend to decline. The US missed the opportunity for recovery of output and employment always afforded in the first four quarters of expansion from recessions. Zero interest rates and quantitative easing were not required or present in successful cyclical expansions and in secular economic growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas (2011May). There is cyclical uncommonly slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing. The long-term trend is growth at average 3.3 percent per year from Jan 1919 to Jun 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 111.7242 in Dec 2007 to 120.3775 in Jun 2014. The actual index NSA in Jun 2014 is 101.9337, which is 15.3 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 113.0017 in Jun 2014. The output of manufacturing at 101.9337 in Jun 2014 is 9.8 percent below trend under this alternative calculation.

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

Year	Total Nonfarm	Year	Total Nonfarm
1980	90,533	2000	132,019
1981	91,297	2001	132,074
1982	89,689	2002	130,628
1983	90,295	2003	130,318
1984	94,548	2004	131,749
1985	97,532	2005	134,005
1986	99,500	2006	136,398
1987	102,116	2007	137,936
1988	105,378	2008	137,170
1989	108,051	2009	131,233
1990	109,527	2010	130,275
1991	108,427	2011	131,842
1992	108,802	2012	134,104
1993	110,935	2013	136,368

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

Chart I-43 provides annual nonfarm jobs in the US not seasonally adjusted from 2000 to 2013. Cyclically slow growth in the expansion since IIIQ2009 has not been sufficient to recover nonfarm jobs. Because of population growth, there are 9.811 million fewer nonfarm jobs in the US in 2013 than in 2007.

Chart I-43, US, Annual Nonfarm Jobs, NSA, Thousands, 2000-2013

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

Chart I-44 provides annual nonfarm jobs in the US not seasonally adjusted from 1980 to 1993. Much more rapid cyclical growth as in other expansions historically allowed steady and rapid growth of nonfarm job opportunities even with similarly dynamic population growth.

Chart I-44, US, Annual Nonfarm Jobs, NSA, Thousands, 1980-1993

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

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 $23.97/hour in Jul 2013 to $24.45/hour in Jul 2014, or by 2.0 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 and earlier at

http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html). Growth of consumption by decreasing savings by means of controlling interest rates in what is called financial repression may not be lasting and sound for personal finances (See Pelaez and Pelaez, Globalization and the State, Vol. II (2008c), 81-6, Pelaez (1975), Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-instability-mediocre-cyclical.html and earlier http://cmpassocregulationblog.blogspot.com/2014/03/financial-uncertainty-mediocre-cyclical.html

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

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

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

http://cmpassocregulationblog.blogspot.com/2013/04/mediocre-and-decelerating-united-states.html http://cmpassocregulationblog.blogspot.com/2013/03/mediocre-gdp-growth-at-16-to-20-percent.html http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states_24.html http://cmpassocregulationblog.blogspot.com/2012/12/mediocre-and-decelerating-united-states.html http://cmpassocregulationblog.blogspot.com/2012/09/historically-sharper-recoveries-from.html http://cmpassocregulationblog.blogspot.com/2012/09/collapse-of-united-states-dynamism-of.html http://cmpassocregulationblog.blogspot.com/2012/07/recovery-without-jobs-stagnating-real.html http://cmpassocregulationblog.blogspot.com/2012/06/mediocre-recovery-without-jobs.html http://cmpassocregulationblog.blogspot.com/2012/04/mediocre-growth-with-high-unemployment.html http://cmpassocregulationblog.blogspot.com/2012/04/mediocre-economic-growth-falling-real.html http://cmpassocregulationblog.blogspot.com/2012/03/mediocre-economic-growth-flattening.html http://cmpassocregulationblog.blogspot.com/2012/01/mediocre-economic-growth-financial.html http://cmpassocregulationblog.blogspot.com/2011/12/slow-growth-falling-real-disposable.html http://cmpassocregulationblog.blogspot.com/2011/11/us-growth-standstill-falling-real.html http://cmpassocregulationblog.blogspot.com/2011/10/slow-growth-driven-by-reducing-savings.html). Average hourly earnings seasonally adjusted changed 0.0 percent from $24.44 in Jun 2014 to $24.45 in Jul 2014. Average private weekly earnings increased $18.96 from $824.57 in Jul 2013 to $843.53 in Jul 2014 or 2.3 percent and moved from $843.18 in Jun 2014 to $843.53 in Jul 2014 or 0.0 percent. The inflation-adjusted wage bill can only be calculated for Jun, which is the most recent month for which there are estimates of the consumer price index. Earnings per hour (not-seasonally-adjusted (NSA)) rose from $23.93 in Jun 2013 to $24.41 in Jun 2014 or by 2.0 percent (http://www.bls.gov/data/; see Table IB-3 below). Data NSA are more suitable for comparison over a year. Average weekly hours NSA were 34.9 in Jun 2013 and 34.9 in Jun 2014 (http://www.bls.gov/data/; see Table IB-2 below). The wage bill increased 2.0 percent in the 12 months ending in Jun 2014:

