Sunday, August 17, 2014

Weakening World Economic Growth, Recovery without Hiring, United States Industrial Production, Fewer Ten Million Full-time Jobs, United States Producer Prices, World Cyclical Slow Growth and Global Recession Risk: Part II

 

Weakening World Economic Growth, Recovery without Hiring, United States Industrial Production, Fewer Ten Million Full-time Jobs, United States Producer Prices, World Cyclical Slow Growth and Global Recession Risk

Carlos M. Pelaez

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

I Recovery without Hiring

IA1 Hiring Collapse

IA2 Labor Underutilization

ICA3 Ten Million Fewer Full-time Jobs

IA4 Theory and Reality of Cyclical Slow Growth Not Secular Stagnation: Youth and

Middle-Age Unemployment

II United States Industrial Production

IIB United States Producer Prices

IIC United States Import and Export Prices

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

I Recovery without Hiring. Professor Edward P. Lazear (2012Jan19) at Stanford University finds that recovery of hiring in the US to peaks attained in 2007 requires an increase of hiring by 30 percent while hiring levels increased by only 4 percent from Jan 2009 to Jan 2012. The high level of unemployment with low level of hiring reduces the statistical probability that the unemployed will find a job. According to Lazear (2012Jan19), the probability of finding a new job in early 2012 is about one third of the probability of finding a job in 2007. Improvements in labor markets have not increased the probability of finding a new job. Lazear (2012Jan19) quotes an essay coauthored with James R. Spletzer in the American Economic Review (Lazear and Spletzer 2012Mar, 2012May) on the concept of churn. A dynamic labor market occurs when a similar amount of workers is hired as those who are separated. This replacement of separated workers is called churn, which explains about two-thirds of total hiring. Typically, wage increases received in a new job are higher by 8 percent. Lazear (2012Jan19) argues that churn has declined 35 percent from the level before the recession in IVQ2007. Because of the collapse of churn, there are no opportunities in escaping falling real wages by moving to another job. As this blog argues, there are meager chances of escaping unemployment because of the collapse of hiring and those employed cannot escape falling real wages by moving to another job (Section I and earlier http://cmpassocregulationblog.blogspot.com/2014/07/financial-risk-recovery-without-hiring.html). Lazear and Spletzer (2012Mar, 1) argue that reductions of churn reduce the operational effectiveness of labor markets. Churn is part of the allocation of resources or in this case labor to occupations of higher marginal returns. The decline in churn can harm static and dynamic economic efficiency. Losses from decline of churn during recessions can affect an economy over the long-term by preventing optimal growth trajectories because resources are not used in the occupations where they provide highest marginal returns. Lazear and Spletzer (2012Mar 7-8) conclude that: “under a number of assumptions, we estimate that the loss in output during the recession [of 2007 to 2009] and its aftermath resulting from reduced churn equaled $208 billion. On an annual basis, this amounts to about .4% of GDP for a period of 3½ years.”

There are two additional facts discussed below: (1) there are about ten million fewer full-time jobs currently than before the recession of 2008 and 2009; and (2) the extremely high and rigid rate of youth unemployment is denying an early start to young people ages 16 to 24 years while unemployment of ages 45 years or over has swelled. There are four subsections. IA1 Hiring Collapse provides the data and analysis on the weakness of hiring in the United States economy. IA2 Labor Underutilization provides the measures of labor underutilization of the Bureau of Labor Statistics (BLS). Statistics on the decline of full-time employment are in IA3 Ten Million Fewer Full-time Jobs. IA4 Theory and Reality of Cyclical Slow Growth Not Secular Stagnation: Youth and Middle-Age Unemployment provides the data on high unemployment of ages 16 to 24 years and of ages 45 years or over.

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

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

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

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

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

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

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

The Bureau of Labor Statistics (BLS) revised on Mar 11, 2014 “job openings, hires and separations data to incorporate the annual update to the Current Employment Statistics employment estimates and the JOLTS seasonal adjustment factors. Unadjusted data and seasonally adjusted data from December 2000 forward are subject to revisions” (http://www.bls.gov/jlt/). Hiring in the nonfarm sector (HNF) has declined from 63.3 million in 2006 to 54.2 million in 2013 or by 9.1 million while hiring in the private sector (HP) has declined from 59.1 million in 2006 to 50.7 million in 2013 or by 8.4 million, as shown in Table I-1. The ratio of nonfarm hiring to employment (RNF) has fallen from 47.0 in 2005 to 39.7 in 2013 and in the private sector (RHP) from 52.7 in 2005 to 44.3 in 2013. Hiring has not recovered as in previous cyclical expansions because of the low rate of economic growth in the current cyclical expansion. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. 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 20 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 dividing 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 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html 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 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html 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 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html

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 Jul 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 122.8881 in Jul 2014. The actual index NSA in Jul 2014 is 98.4978, which is 19.8 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 115.2650 in Jul 2014. The output of manufacturing at 98.4978 in Jul 2014 is 14.5 percent below trend under this alternative calculation.

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

 

HNF

Rate RNF

HP

Rate HP

2001

62,633

47.4

58,501

52.7

2002

58,479

44.8

54,665

50.1

2003

56,949

43.7

53,584

49.3

2004

60,263

45.7

56,573

51.4

2005

62,951

47.0

59,179

52.7

2006

63,327

46.4

59,128

51.7

2007

62,104

45.0

57,797

49.9

2008

54,745

39.9

51,316

44.8

2009

45,931

35.0

42,703

39.3

2010

48,743

37.4

44,914

41.7

2011

50,295

38.1

47,183

43.0

2012

52,360

39.0

48,915

43.6

2013

54,191

39.7

50,718

44.3

Source: Bureau of Labor Statistics

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

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

clip_image001

Chart I-1, US, Level Total Nonfarm Hiring (HNF), Annual, 2001-2013

Source: US Bureau of Labor Statistics

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

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

clip_image002

Chart I-2, US, Rate Total Nonfarm Hiring (HNF), Annual, 2001-2015

Source: US Bureau of Labor Statistics

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

Yearly percentage changes of total nonfarm hiring (HNF) are provided in Table I-2. There were much milder declines in 2002 of 6.6 percent and 2.6 percent in 2003 followed by strong rebounds of 5.8 percent in 2004 and 4.5 percent in 2005. In contrast, the contractions of nonfarm hiring in the recession after 2007 were much sharper in percentage points: 1.9 in 2007, 11.8 in 2008 and 16.1 percent in 2009. On a yearly basis, nonfarm hiring grew 6.1 percent in 2010 relative to 2009, 3.2 percent in 2011, 4.1 percent in 2012 and 3.5 percent in 2013. The relatively large length of 18 quarters of the current expansion reduces the likelihood of significant recovery of hiring levels in the United States because lower rates of growth and hiring in the final phase of expansions.

Table I-2, US, Annual Total Nonfarm Hiring (HNF), Annual Percentage Change, 2002-2013

Year

Annual ∆%

2002

-6.6

2003

-2.6

2004

5.8

2005

4.5

2006

0.6

2007

-1.9

2008

-11.8

2009

-16.1

2010

6.1

2011

3.2

2012

4.1

2013

3.5

Source: US Bureau of Labor Statistics

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

Total private hiring (HP) yearly data are provided in Chart I-4. There has been sharp contraction of total private hiring in the US and only milder recovery from 2010 to 2013.

clip_image003

Chart I-4, US, Total Nonfarm Hiring Level, Annual, ∆%, 2001-2013

Source: Bureau of Labor Statistics

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

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

clip_image004

Chart I-5, US, Total Private Hiring, Annual, 2001-2013

Source: Bureau of Labor Statistics

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

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

clip_image005

Chart I-5A, US, Rate Total Private Hiring Level, Annual, 2001-2013

Source: Bureau of Labor Statistics

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

Total nonfarm hiring (HNF), total private hiring (HP) and their respective rates are provided for the month of Jun in the years from 2001 to 2014 in Table I-3. Hiring numbers are in thousands. There is moderate recovery in HNF from 4264 thousand (or 4.3 million) in Jun 2009 to 4708 thousand in Jun 2010, 4975 thousand in Jun 2011, 5035 thousand in Jun 2012, 5095 thousand in Jun 2013 and 5555 thousand in Jun 2014 for cumulative gain of 18.0 percent at average rate of 4.2 percent per year. HP rose from 3925 thousand in Jun 2009 to 4327 thousand in Jun 2010, 4600 thousand in Jun 2011, 4629 thousand in Jun 2012, 4706 thousand in Jun 2013 and 5164 thousand in Jun 2014 for cumulative gain of 31.6 percent at the average yearly rate of 7.1 percent. HNF has fallen from 6045 thousand in Jun 2006 to 5555 thousand in Jun 2014 or by 8.1 percent. HP has fallen from 5567 thousand in Jun 2006 to 5164 thousand in Jun 2014 or by 7.2 percent. The civilian noninstitutional population of the US, or individuals in condition to work, rose from 228.815 million in 2006 to 245.679 million in 2013 or by 16.864 million and the civilian labor force from 151.428 million in 2006 to 155.389 million in 2013 or by 3.961 million (http://www.bls.gov/data/). The number of nonfarm hires in the US fell from 63.327 million in 2006 to 54.191 million in 2013 or by 9.136 million and the number of private hires fell from 59.128 million in 2006 to 50.718 million in 2013 or by 8.410 million (http://www.bls.gov/jlt/). Private hiring of 59.128 million in 2006 was equivalent to 25.8 percent of the civilian noninstitutional population of 228.815, or those in condition of working, falling to 50.718 million in 2013 or 20.6 percent of the civilian noninstitutional population of 245.679 million in 2013. The percentage of hiring in civilian noninstitutional population of 25.8 percent in 2006 would correspond to 63.385 million of hiring in 2013, which would be 12.667 million higher than actual 50.718 million in 2013. Cyclical slow growth over the entire business cycle from IVQ2007 to the present in comparison with earlier cycles and long-term trend (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html) explains the fact that there are many million fewer hires in the US than before the global recession. The labor market continues to be fractured, failing to provide an opportunity to exit from unemployment/underemployment or to find an opportunity for advancement away from declining inflation-adjusted earnings.

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

 

HNF

Rate RNF

HP

Rate HP

2001 Jun

5762

4.3

5274

4.7

2002 Jun

5468

4.2

5052

4.6

2003 Jun

5440

4.1

5039

4.6

2004 Jun

5678

4.3

5289

4.8

2005 Jun

6069

4.5

5675

5.0

2006 Jun

6045

4.4

5567

4.8

2007 Jun

5992

4.3

5509

4.7

2008 Jun

5513

4.0

5109

4.4

2009 Jun

4264

3.2

3925

3.6

2010 Jun

4708

3.6

4327

4.0

2011 Jun

4975

3.7

4600

4.2

2012 Jun

5035

3.7

4629

4.1

2013 Jun

5095

3.7

4706

4.1

2014 Jun

5555

4.0

5164

4.4

Source: Bureau of Labor Statistics

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

Chart I-6 provides total nonfarm hiring on a monthly basis from 2001 to 2014. Nonfarm hiring rebounded in early 2010 but then fell and stabilized at a lower level than the early peak not-seasonally adjusted (NSA) of 4841 in May 2010 until it surpassed it with 4975 in Jun 2011 but declined to 3084 in Dec 2012. Nonfarm hiring fell to 3012 in Dec 2011 from 3810 in Nov and to revised 3614 in Feb 2012, increasing to 4220 in Mar 2012, 3084 in Dec 2012 and 4223 in Jan 2013 and declining to 3861 in Feb 2013. Nonfarm hires not seasonally adjusted increased to 4165 in Nov 2013 and 3271 in Dec 2013. Nonfarm hires reached 5555 in Jun 2014. Chart I-6 provides seasonally adjusted (SA) monthly data. The number of seasonally-adjusted hires in Oct 2011 was 4237 thousand, increasing to revised 4446 thousand in Feb 2012, or 4.9 percent, moving to 4343 in Dec 2012 for cumulative increase of 2.0 percent from 4256 in Dec 2011 and 4578 in Dec 2013 for increase of 5.4 percent relative to 4343 in Dec 2012. The number of hires not seasonally adjusted was 4975 in Jun 2011, falling to 3012 in Dec 2011 but increasing to 4112 in Jan 2012 and declining to 3084 in Dec 2012. The number of nonfarm hiring not seasonally adjusted fell by 39.5 percent from 4975 in Jun 2011 to 3012 in Dec 2011 and fell 38.7 percent from 5035 in Jun 2012 to 3084 in Dec 2012 in a yearly-repeated seasonal pattern. The number of nonfarm hires not seasonally adjusted fell from 5095 in Jun 2013 to 3271 in Dec 2013, or decline of 35.8 percent, showing strong seasonality.

clip_image006

Chart I-6, US, Total Nonfarm Hiring (HNF), 2001-2014 Month SA

Source: Bureau of Labor Statistics

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

Similar behavior occurs in the rate of nonfarm hiring in Chart I-7. Recovery in early 2010 was followed by decline and stabilization at a lower level but with stability in monthly SA estimates of 3.2 in Aug 2011 to 3.2 in Jan 2012, increasing to 3.3 in May 2012 and falling to 3.2 in Jun 2012. The rate stabilized at 3.2 in Jul 2012, increasing to 3.3 in Aug 2012 but falling to 3.2 in Dec 2012 and 3.3 in Dec 2013. The rate not seasonally adjusted fell from 3.7 in Jun 2011 to 2.3 in Dec 2011, climbing to 3.7 in Jun 2012 but falling to 2.3 in Dec 2012. The rate of nonfarm hires not seasonally adjusted fell from 3.7 in Jun 2013 to 2.4 in Dec 2013. Rates of nonfarm hiring NSA were in the range of 2.7 (Dec) to 4.4 (Jun) in 2006.

