Thirty-Eight Million Unemployed or Underemployed in the Lost Economic
Cycle of the Global Recession with Economic Growth Underperforming Below Trend
Worldwide, Unemployment Rate at 10.2 Percent in Jul 2020 In the Global Recession, with Output in the
US Reaching a High in Feb 2020 (https://www.nber.org/cycles.html), in the Lockdown
of Economic Activity in the COVID-19 Event, Creation of 1.763 Million Nonfarm
Payroll Jobs and 1.462 Million Private Payroll Jobs in Jul 2020, Cyclically
Stagnating Real Wages, Job Creation, Cyclically Stagnating Real Disposable
Income Per Capita, Financial Repression, World Cyclical Slow Growth, and
Government Intervention in Globalization: Part I
Carlos M. Pelaez
© Carlos M. Pelaez, 2009,
2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020.
I Thirty-Eight Million Unemployed or
Underemployed in the Lost Economic Cycle of the Global Recession with Economic
Growth Underperforming
Below Trend Worldwide
IA2 Number of People in Job Stress
IA3 Long-term and
Cyclical Comparison of Employment
IA4 Job Creation
II Stagnating Real Disposable Income and Consumption Expenditures
IIB1 Stagnating Real
Disposable Income and Consumption Expenditures
IB2 Financial
Repression
III World Financial Turbulence
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
The balance of this section considers the second
approach. Charts I-1 to I-12 explain the reasons for considering another
approach to calculating job stress in the US. Chart I-1 of the Bureau of Labor
Statistics provides the level of employment in the US from 2001 to 2020. There
was a big drop of the number of people employed from 147.315 million at the
peak in Jul 2007 (NSA) to 136.809 million at the trough in Jan 2010 (NSA) with
10.506 million fewer people employed. Recovery has been anemic compared with
the shallow recession of 2001 that was followed by nearly vertical growth in
jobs. The number
employed in Jul 2020 was 144.492 million (NSA) or 2.823 million fewer people
with jobs relative to the peak of 147.315 million in Aug 2007 while the
civilian noninstitutional population of ages 16 years and over increased from
231.958 million in Jul 2007 to 260.373 million in Jul 2020 or by 28.415
million. The number employed decreased 1.9 percent from Jul 2007 to Jul 2020
while the noninstitutional civilian population of ages of 16 years and over, or
those available for work, increased 12.3 percent. The ratio of employment to
population in Jul 2007 was 63.5 percent (147.315 million employed as percent of
population of 231.958 million). The same ratio in Jul 2020 would result in 165.337
million jobs (0.635 multiplied by noninstitutional civilian population of 260.373
million). There are effectively 20.845 million fewer jobs in Jul 2020 than in
Jul 2007, or 165.337 million minus 144.492 million. There is actually not
sufficient job creation in merely absorbing new entrants in the labor force
because of those dropping from job searches, worsening the stock of unemployed
or underemployed in involuntary part-time jobs.
Chart I-1, US, Employed, Thousands, SA, 2001-2020
Source: Bureau of Labor Statistics
Chart
I-2 of the Bureau of Labor Statistics provides 12-month percentage changes of
the number of people employed in the US from 2001 to 2020. There was recovery
since 2010 but not sufficient to recover lost jobs. Many people in the US who
had jobs before the global recession are not working now and many who entered
the labor force cannot find employment. There is sharp contraction of
employment in Mar and Apr 2020 with recovery in May-Jul 2020 in the
global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event.
Chart I-2, US, Employed, 12-Month Percentage Change NSA,
2001-2020
Source: Bureau of Labor Statistics
The foundation of the second approach derives from Chart
I-3 of the Bureau of Labor Statistics providing the level of the civilian labor
force in the US. The civilian labor force
consists of people who are available and willing to work and who have searched
for employment recently. The labor force of the US NSA grew 9.4 percent from
142.828 million in Jan 2001 to 156.255 million in Jul 2009. The civilian labor
force is 3.3 percent higher at 161.374 million in Jul 2020 than in Jul 2009,
all numbers not seasonally adjusted. Chart I-3 shows the flattening of the
curve of expansion of the labor force and its decline in 2010 and 2011. The
ratio of the labor force of 154.871 million in Jul 2007 to the noninstitutional
population of 231.958 million in Jul 2007 was 66.8 percent while the ratio of
the labor force of 161.374 million in Jul 2020 to the noninstitutional
population of 260.373 million in Jul 2020 was 62.0 percent. The labor force of
the US in Jul 2020 corresponding to 62.0 percent of participation in the
population would be 173.929 million (0.668 x 260.373) The difference between
the measured labor force in Jul 2020 of 161.374 million and the labor force in
Jul 2020 with participation rate of 66.8 percent (as in Jul 2007) of 173.929
million is 12.555 million. The level of the labor force in the US has stagnated
and is 12.555 million lower than what it would have been had the same
participation rate been maintained. Millions of people have abandoned their
search for employment because they believe there are no jobs available for
them. Millions lost their employment in the lockdown of economic activity of
the COVID-19 event. The key issue is whether the decline in participation of
the population in the labor force is the result of people giving up on finding
another job
in addition to job contraction in the global recession, with output in the
US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event.