{[(wage bill in May 2014)/(wage bill in May 2013)]-1}100 =

{[($24.41x34.9)/($23.93x34.9)]-1]}100

= {[($851.91)/($835.16)]-1}100 = 2.0%

CPI inflation was 2.1 percent in the 12 months ending in Jun 2014 (http://www.bls.gov/cpi/) for an inflation-adjusted wage-bill change of minus 0.1 percent :{[(1.02/1.021)-1]100 = -0.1%} (see Table IB-5 below for Jun 2014 with minor rounding difference). The wage bill for Jul 2014 before inflation adjustment increased 2.6 percent relative to the wage bill for Jul 2013:

{[(wage bill in Jul 2014)/(wage bill in Jul 2013)]-1}100 =

{[($24.29x34.5)/($23.81x34.3)]-1]}100

= {[($838.00)/($816.68)]-1}100 = 2.6%

Average hourly earnings increased 2.0 percent from Jul 2013 to Jul 2014 {[($24.29/$23.81) – 1]100 = 2.0%} while hours worked increased 0.6 percent {[(34.5/34.3) – 1]100 = 0.6%}. The increase of the wage bill is the product of the increase of hourly earnings of 2.0 percent and increase of hours worked of 0.6 percent {[(1.02x1.006) -1]100 = 2.6%}.

Energy and food price increases are similar to a “silent tax” that is highly regressive, harming the most those with lowest incomes. There are concerns that the wage bill would deteriorate in purchasing power because of renewed raw materials shocks in the form of increases in prices of commodities such as the 31.1 percent steady increase in the DJ-UBS Commodity Index from Jul 2, 2010 to Sep 2, 2011. The charts of four commodity price indexes by Bloomberg show steady increase since Jul 2, 2010 that was interrupted briefly only in Nov 2010 with the sovereign issues in Europe triggered by Ireland; in Mar 2011 by the earthquake and tsunami in Japan; and in the beginning of May 2011 by the decline in oil prices and sovereign risk difficulties in Europe (http://www.bloomberg.com/markets/commodities/futures/). Renewed risk aversion because of the sovereign risks in Europe had reduced the rate of increase of the DJ UBS commodity index to 10.2 percent on May 2, 2014, relative to Jul 2, 2010 (see Table VI-4) but there has been a shift in investor preferences into equities. Inflation has been rising in waves with carry trades driven by zero interest rates to commodity futures during periods of risk appetite with interruptions during risk aversion (http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.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	Jul 2013	May 2014	Jun 2014	Jul 2014
Total Private	$23.97	$24.38	$24.44	$24.45
Goods Producing	$25.16	$25.63	$25.75	$25.77
Service Providing	$23.69	$24.08	$24.13	$24.14
Average Weekly Earnings
Total Private	$824.57	$841.11	$843.18	$843.53
Goods Producing	$1,013.95	$1,040.58	$1,045.45	$1,043.69
Service Providing	$786.51	$801.86	$803.53	$803.86
Average Weekly Hours
Total Private	34.4	34.5	34.5	34.5
Goods Producing	40.3	40.6	40.6	40.5
Service Providing	33.2	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 34.9 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 34.7 in Dec 2013. Average weekly hours of all employees eased to 34.5 in Jul 2014.