clip_image007

Chart I-7, US, Rate Total Nonfarm Hiring, Month SA 2001-2014

Source: Bureau of Labor Statistics

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

There is only milder improvement in total private hiring shown in Chart I-8. Hiring private (HP) rose in 2010 with stability and renewed increase in 2011 followed by almost stationary series in 2012. The number of private hiring seasonally adjusted fell from 4057 thousand in Sep 2011 to 3962 in Dec 2011 or by 2.3 percent, decreasing to 3998 in Jan 2012 or decline by 1.5 percent relative to the level in Sep 2011. Private hiring fell to 3959 in Sep 2012 or lower by 2.4 percent relative to Sep 2011, moving to 4061 in Dec 2012 for increase of 1.6 percent relative to 3998 in Jan 2012. The number of private hiring not seasonally adjusted fell from 4600 in Jun 2011 to 2833 in Dec 2011 or by 38.4 percent, reaching 3853 in Jan 2012 or decline of 16.2 percent relative to Jun 2011 and moving to 2911 in Dec 2012 or 37.1 percent lower relative to 4629 in Jun 2012. Hires fell from 4706 in Jun 2013 to 3098 in Dec 2013. Companies reduce hiring in the latter part of the year that explains the high seasonality in year-end employment data. For example, NSA private hiring fell from 5567 in Jun 2006 to 3568 in Dec 2006 or by 35.9 percent. Private hiring NSA data are useful in showing the huge declines from the period before the global recession. In Jul 2006, private hiring NSA was 5501, declining to 4326 in Jul 2011 or by 21.4 percent and to 4354 in Jul 2012 or lower by 20.9 percent relative to Jul 2006. Private hiring NSA fell from 5567 in Jun 2006 to 5164 in Jun 2014 or 7.2 percent. Private hiring fell from 5501 in Jul 2006 to 4632 in Jul 2013 or 15.8 percent. The conclusion is that private hiring in the US is around 20 percent below the hiring before the global recession while the noninstitutional population of the United States has grown from 228.815 million in 2006 to 245.679 million in 2013, by 16.864 million or 7.4 percent. The main problem in recovery of the US labor market has been the low rate of GDP growth. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent.

clip_image008

Chart I-8, US, Total Private Hiring Month SA 2001-2014

Source: Bureau of Labor Statistics

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

Chart I-9 shows similar behavior in the rate of private hiring. The rate in 2011 in monthly SA data did not rise significantly above the peak in 2010. The rate seasonally adjusted fell from 3.7 in Sep 2011 to 3.6 in Dec 2011 and reached 3.6 in Dec 2012 and 3.7 in Dec 2013. The rate not seasonally adjusted (NSA) fell from 3.7 in Sep 2011 to 2.5 in Dec 2011, increasing to 3.8 in Oct 2012 but falling to 2.6 in Dec 2012 and 3.4 in Mar 2013. The NSA rate of private hiring fell from 4.8 in Jul 2006 to 3.4 in Aug 2009 but recovery was insufficient to only 3.9 in Aug 2012, 2.6 in Dec 2012 and 2.7 in Dec 2013. The NSA rate increased to 4.4 in Jun 2014.

clip_image009

Chart I-9, US, Rate Total Private Hiring Month SA 2001-2014

Source: Bureau of Labor Statistics

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

The JOLTS report of the Bureau of Labor Statistics also provides total nonfarm job openings (TNF JOB), TNF JOB rate and TNF LD (layoffs and discharges) shown in Table I-4 for the month of Jun from 2001 to 2014. The final column provides annual TNF LD for the years from 2001 to 2013. Nonfarm job openings (TNF JOB) increased from a peak of 4580 in Jun 2007 to 4712 in Jun 2014 or by 2.9 percent while the rate increased from 3.2 to 3.3. Nonfarm layoffs and discharges (TNF LD) rose from 1604 in Jun 2006 to 2001 in Jun 2009 or by 24.8 percent. The annual data show layoffs and discharges rising from 20.9 million in 2006 to 26.4 million in 2009 or by 26.3 percent. Business pruned payroll jobs to survive the global recession but there has not been hiring because of the low rate of GDP growth. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. 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 20 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 dividing 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 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html 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 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html 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 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html

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 Jul 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 122.8881 in Jul 2014. The actual index NSA in Jul 2014 is 98.4978, which is 19.8 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 115.2650 in Jul 2014. The output of manufacturing at 98.4978 in Jul 2014 is 14.5 percent below trend under this alternative calculation.

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

 

TNF JOB

TNF JOB
Rate

TNF LD

TNF LD
Annual

Jun 2001

4155

3.0

1774

24138

Jun 2002

3257

2.4

1716

22706

Jun 2003

3276

2.4

1987

23490

Jun 2004

3298

2.4

1759

22668

Jun 2005

3911

2.8

1841

22243

Jun 2006

4260

3.0

1604

20896

Jun 2007

4580

3.2

1735

21958

Jun 2008

3638

2.6

1874

24028

Jun 2009

2372

1.8

2001

26444

Jun 2010

2715

2.0

1924

21829

Jun 2011

3196

2.4

1754

20805

Jun 2012

3791

2.7

1712

20892

Jun 2013

3954

2.8

1618

19964

Jun 2014

4712

3.3

1562

 

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

Source: Bureau of Labor Statistics

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

Chart I-10 shows monthly job openings rising from the trough in 2009 to a high in the beginning of 2010. Job openings then stabilized into 2011 but have surpassed the peak of 3080 seasonally adjusted in Apr 2010 with 3646 seasonally adjusted in Dec 2012, which is higher by 18.4 percent relative to Apr 2010 but lower by 2.9 percent relative to 3755 in Nov 2012 and lower by 4.7 percent than 3827 in Mar 2012. Nonfarm job openings increased from 3646 in Dec 2012 to 3914 in Dec 2013 or by 7.4 percent. The high of job openings not seasonally adjusted was 3428 in Apr 2010 that was surpassed by 3661 in Jul 2011, increasing to 3939 in Oct 2012 but declining to 3152 in Dec 2012 and decreasing to 3387 in Dec 2013. The level of job openings not seasonally adjusted fell to 3152 in Dec 2012 or by 21.3 percent relative to 4005 in Apr 2012. There is here again the strong seasonality of year-end labor data. Job openings fell from 4209 in Apr 2013 to 3387 in Dec 2013, showing strong seasonal effects. The level of job openings of 4712 in Jun 2014 NSA is higher by 2.9 percent relative to 4580 in Jun 2007. The main problem in recovery of the US labor market has been the low rate of GDP growth. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent.

clip_image010

Chart I-10, US Job Openings, Thousands NSA, 2001-2014

Source: US Bureau of Labor Statistics

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

The rate of job openings in Chart I-11 shows similar behavior. The rate seasonally adjusted increased from 2.2 in Jan 2011 to 2.6 in Dec 2011, 2.6 in Dec 2012 and 2.8 in Dec 2013. The rate seasonally adjusted stood at 3.3 in Jun 2014. The rate not seasonally adjusted rose from the high of 2.6 in Apr 2010 to 3.0 in Apr 2013 and 2.6 in Nov 2013. The rate of job openings NSA fell from 3.3 in Jul 2007 to 1.6 in Nov-Dec 2009, recovering insufficiently to 3.3 in Jun 2014.

clip_image011

Chart I-11, US, Rate of Job Openings, NSA, 2001-2014

Source: US Bureau of Labor Statistics

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

Total separations are shown in Chart I-12. Separations are much lower in 2012-14 than before the global recession but hiring has not recovered.

clip_image012

Chart I-12, US, Total Nonfarm Separations, Month Thousands SA, 2001-2014

Source: US Bureau of Labor Statistics

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

Annual total separations are shown in Chart I-13. Separations are much lower in 2011-2014 than before the global recession but without recovery in hiring.

clip_image013

Chart I-13, US, Total Separations, Annual, Thousands, 2001-2013

Source: US Bureau of Labor Statistics

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

Table I-5 provides total nonfarm total separations from 2001 to 2013. Separations fell from 61.1 million in 2006 to 47.8 million in 2010 or by 13.3 million and 48.2 million in 2011 or by 12.9 million. Total separations increased from 48.2 million in 2011 to 51.8 million in 2013 or by 3.6 million.

Table I-5, US, Total Nonfarm Total Separations, Thousands, 2001-2013

Year

Annual

2001

64472

2002

59003

2003

56970

2004

58238

2005

60494

2006

61117

2007

60838

2008

58227

2009

51127

2010

47750

2011

48220

2012

50070

2013

51837

Source: US Bureau of Labor Statistics

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

Monthly data of layoffs and discharges reach a peak in early 2009, as shown in Chart I-14. Layoffs and discharges dropped sharply with the recovery of the economy in 2010 and 2011 once employers reduced their job count to what was required for cost reductions and loss of business. Weak rates of growth of GDP (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html) frustrated employment recovery. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent.

clip_image014

Chart I-14, US, Total Nonfarm Layoffs and Discharges, Monthly Thousands SA, 2001-2014

Source: US Bureau of Labor Statistics

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

Layoffs and discharges in Chart I-15 rose sharply to a peak in 2009. There was pronounced drop into 2010 and 2011 with mild increase into 2012 and renewed decline into 2013.

clip_image015

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

Source: US Bureau of Labor Statistics

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

Table I-6 provides annual nonfarm layoffs and discharges from 2001 to 2013. Layoffs and discharges peaked at 26.4 million in 2009 and then fell to 20.8 million in 2011, by 5.6 million, or 21.2 percent. Total nonfarm layoffs and discharges increased mildly to 20.9 million in 2012, falling to 19.9 million in 2013.

Table I-6, US, Total Nonfarm Layoffs and Discharges, Thousands, 2001-2013

Year

Annual

2001

24138

2002

22706

2003

23490

2004

22668

2005

22243

2006

20896

2007

21958

2008

24028

2009

26444

2010

21829

2011

20805

2012

20892

2013

19964

Source: US Bureau of Labor Statistics

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

IA2 Labor Underutilization. The Bureau of Labor Statistics also provides alternative measures of labor underutilization shown in Table I-7. The most comprehensive measure is U6 that consists of total unemployed plus total employed part time for economic reasons plus all marginally attached workers as percent of the labor force. U6 not seasonally adjusted has risen from 8.2 percent in 2006 to 12.6 percent in Jul 2014.

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

 

U1

U2

U3

U4

U5

U6

2014

           

Jul

2.8

3.1

6.5

7.0

7.8

12.6

Jun

2.8

3.0

6.3

6.7

7.5

12.4

May

3.1

3.0

6.1

6.5

7.3

11.7

Apr

3.3

3.2

5.9

6.3

7.2

11.8

Mar

3.7

3.7

6.8

7.2

8.1

12.8

Feb

3.6

3.9

7.0

7.5

8.4

13.1

Jan

3.5

4.0

7.0

7.5

8.6

13.5

2013

           

Dec

3.5

3.5

6.5

7.0

7.9

13.0

Nov

3.7

3.5

6.6

7.1

7.9

12.7

Oct

3.7

3.6

7.0

7.4

8.3

13.2

Sep

3.7

3.5

7.0

7.5

8.4

13.1

Aug

3.7

3.8

7.3

7.9

8.7

13.6

Jul

3.7

3.8

7.7

8.3

9.1

14.3

Jun

3.9

3.8

7.8

8.4

9.3

14.6

May

4.1

3.7

7.3

7.7

8.5

13.4

Apr

4.3

3.9

7.1

7.6

8.5

13.4

Mar

4.3

4.3

7.6

8.1

9.0

13.9

Feb

4.3

4.6

8.1

8.6

9.6

14.9

Jan

4.3

4.9

8.5

9.0

9.9

15.4

2012

           

Dec

4.2

4.3

7.6

8.3

9.2

14.4

Nov

4.2

3.9

7.4

7.9

8.8

13.9

Oct

4.3

3.9

7.5

8.0

9.0

13.9

Sep

4.2

4.0

7.6

8.0

9.0

14.2

Aug

4.3

4.4

8.2

8.7

9.7

14.6

Jul

4.3

4.6

8.6

9.1

10.0

15.2

Jun

4.5

4.4

8.4

8.9

9.9

15.1

May

4.7

4.3

7.9

8.4

9.3

14.3

Apr

4.8

4.3

7.7

8.3

9.1

14.1

Mar

4.9

4.8

8.4

8.9

9.7

14.8

Feb

4.9

5.1

8.7

9.3

10.2

15.6

Jan

4.9

5.4

8.8

9.4

10.5

16.2

2011

           

Dec

4.8

5.0

8.3

8.8

9.8

15.2

Nov

4.9

4.7

8.2

8.9

9.7

15.0

Oct 

5.0

4.8

8.5

9.1

10.0

15.3

Sep

5.2

5.0

8.8

9.4

10.2

15.7

Aug

5.2

5.1

9.1

9.6

10.6

16.1

Jul

5.2

5.2

9.3

10.0

10.9

16.3

Jun

5.1

5.1

9.3

9.9

10.9

16.4

May

5.5

5.1

8.7

9.2

10.0

15.4

Apr

5.5

5.2

8.7

9.2

10.1

15.5

Mar

5.7

5.8

9.2

9.7

10.6

16.2

Feb

5.6

6.0

9.5

10.1

11.1

16.7

Jan

5.6

6.2

9.8

10.4

11.4

17.3

Dec  2010

5.4

5.9

9.1

9.9

10.7

16.6

Annual

           

2013

3.9

3.9

7.4

7.9

8.8

13.8

2012

4.5

4.4

8.1

8.6

9.5

14.7

2011

5.3

5.3

8.9

9.5

10.4

15.9

2010

5.7

6.0

9.6

10.3

11.1

16.7

2009

4.7

5.9

9.3

9.7

10.5

16.2

2008

2.1

3.1

5.8

6.1

6.8

10.5

2007

1.5

2.3

4.6

4.9

5.5

8.3

2006

1.5

2.2

4.6

4.9

5.5

8.2

2005

1.8

2.5

5.1

5.4

6.1

8.9

2004

2.1

2.8

5.5

5.8

6.5

9.6

2003

2.3

3.3

6.0

6.3

7.0

10.1

2002

2.0

3.2

5.8

6.0

6.7

9.6

2001

1.2

2.4

4.7

4.9

5.6

8.1

2000

0.9

1.8

4.0

4.2

4.8

7.0

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

Source: US Bureau of Labor Statistics

http://www.bls.gov/

Monthly seasonally adjusted measures of labor underutilization are provided in Table I-8. U6 climbed from 16.1 percent in Aug 2011 to 16.3 percent in Sep 2011 and then fell to 14.5 percent in Mar 2012, reaching 12.2 percent in Jul 2014. Unemployment is an incomplete measure of the stress in US job markets. A different calculation in this blog is provided by using the participation rate in the labor force before the global recession. This calculation shows 26.8 million in job stress of unemployment/underemployment in Jul 2013, not seasonally adjusted, corresponding to 16.3 percent of the labor force (Table I-4 http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html).

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

 

U1

U2

U3

U4

U5

U6

July 2014

2.9

3.1

6.2

6.6

7.5

12.2

Jun

2.9

3.1

6.1

6.5

7.3

12.1

May

3.1

3.2

6.3

6.7

7.6

12.2

Apr

3.2

3.4

6.3

6.7

7.6

12.3

Mar

3.5

3.5

6.7

7.1

8.0

12.7

Feb

3.5

3.5

6.7

7.2

8.1

12.6

Jan

3.4

3.5

6.6

7.1

8.1

12.7

Dec 2013

3.6

3.5

6.7

7.2

8.1

13.1

Nov

3.7

3.7

7.0

7.4

8.2

13.1

Oct

3.8

4.0

7.2

7.7

8.6

13.7

Sep

3.8

3.7

7.2

7.7

8.6

13.6

Aug

3.8

3.8

7.2

7.8

8.6

13.6

Jul

3.9

3.8

7.3

7.9

8.7

13.9

Jun

4.0

3.9

7.5

8.1

9.0

14.2

May

4.0

3.9

7.5

8.0

8.8

13.8

Apr

4.1

4.1

7.5

8.0

8.9

13.9

Mar

4.1

4.1

7.5

8.0

8.9

13.8

Feb

4.2

4.2

7.7

8.3

9.3

14.3

Jan

4.2

4.3

7.9

8.4

9.3

14.4

Dec 2012

4.3

4.2

7.9

8.5

9.4

14.4

Nov

4.2

4.1

7.8

8.3

9.2

14.4

Oct

4.4

4.2

7.8

8.3

9.2

14.4

Sep

4.3

4.2

7.8

8.3

9.3

14.7

Aug

4.4

4.5

8.1

8.6

9.6

14.7

Jul

4.5

4.6

8.2

8.7

9.7

14.9

Jun

4.6

4.6

8.2

8.7

9.6

14.8

May

4.6

4.5

8.2

8.7

9.6

14.8

Apr

4.6

4.4

8.2

8.7

9.5

14.6

Mar

4.7

4.6

8.2

8.7

9.6

14.5

Feb

4.8

4.6

8.3

8.9

9.8

15.0

Jan

4.8

4.7

8.2

8.8

9.8

15.1

Dec 2011

4.9

4.9

8.5

9.1

10.0

15.2

Nov

5.0

5.0

8.6

9.3

10.2

15.6

Oct

5.1

5.1

8.8

9.4

10.3

15.9

Sep

5.4

5.2

9.0

9.6

10.5

16.3

Aug

5.3

5.2

9.0

9.6

10.5

16.1

Jul

5.3

5.3

9.0

9.7

10.6

16.0

Jun

5.3

5.3

9.1

9.7

10.7

16.1

May

5.3

5.4

9.0

9.5

10.3

15.8

Apr

5.2

5.4

9.1

9.7

10.5

16.1

Mar

5.3

5.4

9.0

9.5

10.4

15.9

Feb

5.4

5.5

9.0

9.6

10.6

16.0

Jan

5.5

5.5

9.1

9.7

10.7

16.1

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

Source: US Bureau of Labor Statistics

http://www.bls.gov/

Chart I-16 provides U6 on a monthly basis from 2001 to 2014. There was a steep climb from 2007 into 2009 and then this measure of unemployment and underemployment stabilized at that high level but declined into 2012. The low of U6 SA was 8.0 percent in Mar 2007 and the peak was 17.1 percent in Apr 2010. The low NSA was 7.6 percent in Oct 2006 and the peak was 18.0 percent in Jan 2010.

clip_image016

Chart I-16, US, U6, total unemployed, plus all marginally attached workers, plus total employed Part-Time for Economic Reasons, Month, SA, 2001-2014

Source: US Bureau of Labor Statistics

http://www.bls.gov/

Chart I-17 provides the number employed part-time for economic reasons or who cannot find full-time employment. There are sharp declines at the end of 2009, 2010 and 2011 but an increase in 2012 followed by stability in 2013-2014.

clip_image017

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

Thousands, Month SA 2001-2014

Sources: US Bureau of Labor Statistics

http://www.bls.gov/

ICA3 Ten Million Fewer Full-time Jobs. There is strong seasonality in US labor markets around the end of the year.

  • Seasonally adjusted part-time for economic reasons. The number employed part-time for economic reasons because they could not find full-time employment fell from 9.068 million in Sep 2011 to 7.780 million in Mar 2012, seasonally adjusted, or decline of 1.288 million in six months, as shown in Table I-9. The number employed part-time for economic reasons rebounded to 8.572 million in Sep 2012 for increase of 527,000 in one month from Aug to Sep 2012. The number employed part-time for economic reasons declined to 8.231 million in Oct 2012 or by 341,000 again in one month, further declining to 8.164 million in Nov 2012 for another major one-month decline of 67,000 and 7.929 million in Dec 2012 or fewer 235,000 in just one month. The number employed part-time for economic reasons increased to 7.983 million in Jan 2013 or 54,000 more than in Dec 2012 and to 7,991 million in Feb 2013, declining to 7.917 million in May 2013 but increasing to 8.194 million in Jun 2013. The number employed part-time for economic reasons fell to 7.898 million in Aug 2013 for decline of 282,000 in one month from 8.180 million in Jul 2013. The number employed part-time for economic reasons increased 16,000 from 7.898 million in Aug 2013 to 7.914 million in Sep 2013. The number part-time for economic reasons rose to 8.016 million in Oct 2013, falling by 293,000 to 7.723 million in Nov 2013. The number part-time for economic reasons increased to 7.771 million in Dec 2013, decreasing to 7.257 million in Jan 2014. The number employed part-time for economic reasons fell from 7.257 million in Jan 2014 to 7.186 million in Feb 2014. The number employed part-time for economic reasons increased to 7.411 million in Mar 2014 and 7.465 million in Apr 2014. The number employed part-time for economic reasons fell to 7.269 million in May 2014, increasing to 7.544 million in Jun 2014. The level employed part-time for economic reasons fell to 7.511 million in Jul 2014. There is an increase of 186,000 in part-time for economic reasons from Aug 2012 to Oct 2012 and of 119,000 from Aug 2012 to Nov 2012.
  • Seasonally adjusted full-time. The number employed full-time increased from 112.906 million in Oct 2011 to 115.114 million in Mar 2012 or 2.208 million but then fell to 114.279 million in May 2012 or 0.835 million fewer full-time employed than in Mar 2012. The number employed full-time increased from 114.626 million in Aug 2012 to 115.531 million in Oct 2012 or increase of 0.905 million full-time jobs in two months and further to 115.821 million in Jan 2013 or increase of 1.195 million more full-time jobs in five months from Aug 2012 to Jan 2013. The number of full time jobs decreased slightly to 115.785 million in Feb 2013, increasing to 116.288 million in May 2013 and 116.087 million in Jun 2013. Then number of full-time jobs increased to 116.156 million in Jul 2013, 116.301 million in Aug 2013 and 116.883 million in Sep 2013. The number of full-time jobs fell to 116.306 million in Oct 2013 and increased to 116.951 in Nov 2013. The level of full-time jobs fell to 117.278 million in Dec 2013, increasing to 117.656 million in Jan 2014 and 117.819 million in Feb 2014. The level of employment full-time increased to 118.003 million in Mar 2014 and 118.415 million in Apr 2014. The level of full-time employment reached 118.727 million in May 2014, decreasing to 118.204 million in Jun 2014. The level of full-time jobs increased to 188.489 in Jul 2014. Adjustments of benchmark and seasonality-factors at the turn of every year could affect comparability of labor market indicators (http://cmpassocregulationblog.blogspot.com/2014/02/financial-instability-rules.html http://cmpassocregulationblog.blogspot.com/2013/02/thirty-one-million-unemployed-or.html).
  • Not seasonally adjusted part-time for economic reasons. The number of employed part-time for economic reasons actually increased without seasonal adjustment from 8.271 million in Nov 2011 to 8.428 million in Dec 2011 or by 157,000 and then to 8.918 million in Jan 2012 or by an additional 490,000 for cumulative increase from Nov 2011 to Jan 2012 of 647,000. The level of employed part-time for economic reasons then fell from 8.918 million in Jan 2012 to 7.867 million in Mar 2012 or by 1.051 million and to 7.694 million in Apr 2012 or 1.224 million fewer relative to Jan 2012. In Aug 2012, the number employed part-time for economic reasons reached 7.842 million NSA or 148,000 more than in Apr 2012. The number employed part-time for economic reasons increased from 7.842 million in Aug 2012 to 8.110 million in Sep 2012 or by 3.4 percent. The number part-time for economic reasons fell from 8.110 million in Sep 2012 to 7.870 million in Oct 2012 or by 240.000 in one month. The number employed part-time for economic reasons NSA increased to 8.628 million in Jan 2013 or 758,000 more than in Oct 2012. The number employed part-time for economic reasons fell to 8.298 million in Feb 2013, which is lower by 330,000 relative to 8.628 million in Jan 2013 but higher by 428,000 relative to 7.870 million in Oct 2012. The number employed part time for economic reasons fell to 7.734 million in Mar 2013 or 564,000 fewer than in Feb 2013 and fell to 7.709 million in Apr 2013. The number employed part-time for economic reasons reached 7.618 million in May 2013. The number employed part-time for economic reasons jumped from 7.618 million in May 2013 to 8.440 million in Jun 2013 or 822,000 in one month. The number employed part-time for economic reasons fell to 8.324 million in Jul 2013 and 7.690 million in Aug 2013. The number employed part-time for economic reasons NSA fell to 7.522 million in Sep 2013, increasing to 7.700 million in Oct 2013. The number employed part-time for economic reasons fell to 7.563 million in Nov 2013 and increased to 7.990 million in Dec 2013. The number employed part-time for economic reasons fell to 7.771 million in Jan 2014 and 7.397 million in Feb 2014. The level of part-time for economic reasons increased to 7.455 million in Mar 2014 and fell to 7.243 million in Apr 2014. The number of part-time for economic reasons fell to 6.960 million in May 2014, increasing to 7.805 million in Jun 2014. The level of part-time for economic reasons fell to 7.785 million in Jul 2014.
  • Not seasonally adjusted full-time. The number employed full time without seasonal adjustment fell from 113.138 million in Nov 2011 to 113.050 million in Dec 2011 or by 88,000 and fell further to 111.879 in Jan 2012 for cumulative decrease of 1.259 million. The number employed full-time not seasonally adjusted fell from 113.138 million in Nov 2011 to 112.587 million in Feb 2012 or by 551.000 but increased to 116.214 million in Aug 2012 or 3.076 million more full-time jobs than in Nov 2011. The number employed full-time not seasonally adjusted decreased from 116.214 million in Aug 2012 to 115.678 million in Sep 2012 for loss of 536,000 full-time jobs and rose to 116.045 million in Oct 2012 or by 367,000 full-time jobs in one month relative to Sep 2012. The number employed full-time NSA fell from 116.045 million in Oct 2012 to 115.515 million in Nov 2012 or decline of 530.000 in one month. The number employed full-time fell from 115.515 in Nov 2012 to 115.079 million in Dec 2012 or decline by 436,000 in one month. The number employed full time fell from 115.079 million in Dec 2012 to 113.868 million in Jan 2013 or decline of 1.211 million in one month. The number of full time jobs increased to 114.191 in Feb 2012 or by 323,000 in one month and increased to 114.796 million in Mar 2013 for cumulative increase from Jan by 928,000 full-time jobs but decrease of 283,000 from Dec 2012. The number employed full time reached 117.400 million in Jun 2013 and increased to 117.688 in Jul 2013 or by 288,000. The number employed full-time reached 117.868 million in Aug 2013 for increase of 180,000 in one month relative to Jul 2013. The number employed full-time fell to 117.308 million in Sep 2013 or by 560,000. The number employed full-time fell to 116.798 million in Oct 2013 or decline of 510.000 in one month. The number employed full-time rose to 116.875 million in Nov 2013, falling to 116.661 million in Dec 2013. The number employed full-time fell to 115.744 million in Jan 2014 but increased to 116.323 million in Feb 2014. The level of full-time jobs increased to 116.985 in Mar 2014 and 118.073 million in Apr 2014. The number of full-time jobs increased to 119.179 million in May 2014, increasing to 119.472 million in Jun 2014. The level of full-time jobs increased to 119.900 million in Jul 2014. Comparisons over long periods require use of NSA data. The number with full-time jobs fell from a high of 123.219 million in Jul 2007 to 108.777 million in Jan 2010 or by 14.442 million. The number with full-time jobs in Jul 2014 is 119.900 million, which is lower by 3.319 million relative to the peak of 123.219 million in Jul 2007.
  • Loss of full-time jobs. The magnitude of the stress in US labor markets is magnified by the increase in the civilian noninstitutional population of the United States from 231.958 million in Jul 2007 to 248.023 million in Jul 2014 or by 15.065 million (http://www.bls.gov/data/) while in the same period the number of full-time jobs fell 3.319 million. The ratio of full-time jobs of 123.219 million Jul 2007 to civilian noninstitutional population of 231.958 million was 53.1 percent. If that ratio had remained the same, there would be 131.700 million full-time jobs with population of 248.023 million in Jul 2014 (0.531 x 248.023) or 11.800 million fewer full-time jobs relative to actual 119.900 million. There appear to be around 10 million fewer full-time jobs in the US than before the global recession while population increased around 15 million. Mediocre GDP growth is the main culprit of the fractured US labor market. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent. US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 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 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html 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 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html 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 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.htmland 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 Jul 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 122.8881 in Jul 2014. The actual index NSA in Jul 2014 is 98.4978, which is 19.8 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 115.2650 in Jul 2014. The output of manufacturing at 98.4978 in Jul 2014 is 14.5 percent below trend under this alternative calculation.