Table IB-2, US, Average Weekly Hours of All Employees, NSA 2006-2014

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	34.1	34.3	34.7	34.4	34.7	34.9	34.7	35.0	34.5	34.5	34.9
2008	34.1	34.2	34.7	34.4	34.4	34.9	34.5	34.6	34.4	34.4	34.6	34.1
2009	33.8	34.2	33.9	33.6	33.7	33.8	33.8	34.3	33.7	33.8	34.2	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	34.2	34.6	34.4	34.4	34.4	34.4	34.8	34.3	34.4
2012	34.5	34.2	34.2	34.6	34.2	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	34.3	34.5	34.9	34.4	34.4	34.7
2014	34.0	34.4	34.7	34.4	34.4	34.9	34.5

Source: US Bureau of Labor Statistics

http://www.bls.gov/

Chart IB-1 provides average weekly hours monthly from Mar 2006 to May 2014. 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 2006-2014

Source: US Bureau of Labor Statistics

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

Calculations of inflation-adjusted average hourly earnings using BLS data are in Table IB-3. The final column of Table IB-3 (“12-Month Real ∆%”) provides inflation-adjusted average hourly earnings of all employees in the US. Average hourly earnings rose above inflation throughout the first nine months of 2007 just before the global recession that began in the final quarter of 2007 when average hourly earnings began to lose to inflation. In contrast, average hourly earnings of all US workers have risen less than inflation in four months in 2010 and in all but the first month in 2011 and the loss accelerated at 1.8 percent in Sep 2011, declining to a real loss of 1.1 percent in Feb 2012 and 0.6 percent in Mar 2012. There was a gain of 0.5 percent in Apr 2012 in inflation-adjusted average hourly earnings but another fall of 0.6 percent in May 2012 followed by increases of 0.3 percent in Jun and 1.0 percent in Jul 2012. Real hourly earnings stagnated in the 12 months ending in Aug 2012 with increase of only 0.1 percent, and increased 0.7 percent in the 12 months ending in Sep 2012. Real hourly earnings fell 1.3 percent in Oct 2012 and gained 1.0 percent in Dec 2012 but declined 0.3 percent in Jan 2013 and stagnated at change of 0.1 percent in Feb 2013. Real hourly earnings increased 0.4 percent in the 12 months ending in Mar 2013 and 0.2 percent in Apr 2013, increasing 0.6 percent in May 2013. In Jun 2013, real hourly earnings increased 1.0 percent relative to Jun 2012. Real hourly earnings fell 0.6 percent in the 12 months ending in Jul 2013 and increased 0.7 percent in the 12 months ending in Aug 2013. Real hourly earnings increased 1.2 percent in the 12 months ending in Oct 2013 and 1.0 percent in Nov 2013. Real hourly earnings increased 0.4 percent in the 12 months ending in Dec 2013. Real hourly earnings increased 0.4 percent in the 12 months ending in Jan 2014 and 1.7 percent in the 12 months ending in Feb 2014. Real hourly earnings increased 1.2 percent in the 12 months ending in Mar 2014. Real hourly earnings fell 0.1 percent in the 12 months ending in Apr 2014. Real hourly earnings stagnated at 0.0 percent in the 12 months ending in May 2014. Real hourly earnings fell 0.1 percent in the 12 months ending in Jun 2014. 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/2014/07/world-inflation-waves-united-states.html) and in part because of the collapse of hiring (http://cmpassocregulationblog.blogspot.com/2014/07/financial-risk-recovery-without-hiring.html) originating in weak economic growth (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.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*	$20.69*	4.2*	2.1	2.1*
Feb*	$20.77*	4.1*	2.4	1.7*
Mar	$20.80	3.6	2.8	0.8
Apr	$21.03	3.3	2.6	0.7
May	$20.82	3.8	2.7	1.1
Jun	$20.81	3.8	2.7	1.1
Jul	$20.97	3.4	2.4	1.0
Aug	$20.83	3.5	2.0	1.5
Sep	$21.17	4.0	2.8	1.2
Oct	$21.05	2.6	3.5	-0.9
Nov	$21.12	3.3	4.3	-1.0
Dec	$21.35	3.6	4.1	-0.5
2010
Jan	$22.53	2.0	2.6	-0.6
Feb	$22.59	1.4	2.1	-0.7
Mar	$22.49	1.1	2.3	-1.2
Apr	$22.54	1.8	2.2	-0.4
May	$22.61	2.5	2.0	0.5
Jun	$22.35	1.7	1.1	0.6
Jul	$22.42	1.8	1.2	0.6
Aug	$22.55	1.7	1.1	0.6
Sep	$22.61	1.8	1.1	0.7
Oct	$22.70	1.9	1.2	0.7
Nov	$22.70	1.1	1.1	0.0
Dec	$22.77	1.7	1.5	0.2
2011
Jan	$23.17	2.8	1.6	1.2
Feb	$23.00	1.8	2.1	-0.3
Mar	$22.91	1.9	2.7	-0.8
Apr	$22.97	1.9	3.2	-1.3
May	$23.07	2.0	3.6	-1.5
Jun	$22.82	2.1	3.6	-1.4
Jul	$22.95	2.4	3.6	-1.2
Aug	$22.86	1.4	3.8	-2.3
Sep	$23.06	2.0	3.9	-1.8
Oct	$23.31	2.7	3.5	-0.8
Nov	$23.16	2.0	3.4	-1.4
Dec	$23.22	2.0	3.0	-1.0
2012
Jan	$23.57	1.7	2.9	-1.2
Feb	$23.41	1.8	2.9	-1.1
Mar	$23.40	2.1	2.7	-0.6
Apr	$23.62	2.8	2.3	0.5
May	$23.33	1.1	1.7	-0.6
Jun	$23.28	2.0	1.7	0.3
Jul	$23.49	2.4	1.4	1.0
Aug	$23.27	1.8	1.7	0.1
Sep	$23.68	2.7	2.0	0.7
Oct	$23.52	0.9	2.2	-1.3
Nov	$23.59	1.9	1.8	0.1
Dec	$23.85	2.7	1.7	1.0
2013
Jan	$23.88	1.3	1.6	-0.3
Feb	$23.91	2.1	2.0	0.1
Mar	$23.84	1.9	1.5	0.4
Apr	$23.92	1.3	1.1	0.2
May	$23.80	2.0	1.4	0.6
Jun	$23.93	2.8	1.8	1.0
Jul	$23.81	1.4	2.0	-0.6
Aug	$23.79	2.2	1.5	0.7
Sep	$24.16	2.0	1.2	0.8
Oct	$24.04	2.2	1.0	1.2
Nov	$24.11	2.2	1.2	1.0
Dec	$24.30	1.9	1.5	0.4
2014
Jan	$24.35	2.0	1.6	0.4
Feb	$24.58	2.8	1.1	1.7
Mar	$24.48	2.7	1.5	1.2
Apr	$24.38	1.9	2.0	-0.1
May	$24.29	2.1	2.1	0.0
Jun	$24.41	2.0	2.1	-0.1
Jul	$24.29	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. Average hourly earnings in the US in constant dollars of 1982-1984 increased 0.3 percent in the 12 months ending in Jun 2012 and 0.9 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 1.0 percent in the 12 months ending in Dec 2012 but fell 0.3 percent in the 12 months ending in Jan 2013 and stagnated with gain of 0.2 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 0.7 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 0.6 percent in the 12 months ending in Jul 2013 and increased 0.7 percent in the 12 months ending in Aug 2013. Average hourly earnings adjusted for inflation increased 0.9 percent in the 12 months ending in Sep 2013 and increased 1.2 percent in the 12 months ending in Oct 2013. Average hourly earnings adjusted for inflation increased 0.9 percent in the 12 months ending in Nov 2013. Average hourly earnings increased 0.4 percent in the 12 months ending in Dec 2013 and 0.4 percent in the 12 months ending in Jan 2014. Average hourly earnings adjusted for inflation increased 1.7 percent in the 12 months ending in Feb 2014 and 1.2 percent in the 12 months ending in Mar 2014. Average hourly earnings adjusted for inflation decreased 0.1 percent in the 12 months ending in Apr 2014 and decreased 0.1 percent in the 12 months ending in May 2014.