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

 

Part-time Thousands

Full-time Millions

Seasonally Adjusted

   

Jul 2014

7,511

188.489

Jun 2014

7,544

118.204

May 2014

7,269

188.727

Apr 2014

7,465

118.415

Mar 2014

7,411

118.003

Feb 2014

7,186

117.819

Jan 2014

7,257

117.656

Dec 2013

7,771

117.278

Nov 2013

7,723

116.951

Oct 2013

8,016

116.306

Sep 2013

7,914

116.883

Aug 2013

7,898

116.301

Jul 2013

8,180

116.156

Jun 2013

8,194

116.087

May 2013

7,917

116.288

Apr 2013

7,929

116.062

Mar 2013

7,663

115.901

Feb 2013

7,991

115.785

Jan 2013

7,983

115.821

Dec 2012

7,929

115.735

Nov 2012

8,164

115.581

Oct 2012

8,231

115.531

Sep 2012

8,572

115.229

Aug 2012

8,045

114.626

Jul 2012

8,163

114.589

Jun 2012

8,154

114.728

May 2012

8,138

114.279

Apr 2012

7,913

114.398

Mar 2012

7,780

115.114

Feb 2012

8,133

114.210

Jan 2012

8,228

113.790

Dec 2011

8,177

113.740

Nov 2011

8,457

113.158

Oct 2011

8,675

112.906

Sep 2011

9,068

112.523

Aug 2011

8,820

112.643

Jul 2011

8,342

112.209

Not Seasonally Adjusted

   

Jul 2014

7,785

119.900

Jun 2014

7,805

119.472

May 2014

6,960

119.179

Apr 2014

7,243

118.073

Mar 2014

7,455

116.985

Feb 2014

7,397

116.323

Jan 2014

7,771

115.744

Dec 2013

7,990

116.661

Nov 2013

7,563

116.875

Oct 2013

7,700

116.798

Sep 2013

7,522

117.308

Aug 2013

7,690

117.868

Jul 2013

8,324

117.688

Jun 2013

8,440

117.400

May 2013

7,618

116.643

Apr 2013

7,709

115.674

Mar 2013

7,734

114.796

Feb 2013

8,298

114.191

Jan 2013

8,628

113.868

Dec 2012

8,166

115.079

Nov 2012

7,994

115.515

Oct 2012

7,870

116.045

Sep 2012

8,110

115.678

Aug 2012

7,842

116.214

Jul 2012

8,316

116.131

Jun 2012

8,394

116.024

May 2012

7,837

114.634

Apr 2012

7,694

113.999

Mar 2012

7,867

113.916

Feb 2012

8,455

112.587

Jan 2012

8,918

111.879

Dec 2011

8,428

113.050

Nov 2011

8,271

113.138

Oct 2011

8,258

113.456

Sep 2011

8,541

112.980

Aug 2011

8,604

114.286

Jul 2011

8,514

113.759

Jun 2011

8,738

113.255

May 2011

8,270

112.618

Apr 2011

8,425

111.844

Mar 2011

8,737

111.186

Feb 2011

8,749

110.731

Jan 2011

9,187

110.373

Dec 2010

9,205

111.207

Nov 2010

8,670

111.348

Oct 2010

8,408

112.342

Sep 2010

8,628

112.385

Aug 2010

8,628

113.508

Jul 2010

8,737

113.974

Jun 2010

8,867

113.856

May 2010

8,513

112.809

Apr 2010

8,921

111.391

Mar 2010

9,343

109.877

Feb 2010

9,282

109.100

Jan 2010

9,290

108.777 (low)

Dec 2009

9,354 (high)

109.875

Nov 2009

8,894

111.274

Oct 2009

8,474

111.599

Sep 2009

8,255

111.991

Aug 2009

8,835

113.863

Jul 2009

9,103

114.184

Jun 2009

9,301

114.014

May 2009

8,785

113.083

Apr 2009

8,648

112.746

Mar 2009

9,305

112.215

Feb 2009

9,170

112.947

Jan 2009

8,829

113.815

Dec 2008

8,250

116.422

Nov 2008

7,135

118.432

Oct 2008

6,267

120.020

Sep 2008

5,701

120.213

Aug 2008

5,736

121.556

Jul 2008

6,054

122.378

Jun 2008

5,697

121.845

May 2008

5,096

120.809

Apr 2008

5,071

120.027

Mar 2008

5,038

119.875

Feb 2008

5,114

119.452

Jan 2008

5,340

119.332

Dec 2007

4,750

121.042

Nov 2007

4,374

121.846

Oct 2007

4,028

122.006

Sep 2007

4,137

121.728

Aug 2007

4,494

122.870

Jul 2007

4,516

123.219 (high)

Jun 2007

4,469

122.150

May 2007

4,315

120.846

Apr 2007

4,205

119.609

Mar 2007

4,384

119.640

Feb 2007

4,417

119.041

Jan 2007

4,726

119.094

Dec 2006

4,281

120.371

Nov 2006

4,054

120.507

Oct 2006

4,010

121.199

Sep 2006

3,735 (low)

120.780

Aug 2006

4,104

121.979

Jul 2006

4,450

121.951

Jun 2006

4,456

121.070

May 2006

3,968

118.925

Apr 2006

3,787

118.559

Mar 2006

4,097

117.693

Feb 2006

4,403

116.823

Jan 2006

4,597

116.395

Source: US Bureau of Labor Statistics

http://www.bls.gov/

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

clip_image018

Chart I-18, US, Number Unemployed for 27 Weeks or Over, Thousands SA Month 2001-2014

Sources: US Bureau of Labor Statistics

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

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

clip_image019

Chart I-19, US, Marginally Attached to the Labor Force, NSA Month, Thousands, 2001-2014

Sources: US Bureau of Labor Statistics

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

The number with full-time jobs in Jul 2014 is 119.900 million, which is lower by 3.319 million relative to the peak of 123.219 million in Jul 2007. The magnitude of the stress in US labor markets is magnified by the increase in the civilian noninstitutional population of the United States from 231.958 million in Jul 2007 to 248.023 million in Jul 2014 or by 15.065 million (http://www.bls.gov/data/) while in the same period the number of full-time jobs fell 3.319 million. The ratio of full-time jobs of 123.219 million Jul 2007 to civilian noninstitutional population of 231.958 million was 53.1 percent. If that ratio had remained the same, there would be 131.700 million full-time jobs with population of 248.023 million in Jul 2014 (0.531 x 248.023) or 11.800 million fewer full-time jobs relative to actual 119.900 million. There appear to be around 10 million fewer full-time jobs in the US than before the global recession while population increased around 15 million. Mediocre GDP growth is the main culprit of the fractured US labor market.

Chart I-20 provides unadjusted full-time jobs in the US from 2001 to 2014 with sharp drop and incomplete recovery. 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). This is merely another case of theory without reality with dubious policy proposals.

Inferior performance of the US economy and labor markets, during cyclical slow growth not secular stagnation, is the critical current issue of analysis and policy design.

clip_image020

Chart I-20, US, Full-time Employed, Thousands, NSA, 2001-2014

Sources: US Bureau of Labor Statistics

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

Chart I-20A provides the noninstitutional civilian population of the United States from 2001 to 2014. There is clear trend of increase of the population while the number of full-time jobs collapsed after 2008 without sufficient recovery as shown in the preceding Chart I-20.

clip_image021

Chart I-20A, US, Noninstitutional Civilian Population, Thousands, 2001-2014

Sources: US Bureau of Labor Statistics

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

Chart I-20B provides number of full-time jobs in the US from 1968 to 2014. There were multiple recessions followed by expansions without contraction of full-time jobs and without recovery as during the period after 2008. The problem is specific of the current cycle and not secular.

clip_image022

Chart I-20B, US, Full-time Employed, Thousands, NSA, 1968-2014

Sources: US Bureau of Labor Statistics

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

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

clip_image023

Chart I-20C, US, Noninstitutional Civilian Population, Thousands, 1968-2014

Sources: US Bureau of Labor Statistics

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

IA4 Theory and Reality of Secular Stagnation: Youth and Middle-Age Unemployment. Three tables support the argument that the proper comparison of the business cycle is between the recessions of the 1980s and the global recession after IVQ2007 and not as argued erroneously with the Great Depression of the 1930s.

Table I-3 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-3, 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-4 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-4, 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-5 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-5, 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

Table EMP provides the comparison between the labor market in the current whole cycle from 2007 to 2013 and the whole cycle from 1979 to 1986. In the entire cycle from 2007 to 2013, the number employed fell 2.118 million, full-time employed fell 4.777 million, part-time for economic reasons increased 3.534 and population increased 13.812 million. The number employed fell 1.5 percent, full-time employed fell 3.9 percent, part-time for economic reasons increased 80.3 percent and population increased 6.0 percent. There is sharp contrast with the contractions of the 1980s and with most economic history of the United States. In the whole cycle from 1979 to 1986, the number employed increased 10.773 million, full-time employed increased 7.875 million, part-time for economic reasons 2.011 million and population 15.724 million. In the entire cycle from 1979 to 1986, the number employed increased 10.9 percent, full-time employed 9.5 percent, part-time for economic reasons 56.2 percent and population 9.5 million. The difference between the 1980s and the current cycle after 2007 is in the high rate of growth after the contraction that maintained trend growth around 3.0 percent for the entire cycle and per capital growth at 2.0 percent. The evident fact is that current weakness in labor markets originates in cyclical slow growth and not in imaginary secular stagnation.

Table EMP, US, Annual Level of Employed, Full-Time Employed, Employed Part-Time for Economic Reasons and Noninstitutional Civilian Population, Millions

 

Employed

Full-Time Employed

Part Time Economic Reasons

Noninstitutional Civilian Population

2000s

       

2000

136.891

113.846

3.227

212.577

2001

136.933

113.573

3.715

215.092

2002

136.485

112.700

4.213

217.570

2003

137.736

113.324

4.701

221.168

2004

139.252

114.518

4.567

223.357

2005

141.730

117.016

4.350

226.082

2006

144.427

119.688

4.162

228.815

2007

146.047

121.091

4.401

231.867

2008

145.362

120.030

5.875

233.788

2009

139.877

112.634

8.913

235.801

2010

139.064

111.714

8.874

237.830

2011

139.869

112.556

8.560

239.618

2012

142.469

114.809

8.122

243.284

2013

143.929

116.314

7.935

245.679

∆2007-2013

-2.118

-4.777

3.534

13.812

∆% 2007-2013

-1.5

-3.9

80.3

6.0

1980s

       

1979

98.824

82.654

3.577

164.863

1980

99.303

82.562

4.321

167.745

1981

100.397

83.243

4.768

170.130

1982

99.526

81.421

6.170

172.271

1983

100.834

82.322

6.266

174.215

1984

105.005

86.544

5.744

176.383

1985

107.150

88.534

5.590

178.206

1986

109.597

90.529

5.588

180.587

1987

112.440

92.957

5.401

182.753

1988

114.968

95.214

5.206

184.613

1989

117.342

97.369

4.894

186.393

∆1979-1986

10.773

7.875

2.011

15.724

∆% 1979-86

10.9

9.5

56.2

9.5

Source: Bureau of Labor Statistics

http://www.bls.gov/

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). Youth workers would obtain employment at a premium in an economy with declining population. In fact, 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. This is merely another case of theory without reality with dubious policy proposals. Inferior performance of the US economy and labor markets is the critical current issue of analysis and policy design.

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

Y = ∑isiyi (1)

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

Y = ∑isiy*i + ∑iyis*i (2)

The first term in (2) captures changes in the demographic and industrial composition of the economy ∆si 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 ∆yi, 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.”

The theory of secular stagnation cannot explain sudden collapse of the US economy and labor markets. There are accentuated cyclic factors for both the entire population and the young population of ages 16 to 24 years. Table Summary provides the total noninstitutional population (ICP) of the US, full-time employment level (FTE), employment level (EMP), civilian labor force (CLF), civilian labor force participation rate (CLFP), employment/population ratio (EPOP) and unemployment level (UNE). Secular stagnation would spread over long periods instead of immediately. All indicators of the labor market weakened sharply during the contraction and did not recover. Population continued to grow but all other variables collapsed and did not recover. The theory of secular stagnation departs from an aggregate production function in which output grows with the use of labor, capital and technology (see Pelaez and Pelaez, Globalization and the State, Vol. I (2008a), 11-6). Hansen (1938, 1939) finds secular stagnation in lower growth of an aging population. In the current US economy, Table Summary shows that population is dynamic while the labor market is fractured. There is key explanation in the behavior of the civilian labor force participation rate (CLFP) and the employment population ratio (EPOP) that collapsed during the global recession with inadequate recovery. Abandoning job searches are difficult to capture in labor statistics but likely explain the decline in the participation of the population in the labor force. Allowing for abandoning job searches, the total number of people unemployed or underemployed is 26.8 million or 16.3 percent of the effective labor force (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html).

Table Summary Total, US, Total Noninstitutional Civilian Population, Full-time Employment, Employment, Civilian Labor Force, Civilian Labor Force Participation Rate, Employment Population Ratio, Unemployment, NSA, Millions and Percent

 

ICP

FTE

EMP

CLF

CLFP

EPOP

UNE

2006

228.8

119.7

144.4

151.4

66.2

63.1

7.0

2009

235.8

112.6

139.9

154.1

65.4

59.3

14.3

2012

243.3

114.8

142.5

155.0

63.7

58.6

12.5

2013

245.7

116.3

143.9

155.4

63.2

58.6

11.5

12/07

233.2

121.0

146.3

153.7

65.9

62.8

7.4

9/09

236.3

112.0

139.1

153.6

65.0

58.9

14.5

7/14

248.0

119.9

147.3

157.8

63.5

59.4

10.3

ICP: Total Noninstitutional Civilian Population; FT: Full-time Employment Level, EMP: Total Employment Level; CLF: Civilian Labor Force; CLFP: Civilian Labor Force Participation Rate; EPOP: Employment Population Ratio; UNE: Unemployment

Source: Bureau of Labor Statistics

http://www.bls.gov/

The same situation is present in the labor market for young people in ages 16 to 24 years with data in Table Summary Youth. The youth noninstitutional civilian population (ICP) continued to increase during and after the global recession. There is the same disastrous labor market with decline for young people in employment (EMP), civilian labor force (CLF), civilian labor force participation rate (CLFP) and employment population ratio (EPOP). There are only increases for unemployment of young people (UNE) and youth unemployment rate (UNER). If aging were a factor of secular stagnation, growth of population of young people would attract a premium in remuneration in labor markets. The sad fact is that young people are also facing tough labor markets. The application of the theory of secular stagnation to the US economy and labor markets is void of reality in the form of key facts, which are best explained by accentuated cyclic factors analyzed by Lazear and Spletzer (2012JHJul22).