Average hourly earnings adjusted for inflation decreased 0.1 percent in the 12 months ending in Jun 2014. 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). There were 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, 0.9 percent in Jul, 0.7 percent in Sep and 1.0 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 0.3 percent in the 12 months ending in Jan 2013, virtually stagnated with gain of 0.2 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 0.7 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 0.6 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, 3.1 percent in 2009 with reversal of carry trades, muted change of 0.1 percent in 2010 and no change in 2012 and decline by 1.1 percent in 2011. Average hourly earnings adjusted for inflation increased 0.5 percent in 2013. Annual average hourly earnings of all employees in the United States adjusted for inflation increased 1.9 percent from 2007 to 2013 at the yearly average rate of 0.3 percent (from $10.10 in 2007 to $10.29 in 2013 in constant dollars of 1982-1984 using data in http://www.bls.gov/data/). Those who still work bring back home a paycheck that buys fewer goods than a year earlier and savings in bank deposits do not pay anything because of financial repression (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-instability-mediocre-cyclical.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	Oct	Nov	Dec
2006			10.05	10.10	9.91	9.88	10.16	10.14	10.21
2007	10.22	10.21	10.13	10.17	10.01	9.99	10.07	10.05	10.16
2008	10.11	10.11	10.10	9.99	9.90	9.83	10.05	10.36	10.46
2009	10.46	10.50	10.46	10.38	10.31	10.19	10.31	10.38	10.37
2010	10.40	10.42	10.33	10.34	10.36	10.25	10.38	10.37	10.39
2011	10.52	10.39	10.25	10.21	10.21	10.11	10.29	10.24	10.29
2012	10.40	10.28	10.20	10.27	10.15	10.14	10.17	10.25	10.39
∆%12M	-1.1	-1.1	-0.5	0.6	-0.6	0.3	-1.2	0.1	1.0
2013	10.37	10.30	10.24	10.29	10.22	10.25	10.29	10.34	10.43
∆%12M	-0.3	0.2	0.4	0.2	0.7	1.1	1.2	0.9	0.4
2014	10.41	10.47	10.36	10.28	10.21	10.24
∆%12M	0.4	1.7	1.2	-0.1	-0.1	-0.1

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 $10.34 in 2009 and $10.35 in 2010 to $10.24 in 2011 and $10.24 again in 2012 or loss of 1.1 percent (data in http://www.bls.gov/data/). Annual real hourly earnings increased 0.5 percent in 2013 relative to 2012. The economic welfare or wellbeing of United States workers deteriorated in a recovery without hiring (http://cmpassocregulationblog.blogspot.com/2014/07/financial-valuations-twenty-seven.html), stagnating/declining real wages and 26.8 million unemployed or underemployed (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/07/financial-valuations-twenty-seven.html) because of mediocre economic growth (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html).

Chart IB-2, US, Average Hourly Earnings of All Employees in Constant Dollars of 1982-1984, SA 2006-2014

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

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

Chart IB-3, Average Hourly Earnings of All Employees NSA 12-Month Percent Change, 1982-1984 Dollars, NSA 2007-2014