Table Summary Youth, US, Youth, Ages 16 to 24 Years, Noninstitutional Civilian Population, Full-time Employment, Employment, Civilian Labor Force, Civilian Labor Force Participation Rate, Employment Population Ratio, Unemployment, NSA, Millions and Percent

 

ICP

EMP

CLF

CLFP

EPOP

UNE

UNER

2006

36.9

20.0

22.4

60.6

54.2

2.4

10.5

2009

37.6

17.6

21.4

56.9

46.9

3.8

17.6

2012

38.8

17.8

21.3

54.9

46.0

3.5

16.2

2013

38.9

18.1

21.4

55.0

46.5

3.3

15.5

12/07

37.5

19.4

21.7

57.8

51.6

2.3

10.7

9/09

37.6

17.0

20.7

55.2

45.1

3.8

18.2

7/14

38.7

20.1

23.4

60.5

51.9

3.4

14.3

ICP: Youth Noninstitutional Civilian Population; EMP: Youth Employment Level; CLF: Youth Civilian Labor Force; CLFP: Youth Civilian Labor Force Participation Rate; EPOP: Youth Employment Population Ratio; UNE: Unemployment; UNER: Youth Unemployment Rate

Source: Bureau of Labor Statistics

http://www.bls.gov/

The United States is experiencing high youth unemployment as in European economies. Table I-10 provides the employment level for ages 16 to 24 years of age estimated by the Bureau of Labor Statistics. On an annual basis, youth employment fell from 20.041 million in 2006 to 17.362 million in 2011 or 2.679 million fewer youth jobs and to 17.834 million in 2012 or 2.207 million fewer jobs. Youth employment fell from 20.041 million in 2006 to 18.057 million in 2013 or 1.984 million fewer jobs. During the seasonal peak months of youth employment in the summer from Jun to Aug, youth employment has fallen by more than two million jobs relative to 21.914 million in Jul 2006 to 20.085 million in Jul 2014 for 1.829 million fewer youth jobs. The number of youth jobs fell from 21.268 million in Jun 2006 million to 19.421 million in Jun 2014 or 1.847 million fewer youth jobs. The number of jobs ages 16 to 24 years fell from 21.167 million in Aug 2006 to 18.636 million in Aug 2013 or by 2.531 million. The number of youth jobs fell from 19.604 million in Sep 2006 to 18.043 million in Sep 2013 or 1.561 million fewer youth jobs. The number of youth jobs fell from 20.129 million in Dec 2006 to 18.106 million in Dec 2013 or 2.023 million fewer jobs. The civilian noninstitutional population ages 16 to 24 years increased from 37.443 million in Jul 2007 to 38.861 million in Jul 2013 or by 1.418 million while the number of jobs for ages 16 to 24 years fell by 2.230 million from 21.914 million in Jul 2006 to 19.684 million in Jul 2013. The civilian noninstitutional population for ages 16 to 24 years increased from 37.455 million in Aug 2007 to 38.841 million in Aug 2013 or by 1.386 million while the number of youth jobs fell by 1.777 million. The civilian noninstitutional population increased from 37.467 million in Sep 2007 to 38.822 million in Sep 2013 or by 1.355 million while the number of youth jobs fell by 1.455 million. The civilian noninstitutional population increased from 37.480 million in Oct 2007 to 38.804 million in Oct 2013 or by 1.324 million while the number of youth jobs decreased 1.877 million from Oct 2006 to Oct 2013. The civilian noninstitutional population increased from 37.076 million in Nov 2006 to 38.798 million in Nov 2013 or by 1.722 million while the number of youth jobs fell 1.799 million. The civilian noninstitutional population increased from 37.518 million in Dec 2007 to 38.790 million in Dec 2013 or by 1.272 million while the number of youth jobs fell 2.023 million from Dec 2006 to Dec 2013. The youth civilian noninstitutional population increased 1.488 million from 37.282 million in in Jan 2007 to 38.770 million in Jan 2014 while the number of youth jobs fell 2.035 million. The youth civilian noninstitutional population increased 1.464 million from 37.302 in Feb 2007 to 38.766 million in Feb 2014 while the number of youth jobs decreased 2.058 million. The civilian noninstitutional population increased 1.437 million from 37.324 million in Mar 2007 to 38.761 million in Mar 2014 while jobs for ages 16 to 24 years decreased 1.599 million from 19.538 million in Mar 2007 to 17.939 million in Mar 2014. The civilian noninstitutional population ages 16 to 24 years increased 1.410 million from 37.349 million in Apr 2007 to 38.759 million in Apr 2014 while the number of youth jobs fell 1.347 million. The civilian noninstitutional population increased 1.370 million from 37.379 million in May 2007 to 38.749 million in May 2014 while the number of youth jobs decreased 1.128 million. The civilian noninstitutional population increased 1.330 million from 37.410 million in Jun 2007 to 38.740 million in Jun 2014 while the number of youth jobs fell 1.847 million from 21.268 million in Jun 2006 to 19.421 million in Jun 2014. The youth civilian noninstitutional population increased by 1.292 million from 37.443 million in Jul 2007 to 38.735 million in Jul 2014 while the number of youth jobs fell 1.632 million. The hardship does not originate in low growth of population but in underperformance of the economy in the expansion from the business cycle. There are two hardships behind these data. First, young people cannot find employment after finishing high school and college, reducing prospects for achievement in older age. Second, students with more modest means cannot find employment to keep them in college.

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

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

2001

19678

19745

19800

19778

19648

21212

22042

2002

18653

19074

19091

19108

19484

20828

21501

2003

18811

18880

18709

18873

19032

20432

20950

2004

18852

18841

18752

19184

19237

20587

21447

2005

18858

18670

18989

19071

19356

20949

21749

2006

19003

19182

19291

19406

19769

21268

21914

2007

19407

19415

19538

19368

19457

21098

21717

2008

18724

18546

18745

19161

19254

20466

21021

2009

17467

17606

17564

17739

17588

18726

19304

2010

16166

16412

16587

16764

17039

17920

18564

2011

16512

16638

16898

16970

17045

18180

18632

2012

16944

17150

17301

17387

17681

18907

19461

2013

17183

17257

17271

17593

17704

19125

19684

2014

17372

17357

17939

18021

18329

19421

20085

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

Chart I-21 provides US employment level ages 16 to 24 years from 2002 to 2014. Employment level is sharply lower in Jun 2014 relative to the peak in 2007. The following Chart I-21A relates youth employment and youth civilian noninstitutional population.

clip_image024

Chart I-21, US, Employment Level 16-24 Years, Thousands SA, 2001-2014

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

Chart I-21A provides the US civilian noninstitutional population ages 16 to 24 years not seasonally adjusted from 2001 to 2014. The civilian noninstitutional population ages 16 to 24 years increased from 37.443 million in Jul 2007 to 38.861 million in Jul 2013 or by 1.418 million while the number of jobs for ages 16 to 24 years fell by 2.230 million from 21.914 million in Jul 2006 to 19.684 million in Jul 2013. The civilian noninstitutional population for ages 16 to 24 years increased from 37.455 million in Aug 2007 to 38.841 million in Aug 2013 or by 1.386 million while the number of youth jobs fell by 1.777 million. The civilian noninstitutional population increased from 37.467 million in Sep 2007 to 38.822 million in Sep 2013 or by 1.355 million while the number of youth jobs fell by 1.455 million. The civilian noninstitutional population increased from 37.480 million in Oct 2007 to 38.804 million in Oct 2013 or by 1.324 million while the number of youth jobs decreased 1.877 million from Oct 2006 to Oct 2013. The civilian noninstitutional population increased from 37.076 million in Nov 2006 to 38.798 million in Nov 2013 or by 1.722 million while the number of youth jobs fell 1.799 million. The civilian noninstitutional population increased from 37.518 million in Dec 2007 to 38.790 million in Dec 2013 or by 1.272 million while the number of youth jobs fell 2.023 million from Dec 2006 to Dec 2013. The youth civilian noninstitutional population increased 1.488 million from 37.282 million in in Jan 2007 to 38.770 million in Jan 2014 while the number of youth jobs fell 2.035 million. The youth civilian noninstitutional population increased 1.464 million from 37.302 in Feb 2007 to 38.766 million in Feb 2014 while the number of youth jobs decreased 2.058 million. The civilian noninstitutional population increased 1.437 million from 37.324 million in Mar 2007 to 38.761 million in Mar 2014 while jobs for ages 16 to 24 years decreased 1.599 million from 19.538 million in Mar 2007 to 17.939 million in Mar 2014. The civilian noninstitutional population ages 16 to 24 years increased 1.410 million from 37.349 million in Apr 2007 to 38.759 million in Apr 2014 while the number of youth jobs fell 1.347 million. The civilian noninstitutional population increased 1.370 million from 37.379 million in May 2007 to 38.749 million in May 2014 while the number of youth jobs decreased 1.128 million. The civilian noninstitutional population increased 1.330 million from 37.410 million in Jun 2007 to 38.740 million in Jun 2014 while the number of youth jobs fell 1.847 million from 21.268 million in Jun 2006 to 19.421 million in Jun 2014. The youth civilian noninstitutional population increased by 1.292 million from 37.443 million in Jul 2007 to 38.735 million in Jul 2014 while the number of youth jobs fell 1.632 million. The hardship does not originate in low growth of population but in underperformance of the economy in the expansion from the business cycle. There are two hardships behind these data. First, young people cannot find employment after finishing high school and college, reducing prospects for achievement in older age. Second, students with more modest means cannot find employment to keep them in college.

clip_image025

Chart I-21A, US, Civilian Noninstitutional Population Ages 16 to 24 Years, Thousands NSA, 2001-2014

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

Chart I-21B provides the civilian labor force of the US ages 16 to 24 years NSA from 2001 to 2014. The US civilian labor force ages 16 to 24 years fell from 24.339 million in Jul 2007 to 23.506 million in Jul 2013, by 0.833 million or decline of 3.4 percent, while the civilian noninstitutional population NSA increased from 37.443 million in Jul 2007 to 38.861 million in Jul 2013, by 1.418 million or 3.8 percent. The US civilian labor force ages 16 to 24 fell from 22.801 million in Aug 2007 to 22.089 million in Aug 2013, by 0.712 million or 3.1 percent, while the noninstitutional population for ages 16 to 24 years increased from 37.455 million in Aug 2007 to 38.841 million in Aug 2013, by 1.386 million or 3.7 percent. The US civilian labor force ages 16 to 24 years fell from 21.917 million in Sep 2007 to 21.183 million in Sep 2013, by 0.734 million or 3.3 percent while the civilian noninstitutional youth population increased from 37.467 million in Sep 2007 to 38.822 million in Sep 2013 by 1.355 million or 3.6 percent. The US civilian labor force fell from 21.821 million in Oct 2007 to 21.003 million in Oct 2013, by 0.818 million or 3.7 percent while the noninstitutional youth population increased from 37.480 million in Oct 2007 to 38.804 million in Oct 2013, by 1.324 million or 3.5 percent. The US youth civilian labor force fell from 21.909 million in Nov 2007 to 20.825 million in Nov 2013, by 1.084 million or 4.9 percent while the civilian noninstitutional youth population increased from 37.076 million in Nov 2006 to 38.798 million in Nov 2013 or by 1.722 million. The US youth civilian labor force fell from 21.684 million in Dec 2007 to 20.642 million in Dec 2013, by 1.042 million or 4.8 percent, while the civilian noninstitutional population increased from 37.518 million in Dec 2007 to 38.790 million in Dec 2013, by 1.272 million or 3.4 percent. The youth civilian labor force of the US fell from 21.770 million in Jan 2007 to 20.423 million in Jan 2014, by 1.347 million or 6.2 percent while the youth civilian noninstitutional population increased 37.282 million in Jan 2007 to 38.770 million in Jan 2014, by 1.488 million or 4.0 percent. The youth civilian labor force of the US fell 1.255 million from 21.645 million in Feb 2007 to 20.390 million in Feb 2014 while the youth civilian noninstitutional population increased 1.464 million from 37.302 million in Feb 2007 to 38.766 million in Feb 2014. The youth civilian labor force of the US fell 0.693 million from 21.634 million in Mar 2007 to 20.941 million in Mar 2014 or 3.2 person while the youth noninstitutional civilian population 1.437 million from 37.324 million in Mar 2007 to 38.761 million in Mar 2014 or 3.9 percent. The US youth civilian labor force fell 981 thousand from 21.442 million in Apr 2007 to 20.461 million in Apr 2014 while the youth civilian noninstitutional population increased from 37.349 million in Apr 2007 to 38.759 million in Apr 2014 by 1.410 thousand or 3.8 percent. The youth civilian labor force decreased from 21.659 million in May 2007 to 21.160 million in May 2014 by 499 thousand or 2.3 percent while the youth civilian noninstitutional population increased 1.370 million from 37.739 million in May 2007 to 38.749 million in May 2007 or by 2.7 percent. The youth civilian labor force decreased from 24.128 million in Jun 2006 to 22.851 million in Jun 2014 by 1.277 million or 5.3 percent while the civilian noninstitutional population increased from 36.943 million in Jun 2006 to 38.740 million in Jun 2014 by 1.797 million or 4.9 percent. The youth civilian labor force fell from 24.664 million in Jul 2006 to 23.437 million in Jul 2014 while the civilian noninstitutional population increased from 36.989 million in Jul 2006 to 38.735 million in Jul 2014. Youth in the US abandoned their participation in the labor force because of the frustration that there are no jobs available for them.

clip_image026

Chart I-21B, US, Civilian Labor Force Ages 16 to 24 Years, Thousands NSA, 2001-2014

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

Chart I-21C provides the ratio of labor force to noninstitutional population or labor force participation of ages 16 to 24 years not seasonally adjusted. The US labor force participation rates for ages 16 to 24 years fell from 66.7 in Jul 2006 to 60.5 in Jul 2013 because of the frustration of young people who believe there may not be jobs available for them. The US labor force participation rate of young people fell from 63.9 in Aug 2006 to 56.9 in Aug 2013. The US labor force participation rate of young people fell from 59.1 percent in Sep 2006 to 54.6 percent in Sep 2013. The US labor force participation rate of young people fell from 59.7 percent in Oct 2006 to 54.1 in Oct 2013. The US labor force participation rate of young people fell from 59.7 percent in Nov 2006 to 53.7 percent in Nov 2013. The US labor force participation rate fell from 57.8 in Dec 2007 to 53.2 in Dec 2013. The youth labor force participation rate fell from 58.4 in Jan 2007 to 52.7 in Jan 2014. The US youth labor force participation rate fell from 58.0 percent in Feb 2007 to 52.6 percent in Feb 2013. The labor force participation rate of ages 16 to 24 years fell from 58.0 in Mar 2007 to 54.0 in Mar 2014. The labor force participation rate of ages 16 to 24 years fell from 57.4 in Apr 2007 to 52.8 in Apr 2014. The labor force participation rate of ages 16 to 24 years fell from 57.9 in May 2007 to 54.6 in May 2014. The labor force participation rate of ages 16 to 24 years fell from 65.3 in Jun 2006 to 59.0 in Jun 2014. The labor force participation rate ages 16 to 24 years fell from 66.7 in Jul 2006 to 60.5 in Jul 2014. Many young people abandoned searches for employment, dropping from the labor force.