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 and increased 0.6 percent in the 12 months ending in Oct 2011. Average weekly earnings fell 1.0 percent in the 12 months ending in Nov 2011 and 0.4 percent in the 12 months ending in Dec 2011. Average weekly earnings declined 0.3 percent in the 12 months ending in Jan 2012 and 0.5 percent in the 12 months ending in Feb 2012. Average weekly earnings in constant dollars were virtually flat in Mar 2012 relative to Mar 2011, decreasing 0.2 percent. Average weekly earnings in constant dollars increased 1.7 percent in Apr 2012 relative to Apr 2011 but fell 1.7 percent in May 2012 relative to May 2011, increasing 0.3 percent in the 12 months ending in Jun 2012 and 2.1 percent in the 12 months ending in Jul 2012. Real weekly earnings increased 0.4 percent in the 12 months ending in Aug 2012 and 2.1 percent in the 12 months ending in Sep 2012. Real weekly earnings fell 2.7 percent in the 12 months ending in Oct 2012 and increased 0.1 percent in the 12 months ending in Nov 2012 and 2.4 percent in the 12 months ending in Dec 2012. Real weekly earnings fell 1.7 percent in the 12 months ending in Jan 2013 and virtually stagnated with gain of 0.2 percent in the 12 months ending in Feb 2013, increasing 0.7 percent in the 12 months ending in Mar 2013. Real weekly earnings fell 0.7 percent in the 12 months ending in Apr 2013 and increased 0.9 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 2.0 percent in the 12 months ending in Jul 2013. Real weekly earnings increased 0.7 percent in the 12 months ending in Aug 2013, 0.8 percent in the 12 months ending in Sep 2013 and 1.5 percent in the 12 months ending in Oct 2013. Average weekly earnings increased 1.2 percent in the 12 months ending in Nov 2013 and fell 0.2 percent in the 12 months ending in Dec 2013. Average weekly earnings increased 0.4 percent in the 12 months ending in Jan 2014 and 2.3 percent in the 12 months ending in Feb 2014. Average weekly earnings increased 2.3 percent in the 12 months ending in Mar 2014 and 0.3 percent in the 12 months ending in Apr 2014. Average weekly earnings in constant dollars increased 0.2 percent in the 12 months ending in May 2014 and fell 0.1 percent in the 12 months ending in Jun 2014. Table I-5 confirms the trend of deterioration of purchasing power of average weekly earnings in 2011 and into 2013 with oscillations according to carry trades causing world inflation waves (http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html). On an annual basis, average weekly earnings in constant 1982-1984 dollars increased from $349.34 in 2007 to $354.16 in 2013, by 1.4 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 $353.11 in 2010 were virtually unchanged at $353.00 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 because of poor job creation with 26.8 million unemployed or underemployed (Section II and earlier

http://cmpassocregulationblog.blogspot.com/2014/07/financial-valuations-twenty-seven.html) in a recovery without hiring (http://cmpassocregulationblog.blogspot.com/2014/07/financial-valuations-twenty-seven.html) because of mediocre economic growth (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/06/financial-indecision-mediocre-cyclical.html).

Table IB-5, US, Average Weekly Earnings of All Employees in Constant Dollars of 1982-1984, NSA 2007-2014

Year	Jan	Feb	Mar	Apr	May	Jun
2006			343.54	349.61	339.78	341.73
2007	348.55	348.04	347.42	353.07	344.42	346.58
2008	344.58	345.89	350.37	343.80	340.46	343.08
2009	353.62	358.93	354.45	348.86	347.47	344.28
2010	350.39	350.20	349.29	351.53	356.49	349.66
2011	359.82	353.35	349.60	349.29	353.25	347.78
2012	358.75	351.67	348.87	355.19	347.19	348.98
∆%12M	-0.3	-0.5	-0.2	1.7	-1.7	0.3
2013	352.58	352.21	351.29	352.84	350.44	357.66
∆%12M	-1.7	0.2	0.7	-0.7	0.9	2.5
2014	353.93	360.14	359.49	353.76	351.23	357.43
∆%12M	0.4	2.3	2.3	0.3	0.2	-0.1

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 2012-2014.

Chart IB-4, US, Average Weekly Earnings of All Employees in Constant Dollars of 1982-1984, SA 2006-2014

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

Chart IB-5 provides 12-month percentage changes of average weekly earnings of all employees in the US in constant dollars of 1982-1984. 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. (http://cmpassocregulationblog.blogspot.com/2014/07/world-inflation-waves-united-states.html http://cmpassocregulationblog.blogspot.com/2014/06/valuation-risks-world-inflation-waves.html http://cmpassocregulationblog.blogspot.com/2014/05/world-inflation-waves-squeeze-of.html http://cmpassocregulationblog.blogspot.com/2014/04/imf-view-world-inflation-waves-squeeze.html http://cmpassocregulationblog.blogspot.com/2014/03/interest-rate-risks-world-inflation.html http://cmpassocregulationblog.blogspot.com/2014/01/world-inflation-waves-interest-rate.html http://cmpassocregulationblog.blogspot.com/2013/12/tapering-quantitative-easing-mediocre.html

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

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

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

Chart IB-5, US, Average Weekly Earnings of All Employees NSA in Constant Dollars of 1982-1984 12-Month Percent Change, NSA 2007-2014

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

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