clip_image027

Chart I-21C, US, Labor Force Participation Rate Ages 16 to 24 Years, NSA, 2001-2014

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

An important measure of the job market is the number of people with jobs relative to population available for work (civilian noninstitutional population) or employment/population ratio. Chart I-21D provides the employment population ratio for ages 16 to 24 years. The US employment/population ratio NSA for ages 16 to 24 years collapsed from 59.2 in Jul 2006 to 50.7 in Jul 2013. The employment population ratio for ages 16 to 24 years dropped from 57.2 in Aug 2006 to 48.0 in Aug 2013. The employment population ratio for ages to 16 to 24 years declined from 52.9 in Sep 2006 to 46.5 in Sep 2013. The employment population ratio for ages 16 to 24 years fell from 53.6 in Oct 2006 to 46.3 in Oct 2013. The employment population ratio for ages 16 to 24 years fell from 53.7 in Nov 2007 to 46.7 in Nov 2013. The US employment population ratio for ages 16 to 24 years fell from 51.6 in Dec 2007 to 46.7 in Dec 2013. The US employment population ratio fell from 52.1 in Jan 2007 to 44.8 in Jan 2014. The US employment population ratio for ages 16 to 24 fell from 52.0 in Feb 2007 to 44.8 in Feb 2014. The US employment population ratio for ages 16 to 24 years fell from 52.3 in Mar 2007 to 46.3 in Mar 2014. The US employment population ratio for ages 16 to 24 years fell from 51.9 in Apr 2007 to 46.5 in Apr 2014. The US employment population ratio for ages 16 to 24 years fell from 52.1 in May 2007 to 47.3 in May 2014. The US employment population ratio for ages 16 to 24 years fell from 57.6 in Jun 2006 to 50.1 in Jun 2014. The US employment population ratio for ages 16 to 24 years fell from 59.2 in Jul 2006 to 50.1 in Jul 2014. Chart I-21D shows vertical drop during the global recession without recovery.

clip_image028

Chart I-21D, US, Employment Population Ratio Ages 16 to 24 Years, Thousands NSA, 2001-2014

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

Table I-11 provides US unemployment level ages 16 to 24 years. The number unemployed ages 16 to 24 years increased from 2342 thousand in 2007 to 3634 thousand in 2011 or by 1.292 million and 3451 thousand in 2012 or by 1.109 million. The unemployment level ages 16 to 23 years increased from 2342 in 2007 to 3324 thousand in 2013 or by 0.982 million. The unemployment level ages 16 to 24 years rose from 2.622 million in Jul 2007 to 3.353 million in Jul 2014 or by 0.731 million. This situation may persist for many years.

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

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

Dec

Annual

2001

2250

2258

2253

2095

2171

2775

2585

2412

2371

2002

2754

2731

2822

2515

2568

3167

3034

2374

2683

2003

2748

2740

2601

2572

2838

3542

3200

2248

2746

2004

2767

2631

2588

2387

2684

3191

3018

2294

2638

2005

2661

2787

2520

2398

2619

3010

2688

2055

2521

2006

2366

2433

2216

2092

2254

2860

2750

2007

2353

2007

2363

2230

2096

2074

2203

2883

2622

2323

2342

2008

2633

2480

2347

2196

2952

3450

3408

2928

2830

2009

3278

3457

3371

3321

3851

4653

4387

3532

3760

2010

3983

3888

3748

3803

3854

4481

4374

3352

3857

2011

3851

3696

3520

3365

3628

4248

4110

3161

3634

2012

3416

3507

3294

3175

3438

4180

4011

3153

3451

2013

3674

3449

3261

3129

3478

4198

3821

2536

3324

2014

3051

3033

3002

2440

2831

3429

3353

   

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

Chart I-22 provides the unemployment level for ages 16 to 24 from 2001 to 2014. The level rose sharply from 2007 to 2010 with tepid improvement into 2012 and deterioration into 2013-2014 with recent marginal improvement alternating with deterioration.

clip_image029

Chart I-22, US, Unemployment Level 16-24 Years, Thousands SA, 2001-2014

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

Table I-12 provides the rate of unemployment of young peoples in ages 16 to 24 years. The annual rate jumped from 10.5 percent in 2007 to 18.4 percent in 2010, 17.3 percent in 2011 and 16.2 percent in 2012. The rate of youth unemployment fell marginally to 15.5 percent in 2013. During the seasonal peak in Jul, the rate of youth unemployed was 18.1 percent in Jul 2011, 17.1 percent in Jul 2012 and 16.3 percent in Jul 2013 compared with 10.8 percent in Jul 2007. The rate of youth unemployment rose from 11.2 percent in Jul 2006 to 16.3 percent in Jul 2013 and likely higher if adding those who ceased searching for a job in frustration none may be available. The rate of youth unemployment rose from 10.8 in Jul 2007 to 14.3 in Jul 2014. The rate of youth unemployment increased from 9.1 percent in Dec 2006 to 12.3 percent in Dec 2013. The rate of youth unemployment increased from 10.9 percent in Jan 2007 to 14.9 percent in Jan and Feb 2014. The rate of youth unemployment increased from 9.7 percent in Mar 2007 to 14.3 percent in Mar 2014. The rate of youth unemployment increased from 9.7 percent in Apr 2007 to 11.9 percent in Apr 2014. The rate of youth unemployment increased from 10.2 percent in May 2007 to 13.4 percent in May 2014. The rate of youth unemployment increased from 12.0 percent in Jun 2007 to 15.0 percent in Jun 2014. The rate of youth unemployment increased from 10.8 in Jul 2007 to 14.3 in Jul 2014. The actual rate is higher because of the difficulty in counting those dropping from the labor force because they believe there are no jobs available for them.

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

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

Nov

Dec

Annual

2001

10.3

10.3

10.2

9.6

10.0

11.6

10.5

11.2

11.0

10.6

2002

12.9

12.5

12.9

11.6

11.6

13.2

12.4

11.7

10.9

12.0

2003

12.7

12.7

12.2

12.0

13.0

14.8

13.3

11.6

10.5

12.4

2004

12.8

12.3

12.1

11.1

12.2

13.4

12.3

11.1

10.5

11.8

2005

12.4

13.0

11.7

11.2

11.9

12.6

11.0

10.7

9.4

11.3

2006

11.1

11.3

10.3

9.7

10.2

11.9

11.2

10.1

9.1

10.5

2007

10.9

10.3

9.7

9.7

10.2

12.0

10.8

10.3

10.7

10.5

2008

12.3

11.8

11.1

10.3

13.3

14.4

14.0

13.3

13.7

12.8

2009

15.8

16.4

16.1

15.8

18.0

19.9

18.5

18.1

17.5

17.6

2010

19.8

19.2

18.4

18.5

18.4

20.0

19.1

17.4

16.7

18.4

2011

18.9

18.2

17.2

16.5

17.5

18.9

18.1

15.9

15.5

17.3

2012

16.8

17.0

16.0

15.4

16.3

18.1

17.1

14.8

15.2

16.2

2013

17.6

16.7

15.9

15.1

16.4

18.0

16.3

13.1

12.3

15.5

2014

14.9

14.9

14.3

11.9

13.4

15.0

14.3

     

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

Chart I-23 provides the BLS estimate of the not-seasonally-adjusted rate of youth unemployment for ages 16 to 24 years from 2001 to 2014. The rate of youth unemployment increased sharply during the global recession of 2008 and 2009 but has failed to drop to earlier lower levels because of low growth of GDP. Long-term economic performance in the United States consisted of trend growth of GDP at 3 percent per year and of per capita GDP at 2 percent per year as measured for 1870 to 2010 by Robert E. Lucas (2011May). The economy returned to trend growth after adverse events such as wars and recessions. The key characteristic of adversities such as recessions was much higher rates of growth in expansion periods that permitted the economy to recover output, income and employment losses that occurred during the contractions. Over the business cycle, the economy compensated the losses of contractions with higher growth in expansions to maintain trend growth of GDP of 3 percent and of GDP per capita of 2 percent.

clip_image030

Chart I-23, US, Unemployment Rate 16-24 Years, Percent, NSA, 2001-2014

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

Chart I-24 provides longer perspective with the rate of youth unemployment in ages 16 to 24 years from 1948 to 2014. The rate of youth unemployment rose to 20 percent during the contractions of the early 1980s and also during the contraction of the global recession in 2008 and 2009. The data illustrate again the argument in this blog that the contractions of the early 1980s are the valid framework for comparison with the global recession of 2008 and 2009 instead of misleading comparisons with the 1930s. During the initial phase of recovery, the rate of youth unemployment 16 to 24 years NSA fell from 18.9 percent in Jun 1983 to 14.5 percent in Jun 1984. In contrast, the rate of youth unemployment 16 to 24 years was nearly the same during the expansion after IIIQ2009: 17.5 percent in Dec 2009, 16.7 percent in Dec 2010, 15.5 percent in Dec 2011, 15.2 percent in Dec 2012, 17.6 percent in Jan 2013, 16.7 percent in Feb 2013, 15.9 percent in Mar 2013, 15.1 percent in Apr 2013. The rate of youth unemployment was 16.4 percent in May 2013, 18.0 percent in Jun 2013, 16.3 percent in Jul 2013 and 15.6 percent in Aug 2013. In Sep 2006, the rate of youth unemployment was 10.5 percent, increasing to 14.8 percent in Sep 2013. The rate of youth unemployment was 10.3 in Oct 2007, increasing to 14.4 percent in Oct 2013. The rate of youth unemployment was 10.3 percent in Nov 2007, increasing to 13.1 percent in Nov 2013. The rate of youth unemployment was 10.7 percent in Dec 2013, increasing to 12.3 percent in Dec 2013. The rate of youth unemployment was 10.9 percent in Jan 2007, increasing to 14.9 percent in Jan 2014. The rate of youth unemployment was 10.3 percent in Feb 2007, increasing to 14.9 percent in Feb 2014. The rate of youth unemployment was 9.7 percent in Mar 2007, increasing to 14.3 percent in Mar 2014. The rate of youth unemployment was 9.7 percent in Apr 2007, increasing to 11.9 percent in Apr 2014. The rate of youth unemployment was 10.2 percent in May 2007, increasing to 13.4 percent in May 2014. The rate of youth unemployment was 12.0 percent in Jun 2007, increasing to 15.0 percent in Jun 2014. The rate of youth unemployment was 10.8 percent in Jul 2007, increasing to 14.3 percent in Jul 2014. The difference originates in the vigorous seasonally-adjusted annual equivalent average rate of GDP growth of 5.9 percent during the recovery from IQ1983 to IVQ1985 and 4.9 percent from IQ1983 to IIIQ1987 compared with 2.2 percent on average during the first 20 quarters of expansion from IIIQ2009 to IIQ2014 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html). US economic growth has been at only 2.2 percent on average in the cyclical expansion in the 20 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 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html 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 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html 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 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html

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 Jul 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 122.8881 in Jul 2014. The actual index NSA in Jul 2014 is 98.4978, which is 19.8 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 115.2650 in Jul 2014. The output of manufacturing at 98.4978 in Jul 2014 is 14.5 percent below trend under this alternative calculation.

clip_image031

Chart I-24, US, Unemployment Rate 16-24 Years, Percent NSA, 1948-2014

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

It is more difficult to move to other jobs after a certain age because of fewer available opportunities for mature individuals than for new entrants into the labor force. Middle-aged unemployed are less likely to find another job. Table I-13 provides the unemployment level ages 45 years and over. The number unemployed ages 45 years and over rose from 1.607 million in Oct 2006 to 4.576 million in Oct 2010 or by 184.8 percent. The number of unemployed ages 45 years and over declined to 3.800 million in Oct 2012 that is still higher by 136.5 percent than in Oct 2006. The number unemployed age 45 and over increased from 1.704 million in Nov 2006 to 3.861 million in Nov 2012, or 126.6 percent. The number unemployed age 45 and over is still higher by 98.5 percent at 3.383 million in Nov 2013 than 1.704 million in Nov 2006. The number unemployed age 45 and over jumped from 1.794 million in Dec 2006 to 4.762 million in Dec 2010 or 165.4 percent. At 3.927 million in Dec 2012, mature unemployment is higher by 2.133 million or 118.9 percent higher than 1.794 million in Dec 2006. The level of unemployment of those aged 45 year or more of 3.632 million in Oct 2013 is higher by 2.025 million than 1.607 million in Oct 2006 or higher by 126.0 percent. The number of unemployed 45 years and over increased from 1.794 million in Dec 2006 to 3.378 million in Nov 2013 or 88.3 percent. The annual number of unemployed 45 years and over increased from 1.848 million in 2006 to 3.719 million in 2013 or 101.2 percent. The number of unemployed 45 years and over increased from 2.126 million in Jan 2006 to 4.394 million in Jan 2013, by 2.618 million or 106.7 percent. The number of unemployed 45 years and over rose from 2.126 million in Jan 2006 to 3.508 million in Jan 2014, by 1.382 million or 65.0 percent. The level of unemployed 45 years or older increased 2.051 million or 99.8 percent from 2.056 million in Feb 2006 to 4.107 million in Feb 2013 and at 3.490 million in Feb 2014 is higher by 69.7 percent than in Feb 2006. The number of unemployed 45 years and over increased 2.048 million or 108.9 percent from 1.881 million in Mar 2006 to 3.929 million in Mar 2013 and at 3.394 million in Mar 2014 is higher by 80.4 percent than in Mar 2006. The number of unemployed 45 years and over increased 1.846 million or 100.2 percent from 1.843 million in Apr 2006 to 3.689 million in Apr 2013 and at 3.006 million in Apr 2014 is higher by 1.163 million or 63.1 percent. The number of unemployed ages 45 years and over increased 102.1 percent from 1.784 million in May 2006 to 3.605 million in May 2014 and at 2.913 million in May 2014 is higher by 63.3 percent than in May 2007.

The number of unemployed ages 45 years and over increased 102.1 percent from 1.805 million in Jun 2007 to 3.648 million in Jun 2013 and at 2.832 million in Jun 2014 is higher by 56.9 percent than in Jun 2007. The number of unemployed ages 45 years and over increased 81.5 percent from 2.053 million in Jul 2007 to 3.727 million in Jul 2013 and at 3.083 million in Jul 2014 is higher by 50.2 percent than in Jul 2007. The actual number unemployed is likely much higher because many are not accounted who abandoned job searches in frustration there may not be a job for them. Recent improvements may be illusory.

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

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

Dec

Annual

2000

1498

1392

1291

1062

1074

1163

1253

1217

1249

2001

1572

1587

1533

1421

1259

1371

1539

1901

1576

2002

2235

2280

2138

2101

1999

2190

2173

2210

2114

2003

2495

2415

2485

2287

2112

2212

2281

2130

2253

2004

2453

2397

2354

2160

2025

2182

2116

2086

2149

2005

2286

2286

2126

1939

1844

1868

2119

1963

2009

2006

2126

2056

1881

1843

1784

1813

1985

1794

1848

2007

2155

2138

2031

1871

1803

1805

2053

2120

1966

2008

2336

2336

2326

2104

2095

2211

2492

3485

2540

2009

4138

4380

4518

4172

4175

4505

4757

4960

4500

2010

5314

5307

5194

4770

4565

4564

4821

4762

4879

2011

5027

4837

4748

4373

4356

4559

4772

4182

4537

2012

4458

4472

4390

4037

4083

4084

4405

3927

4133

2013

4394

4107

3929

3689

3605

3648

3727

3378

3719

2014

3508

3490

3394

3006

2913

2832

3083

   

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

Chart I-25 provides the level unemployed ages 45 years and over. There was an increase in the recessions of the 1980s, 1991 and 2001 followed by declines to earlier levels. The current expansion of the economy after IIIQ2009 has not been sufficiently vigorous to reduce significantly middle-age unemployment. Recent improvements could be illusory because many abandoned job searches in frustration that there may not be jobs for them and are not counted as unemployed.

clip_image032

Chart I-25, US, Unemployment Level Ages 45 Years and Over, Thousands, NSA, 1976-2014

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

II United States Industrial Production. There is socio-economic stress in the combination of adverse events and cyclical performance:

Industrial production increased 0.4 percent in Jul 2014 after increasing 0.4 percent in Jun 2014 and increasing 0.3 percent in May 2014, as shown in Table I-1, 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 0.4 percent in July for its sixth consecutive monthly gain. Manufacturing output advanced 1.0 percent in July, its largest increase since February. The production of motor vehicles and parts jumped 10.1 percent, while output in the rest of the manufacturing sector rose 0.4 percent. The production at mines moved up 0.3 percent, its ninth consecutive monthly increase. The output of utilities dropped 3.4 percent, as weather that was milder than usual for July reduced demand for air conditioning. At 104.4 percent of its 2007 average, total industrial production in July was 5.0 percent above its year-earlier level. Capacity utilization for total industry edged up 0.1 percentage point to 79.2 percent in July, a rate 1.7 percentage points above its level of a year earlier and 0.9 percentage point below its long-run (1972–2013) average.”

In the six months ending in Jul 2014, United States national industrial production accumulated increase of 3.0 percent at the annual equivalent rate of 6.2 percent, which is higher than growth of 5.0 percent in the 12 months ending in Jul 2014. Excluding growth of 0.9 percent in Feb 2014 and 0.9 percent in Mar 2014, growth in the remaining four months from Feb to Jul 2014 accumulated to 1.2 percent or 3.7 percent annual equivalent. Industrial production stagnated in one of the past six months. Industrial production expanded at annual equivalent 4.5 percent in the most recent quarter from May to Jul 2014 and at 7.9 percent in the prior quarter Feb-Apr 2014. Business equipment accumulated growth of 5.4 percent in the six months from Feb to Jul 2014 at the annual equivalent rate of 11.1 percent, which is higher than growth of 7.0 percent in the 12 months ending in Jul 2014. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “Capacity utilization for total industry edged up 0.1 percentage point to 79.2 percent in July, a rate 1.7 percentage points above its level of a year earlier and 0.9 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.

Table I-1, US, Industrial Production and Capacity Utilization, SA, ∆% 

2014

Jul

14

Jun  

14

May 

14

Apr 

14

Mar 

14

Feb

14

Jul 

14/

Jul 

Total

0.4

0.4

0.3

0.1

0.9

0.9

5.0

Market
Groups

             

Final Products

0.7

0.1

-0.1

-0.3

0.8

1.7

4.9

Consumer Goods

0.5

0.2

-0.5

-0.6

0.8

1.6

4.3

Business Equipment

1.3

-0.3

0.7

0.3

0.9

2.4

7.0

Non
Industrial Supplies

0.2

0.0

0.7

-0.4

0.2

0.5

3.2

Construction

0.8

0.7

1.3

-0.8

0.8

0.9

5.3

Materials

0.3

0.7

0.6

0.5

1.0

0.5

5.5

Industry Groups

             

Manufacturing

1.0

0.3

0.3

0.3

0.9

1.3

4.9

Mining

0.3

1.3

0.6

2.1

1.7

0.1

8.6

Utilities

-3.4

-0.7

0.0

-5.1

-0.5

-0.3

-1.0

Capacity

79.2

79.1

79.0

79.0

79.1

78.6

2.7

Sources: Board of Governors of the Federal Reserve System

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

Manufacturing increased 1.0 percent in Jul 2014 after increasing 0.3 percent in Jun 2014 and increasing 0.3 percent in May 2014 seasonally adjusted, increasing 4.2 percent not seasonally adjusted in the 12 months ending in Jul 2014, as shown in Table I-2. Manufacturing grew cumulatively 3.9 percent in the six months ending in Jul 2014 or at the annual equivalent rate of 7.9 percent. Excluding the increase of 1.3 percent in Feb 2014, manufacturing accumulated growth of 2.8 percent from Feb 2013 to Jul 2014 or at the annual equivalent rate of 6.9 percent. Table I-2 provides a longer perspective of manufacturing in the US. There has been evident deceleration of manufacturing growth in the US from 2010 and the first three months of 2011 into more recent months as shown by 12 months rates of growth. Growth rates appeared to be increasing again closer to 5 percent in Apr-Jun 2012 but deteriorated. The rates of decline of manufacturing in 2009 are quite high with a drop of 18.2 percent in the 12 months ending in Apr 2009. Manufacturing recovered from this decline and led the recovery from the recession. Rates of growth appeared to be returning to the levels at 3 percent or higher in the annual rates before the recession but the pace of manufacturing fell steadily in the past six months with some strength at the margin. The Board of Governors of the Federal Reserve System conducted the annual revision of industrial production released on Mar 28, 2014 (http://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm):

“The Federal Reserve has revised its index of industrial production (IP) and the related measures of capacity and capacity utilization. The annual revision for 2014 was more limited than in recent years because the source data required to extend the annual benchmark indexes of production into 2012 were mostly unavailable. Consequently, the IP indexes published with this revision are very little changed from previous estimates. Measured from fourth quarter to fourth quarter, total IP is now reported to have increased about 3 1/3 percent in each year from 2011 to 2013. Relative to the rates of change for total IP published earlier, the new rates are 1/2 percentage point higher in 2012 and little changed in any other year. Total IP still shows a peak-to-trough decline of about 17 percent for the most recent recession, and it still returned to its pre-recession peak in the fourth quarter of 2013.”

The bottom part of Table I-2 shows decline of manufacturing by 21.9 from the peak in Jun 2007 to the trough in Apr 2009 and increased by 19.9 percent from the trough in Apr 2009 to Dec 2013. Manufacturing grew 22.4 percent from the trough in Apr 2009 to Jul 2014. Manufacturing output in Jul 2014 is 4.4 percent below the peak in Jun 2007. 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 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html

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 Jul 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 122.8881 in Jul 2014. The actual index NSA in Jul 2014 is 98.4978, which is 19.8 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 115.2650 in Jul 2014. The output of manufacturing at 98.4978 in Jul 2014 is 14.5 percent below trend under this alternative calculation.

Table I-2, US, Monthly and 12-Month Rates of Growth of Manufacturing ∆%

 

Month SA ∆%

12-Month NSA ∆%

Jul 2014

1.0

4.2

Jun

0.3

3.5

May

0.3

3.5

Apr

0.3

3.0

Mar

0.9

3.5

Feb

1.3

2.4

Jan

-1.0

1.4

Dec 2013

0.2

2.2

Nov

0.3

2.8

Oct

0.4

3.7

Sep

0.3

2.8

Aug

0.7

2.9

Jul

-0.4

1.7

Jun

0.3

2.3

May

0.3

2.4

Apr

-0.2

2.7

Mar

0.1

2.6

Feb

0.6

2.5

Jan

-0.2

2.9

Dec 2012

0.7

3.8

Nov

1.3

3.8

Oct

-0.4

2.6

Sep

0.2

3.5

Aug

-0.5

3.8

Jul

0.4

4.3

Jun

0.4

5.0

May

-0.2

4.9

Apr

0.8

5.1

Mar

-0.3

3.8

Feb

0.6

5.1

Jan

1.0

4.0

Dec 2011

0.7

3.5

Nov

-0.1

2.9

Oct

0.5

3.0

Sep

0.4

2.9

Aug

0.3

2.3

Jul

0.8

2.6

Jun

0.1

2.1

May

0.2

1.9

Apr

-0.6

3.2

Mar

0.7

4.9

Feb

0.0

5.4

Jan

0.2

5.7

Dec 2010

0.4

6.3

Nov

0.2

5.4

Oct

0.1

6.6

Sep

0.1

6.9

Aug

0.1

7.4

Jul

0.8

7.8

Jun

0.0

9.3

May

1.5

8.8

Apr

0.9

7.0

Mar

1.3

4.8

Feb

-0.1

1.3

Jan

1.1

1.2

Dec 2009

-0.1

-3.1

Nov

1.0

-6.0

Oct

0.2

-9.1

Sep

0.8

-10.6

Aug

1.0

-13.6

Jul

1.4

-15.2

Jun

-0.3

-17.7

May

-1.1

-17.6

Apr

-0.7

-18.2

Mar

-1.8

-17.3

Feb

-0.3

-16.1

Jan

-2.9

-16.4

Dec 2008

-3.4

-13.9

Nov

-2.4

-11.3

Oct

-0.6

-8.9

Sep

-3.4

-8.5

Aug

-1.2

-5.0

Jul

-1.1

-3.5

Jun

-0.6

-3.1

May

-0.5

-2.4

Apr

-1.1

-1.1

Mar

-0.3

-0.6

Feb

-0.6

0.9

Jan

-0.4

2.2

Dec 2007

0.1

1.9

Nov

0.5

3.3

Oct

-0.4

2.8

Sep

0.5

2.9

Aug

-0.4

2.6

Jul

0.2

3.5

Jun

0.3

3.0

May

-0.1

3.1

Apr

0.7

3.6

Mar

0.8

2.5

Feb

0.4

1.6

Jan

-0.5

1.3

Dec 2006

 

2.7

Dec 2005

 

3.5

Dec 2004

 

3.8

Dec 2003

 

2.0

Dec 2002

 

2.4

Dec 2001

 

-5.7

Dec 2000

 

0.7

Dec 1999

 

5.3

Average ∆% Dec 1986-Dec 2013

 

2.3

Average ∆% Dec 1986-Dec 2012

 

2.3

Average ∆% Dec 1986-Dec 1999

 

4.2

Average ∆% Dec 1999-Dec 2006

 

1.3

Average ∆% Dec 1999-Dec 2013

 

0.6

∆% Peak 103.0351 in 06/2007 to 96.4739 in 12/2013

 

-6.4

∆% Peak 103.0351 in 06/2007 to Trough 80.4551 in 4/2009

 

-21.9

∆% Trough  80.4551 in 04/2009 to 96.4739 in 12/2013

 

19.9

∆% Trough  80.4551 in 04/2009 to 98.4978 in 7/2014

 

22.4

∆% Peak 103.0351 on 06/2007 to 98.4978 in 7/2014

 

-4.4

Source: Board of Governors of the Federal Reserve System

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

Chart I-1 of the Board of Governors of the Federal Reserve System provides industrial production, manufacturing and capacity since the 1970s. There was acceleration of growth of industrial production, manufacturing and capacity in the 1990s because of rapid growth of productivity in the US (Cobet and Wilson (2002); see Pelaez and Pelaez, The Global Recession Risk (2007), 135-44). The slopes of the curves flatten in the 2000s. Production and capacity have not recovered sufficiently above levels before the global recession, remaining like GDP below historical trend.

clip_image034

Chart I-1, US, Industrial Production, Capacity and Utilization

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/g17/Current/ipg1.gif

The modern industrial revolution of Jensen (1993) is captured in Chart I-2 of the Board of Governors of the Federal Reserve System (for the literature on M&A and corporate control see Pelaez and Pelaez, Regulation of Banks and Finance (2009a), 143-56, Globalization and the State, Vol. I (2008a), 49-59, Government Intervention in Globalization (2008c), 46-49). The slope of the curve of total industrial production accelerates in the 1990s to a much higher rate of growth than the curve excluding high-technology industries. Growth rates decelerate into the 2000s and output and capacity utilization have not recovered fully from the strong impact of the global recession. Growth in the current cyclical expansion has been more subdued than in the prior comparably deep contractions in the 1970s and 1980s. Chart II-2 shows that the past recessions after World War II are the relevant ones for comparison with the recession after 2007 instead of common comparisons with the Great Depression (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html). The bottom left-hand part of Chart II-2 shows the strong growth of output of communication equipment, computers and semiconductor that continued from the 1990s into the 2000s. Output of semiconductors has already surpassed the level before the global recession.

clip_image036

Chart I-2, US, Industrial Production, Capacity and Utilization of High Technology Industries

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/g17/Current/ipg3.gif

Additional detail on industrial production and capacity utilization is provided in Chart I-3 of the Board of Governors of the Federal Reserve System. Production of consumer durable goods fell sharply during the global recession by more than 30 percent and is still around the level before the contraction. Output of nondurable consumer goods fell around 10 percent and is some 5 percent below the level before the contraction. Output of business equipment fell sharply during the contraction of 2001 but began rapid growth again after 2004. An important characteristic is rapid growth of output of business equipment in the cyclical expansion after sharp contraction in the global recession. Output of defense and space only suffered reduction in the rate of growth during the global recession and surged ahead of the level before the contraction. Output of construction supplies collapsed during the global recession and is well below the level before the contraction. Output of energy materials was stagnant before the contraction but has recovered sharply above the level before the contraction.

clip_image038

Chart I-3, US, Industrial Production and Capacity Utilization

Source: Board of Governors of the Federal Reserve System

http://www.federalreserve.gov/releases/g17/Current/ipg2.gif

United States manufacturing output from 1919 to 2014 on a monthly basis is in Chart I-4 of the Board of Governors of the Federal Reserve System. The second industrial revolution of Jensen (1993) is quite evident in the acceleration of the rate of growth of output given by the sharper slope in the 1980s and 1990s. Growth was robust after the shallow recession of 2001 but dropped sharply during the global recession after IVQ2007. Manufacturing output recovered sharply but has not reached earlier levels and is losing momentum at the margin. Current output is well below the extrapolation of a long-term trend. The long-term trend is growth at average 3.3 percent per year from Jan 1919 to Jul 2014. The long-term trend is growth at average 3.3 percent per year from Jan 1919 to Jul 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 122.8881 in Jul 2014. The actual index NSA in Jul 2014 is 98.4978, which is 19.8 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 115.2650 in Jul 2014. The output of manufacturing at 98.4978 in Jul 2014 is 14.5 percent below trend under this alternative calculation.

clip_image039

Chart I-4, US, Manufacturing Output, 1919-2014

Source: Board of Governors of the Federal Reserve System

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 0.4 percent in Jul 2014 after increasing 0.4 percent in Jun 2014 and increasing 0.3 percent in May 2014, as shown in Table I-1, 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 0.4 percent in July for its sixth consecutive monthly gain. Manufacturing output advanced 1.0 percent in July, its largest increase since February. The production of motor vehicles and parts jumped 10.1 percent, while output in the rest of the manufacturing sector rose 0.4 percent. The production at mines moved up 0.3 percent, its ninth consecutive monthly increase. The output of utilities dropped 3.4 percent, as weather that was milder than usual for July reduced demand for air conditioning. At 104.4 percent of its 2007 average, total industrial production in July was 5.0 percent above its year-earlier level. Capacity utilization for total industry edged up 0.1 percentage point to 79.2 percent in July, a rate 1.7 percentage points above its level of a year earlier and 0.9 percentage point below its long-run (1972–2013) average.”

In the six months ending in Jul 2014, United States national industrial production accumulated increase of 3.0 percent at the annual equivalent rate of 6.2 percent, which is higher than growth of 5.0 percent in the 12 months ending in Jul 2014. Excluding growth of 0.9 percent in Feb 2014 and 0.9 percent in Mar 2014, growth in the remaining four months from Feb to Jul 2014 accumulated to 1.2 percent or 3.7 percent annual equivalent. Industrial production stagnated in one of the past six months. Industrial production expanded at annual equivalent 4.5 percent in the most recent quarter from May to Jul 2014 and at 7.9 percent in the prior quarter Feb-Apr 2014. Business equipment accumulated growth of 5.4 percent in the six months from Feb to Jul 2014 at the annual equivalent rate of 11.1 percent, which is higher than growth of 7.0 percent in the 12 months ending in Jul 2014. The Fed analyzes capacity utilization of total industry in its report (http://www.federalreserve.gov/releases/g17/Current/default.htm): “Capacity utilization for total industry edged up 0.1 percentage point to 79.2 percent in July, a rate 1.7 percentage points above its level of a year earlier and 0.9 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 increased by 19.9 percent from the trough in Apr 2009 to Dec 2013. Manufacturing grew 22.4 percent from the trough in Apr 2009 to Jul 2014. Manufacturing output in Jul 2014 is 4.4 percent below the peak in Jun 2007. 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 (http://cmpassocregulationblog.blogspot.com/2014/08/fluctuating-financial-valuations.html

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 Jul 2014. Growth at 3.3 percent per year would raise the NSA index of manufacturing output from 99.2392 in Dec 2007 to 122.8881 in Jul 2014. The actual index NSA in Jul 2014 is 98.4978, which is 19.8 percent below trend. Manufacturing output grew at average 2.3 percent between Dec 1986 and Dec 2013, raising the index at trend to 115.2650 in Jul 2014. The output of manufacturing at 98.4978 in Jul 2014 is 14.5 percent below trend under this alternative calculation.

Table I-13 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 87.1 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-13. Most income in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.

Table I-13, 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

Motor vehicle sales and production in the US have been in long-term structural change. Table VA-1 provides the data on new motor vehicle sales and domestic car production in the US from 1990 to 2010. New motor vehicle sales grew from 14,137 thousand in 1990 to the peak of 17,806 thousand in 2000 or 29.5 percent. In that same period, domestic car production fell from 6,231 thousand in 1990 to 5,542 thousand in 2000 or -11.1 percent. New motor vehicle sales fell from 17,445 thousand in 2005 to 11,772 in 2010 or 32.5 percent while domestic car production fell from 4,321 thousand in 2005 to 2,840 thousand in 2010 or 34.3 percent. In Jul 2014, light vehicle sales accumulated to 9,599,284, which is higher by 5.0 percent relative to 9,144,335 a year earlier (http://motorintelligence.com/m_frameset.html). The seasonally adjusted annual rate of light vehicle sales in the US reached 16.48 million in Jul 2014, lower than 16.90 million in May 2014 and higher than 15.76 million in Jul 2013 (http://motorintelligence.com/m_frameset.html).

Table VA-1, US, New Motor Vehicle Sales and Car Production, Thousand Units

 

New Motor Vehicle Sales

New Car Sales and Leases

New Truck Sales and Leases

Domestic Car Production

1990

14,137

9,300

4,837

6,231

1991

12,725

8,589

4,136

5,454

1992

13,093

8,215

4,878

5,979

1993

14,172

8,518

5,654

5,979

1994

15,397

8,990

6,407

6,614

1995

15,106

8,536

6,470

6,340

1996

15,449

8,527

6,922

6,081

1997

15,490

8,273

7,218

5,934

1998

15,958

8,142

7,816

5,554

1999

17,401

8,697

8,704

5,638

2000

17,806

8,852

8,954

5,542

2001

17,468

8,422

9,046

4,878

2002

17,144

8,109

9,036

5,019

2003

16,968

7,611

9,357

4,510

2004

17,298

7,545

9,753

4,230

2005

17,445

7,720

9,725

4,321

2006

17,049

7,821

9,228

4,367

2007

16,460

7,618

8,683

3,924

2008

13,494

6,814

6.680

3,777

2009

10,601

5,456

5,154

2,247

2010

11,772

5,729

6,044

2,840

Source: US Census Bureau

http://www.census.gov/compendia/statab/cats/wholesale_retail_trade/motor_vehicle_sales.html

Chart I-5 of the Board of Governors of the Federal Reserve provides output of motor vehicles and parts in the United States from 1972 to 2014. Output virtually stagnated since the late 1990s.

clip_image040

Chart I-5, US, Motor Vehicles and Parts Output, 1972-2014

Source: Board of Governors of the Federal Reserve System

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

Chart I-6 of the Board of Governors of the Federal Reserve System provides output of computers and electronic products in the United States from 1972 to 2014. Output accelerated sharply in the 1990s and 2000s and has surpassed the level before the global recession beginning in IVQ2007.

clip_image041

Chart I-6, US, Output of Computers and Electronic Products, 1972-2014

Source: Board of Governors of the Federal Reserve System

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

Chart I-7 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.

clip_image042

Chart I-7, US, Output of Durable Manufacturing, 1972-2014

Source: Board of Governors of the Federal Reserve System

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

Chart I-8 of the Board of Governors of the Federal Reserve System provides output of aerospace and miscellaneous transportation equipment from 1972 to 2014. There is long-term upward trend with oscillations around the trend and cycles of large amplitude.

clip_image043

Chart I-8, US, Output of Aerospace and Miscellaneous Transportation Equipment, 1972-2014

Source: Board of Governors of the Federal Reserve System

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

The Empire State Manufacturing Survey Index in Table VA-1 provides continuing deterioration that started in Jun 2012 well before Hurricane Sandy in Oct 2012. The current general index has been in negative contraction territory from minus 3.86 in Aug 2012 to minus 7.93 in Jan 2013 and 0.27 in May 2013. The current general index improved to 14.69 in Aug 2014. The index of current orders has also been in negative contraction territory from minus 3.24 in Aug 2012 to minus 8.48 in Jan 2013 and minus 4.32 in Jun 2013. The index of current new orders increased to 14.14 in Aug 2014. Number of workers and hours worked have registered negative or declining readings since Sep 2012 with improvement to 13.64 for number of workers in Aug 2014 and 7.95 for average workweek. There is improvement in the general index for the next six months at 46.76 in Aug 2014 and strengthening new orders at 50.44.

Table VA-1, US, New York Federal Reserve Bank Empire State Manufacturing Survey Index SA

 

General Index

New Orders

Shipments

Number of Workers

Average Workweek

Sep-11

-4.55

-4.13

-5.6

-5.43

-2.17

Oct-11

-6.07

0.64

1.48

3.37

-4.49

Nov-11

4.09

0.66

13.22

-3.66

2.44

Dec-11

10.7

8.03

22.09

2.33

-2.33

Jan-12

11.63

10.42

19.7

12.09

6.59

Feb-12

16.36

5.28

17.16

11.76

7.06

Mar-12

15.97

4.67

13.76

13.58

18.52

Apr-12

5.92

4.21

4.24

19.28

6.02

May-12

15.85

9.29

22.95

20.48

12.05

Jun-12

3.48

4.75

11.39

12.37

3.09

Jul-12

6.64

-2.2

11

18.52

0

Aug-12

-3.86

-3.24

8.41

16.47

3.53

Sep-12

-7.41

-10.41

6.4

4.26

-1.06

Oct-12

-4.91

-8.25

-7.44

-1.08

-4.3

Nov-12

-1.8

5.02

17.01

-14.61

-7.87

Dec-12

-6.35

-1.9

10.04

-9.68

-10.75

Jan-13

-7.93

-8.48

-2.13

-4.3

-5.38

Feb-13

7.25

9.84

9.72

8.08

-4.04

Mar-13

6.45

5.8

5.39

3.23

0

Apr-13

2.46

1.4

0.51

6.82

5.68

May-13

0.27

-0.67

-0.36

5.68

-1.14

Jun-13

7.09

-4.32

-6.3

0

-11.29

Jul-13

8.88

3.99

8.26

3.26

-7.61

Aug-13

8.3

1.88

4

10.84

4.82

Sep-13

6.78

2.62

15.69

7.53

1.08

Oct-13

3.24

6.6

12.98

3.61

3.61

Nov-13

0.83

-3.46

1.46

0

-5.26

Dec-13

2.22

-1.69

4.69

0

-10.84

Jan-14

12.51

10.98

15.52

12.2

1.22

Feb-14

4.48

-0.21

2.13

11.25

3.75

Mar-14

5.61

3.13

3.97

5.88

4.71

Apr-14

1.29

-2.77

3.15

8.16

2.04

May-14

19.01

10.44

17.44

20.88

2.2

Jun-14

19.28

18.36

14.15

10.75

9.68

Jul-14

25.6

18.77

23.64

17.05

2.27

Aug-14

14.69

14.14

24.59

13.64

7.95

Future

General Index

New Orders

Shipments

Number of Workers

Average Workweek

Sep-11

22.77

23.38

22.66

0

-6.52

Oct-11

14.41

18.95

23.42

6.74

-2.25

Nov-11

35.91

30.35

32.7

14.63

8.54

Dec-11

46.81

45.01

41.56

24.42

22.09

Jan-12

51.83

45.4

44.3

28.57

17.58

Feb-12

45.6

38.41

41.41

29.41

18.82

Mar-12

42.56

37.16

39.87

32.1

20.99

Apr-12

40.21

36.97

38.62

27.71

10.84

May-12

33.49

30.86

25.03

12.05

8.43

Jun-12

26.78

28.74

23.59

16.49

2.06

Jul-12

22.79

20.36

21.46

6.17

-4.94

Aug-12

20.15

15.26

22.39

3.53

-8.24

Sep-12

27.17

27.74

23.17

8.51

2.13

Oct-12

20.23

22.03

18.34

0

-11.83

Nov-12

18.53

15.49

25.5

-1.12

0

Dec-12

21.18

21.43

23.86

10.75

5.38

Jan-13

22.54

24.4

24.1

7.53

3.23

Feb-13

30.39

28.04

27.94

15.15

11.11

Mar-13

33.2

32.59

39.59

19.35

2.15

Apr-13

30.42

34.02

37

25

7.95

May-13

27.3

28.85

24.72

11.36

1.14

Jun-13

26.85

22.9

22.13

1.61

-9.68

Jul-13

32.59

31.53

33.97

1.09

-1.09

Aug-13

37

31.33

31.71

8.43

-6.02

Sep-13

40.39

37.71

37.66

4.3

-2.15

Oct-13

40.86

36.94

33.74

7.23

2.41

Nov-13

38.32

39.31

37.09

22.37

-3.95

Dec-13

38.96

30.15

33.31

9.64

1.2

Jan-14

37.51

39.1

30.58

20.73

9.76

Feb-14

38.99

45.31

43.33

25

7.5

Mar-14

33.21

36.02

35.17

17.65

9.41

Apr-14

38.23

32.69

38.83

22.45

1.02

May-14

43.96

36.71

33.8

17.58

-3.3

Jun-14

39.84

44.52

45.15

20.43

0

Jul-14

28.47

25.57

24.59

17.05

-4.55

Aug-14

46.76

50.44

54.48

22.73

0

Source: Federal Reserve Bank of New York

http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html

Chart VA-1 of the Federal Reserve Bank of New York provides indexes of current and expected economic activity. There were multiple contractions in current activity after the global recession shown in shade. Current activity is weakening relative to strong recovery in the initial expansion in 2010 and 2011.

clip_image044

Chart VA-1, US, US, Federal Reserve Bank of New York, Diffusion Index of Current and Expected Activity, Seasonally Adjusted

Source: Federal Reserve Bank of New York

http://www.newyorkfed.org/survey/empire/empiresurvey_overview.html

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

No comments:

Post a Comment