Chart I-3, US, Civilian Labor Force, Thousands, SA, 2001-2020
Source: US Bureau of Labor Statistics https://www.bls.gov/data/
Chart
I-4 of the Bureau of Labor Statistics provides 12-month percentage changes of
the level of the labor force in the US. The rate of growth fell almost
instantaneously with the global recession and became negative from 2009 to
2011. The labor force of the US collapsed and did not recover. Growth in the
beginning of the summer originates in younger people looking for jobs in the
summer after graduation or during school recess.
Chart I-4, US, Civilian Labor Force, Thousands, NSA, 12-month
Percentage Change, 2001-2020
Source: US Bureau of Labor Statistics https://www.bls.gov/data/
Chart I-5 of the Bureau of Labor Statistics
provides the labor force participation rate in the US or labor force as percent
of the population. The labor force participation rate of the US fell from 66.8
percent in Jan 2001 to 61.8 percent NSA in Jun 2020, all numbers not seasonally
adjusted. The annual labor force participation rate for 1979 was 63.7 percent
and also 63.7 percent in Nov 1980 during sharp economic contraction. This
comparison is further elaborated below. Chart I-5 shows an evident downward
trend beginning with the global recession that has continued throughout the
recovery beginning in IIIQ2009. The critical issue is whether people left the
workforce of the US because they believe there is no longer a job for them and
if that number will increase in the global recession, with output in the US reaching a
high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event.
Chart I-5, Civilian Labor Force Participation Rate, Percent
of Population in Labor Force SA, 2001-2020
Source: US Bureau of Labor Statistics https://www.bls.gov/data/
Chart I-6 of the Bureau of Labor Statistics
provides the level of unemployed in the US. The number unemployed rose from the
trough of 6.272 million NSA in Oct 2006 to the peak of 16.147 million in Jan
2010, declining to 13.400 million in Jul 2012, 12.696 million in Aug 2012 and
11.741 million in Sep 2012. The level unemployed fell to 11.741 million in Oct
2012, 11.404 million in Nov 2012, 11.844 million in Dec 2012, 13.181 million in
Jan 2013, 12.500 million in Feb 2013 and 9.984 million in Dec 2013. The level
of unemployment reached 16.882 million in Jul 2020, all numbers not seasonally
adjusted, in the global recession, with output in the
US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event.
Chart I-6, US, Unemployed, Thousands, SA, 2001-2020
Source: US Bureau of Labor Statistics https://www.bls.gov/data/
Chart
I-7 of the Bureau of Labor Statistics provides the rate of unemployment in the
US or unemployed as percent of the labor force. The rate of unemployment of the
US rose from 4.7 percent in Jan 2001 to 6.5 percent in Jun 2003, declining to
4.1 percent in Oct 2006. The rate of unemployment jumped to 10.6 percent in Jan
2010 and declined to 7.6 percent in Dec 2012 but increased to 8.5 percent in
Jan 2013 and 8.1 percent in Feb 2013, falling back to 7.3 percent in May 2013
and 7.8 percent in Jun 2013, all numbers not seasonally adjusted. The rate of
unemployment not seasonally adjusted stabilized at 7.7 percent in Jul 2013 and
fell to 6.5 percent in Dec 2013 and 5.4 percent in Dec 2014. The rate of
unemployment NSA decreased to 4.8 percent in Dec 2015 and 4.5 percent in Dec
2016, reaching 3.9 percent in Dec 2017. The NSA rate of unemployment was at 3.7
percent in Dec 2018 and 3.4 percent in Dec 2019. The NSA unemployment rate was
10.5 percent in Jul 2020 in the global recession, with output in the US reaching a
high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event.
Chart I-7, US, Unemployment Rate, SA, 2001-2020
Source: Bureau of Labor Statistics
Chart I-8 of the Bureau of Labor Statistics
provides 12-month percentage changes of the level of unemployed. There was a
jump of 81.8 percent in Apr 2009 with subsequent decline and negative rates
since 2010. On an annual basis, the level of unemployed rose 59.8 percent in
2009 and 26.1 percent in 2008 with increase of 3.9 percent in 2010, decline of
7.3 percent in 2011 and decrease of 9.0 percent in 2012. The annual level of
unemployment decreased 8.4 percent in 2013 and fell 16.1 percent in 2014. The
annual level of unemployment fell 13.7 percent in 2015 and fell 6.6 percent in
2016, decreasing 9.9 percent in 2017. The level of unemployment decreased 12.4
percent in Dec 2017 relative to a year earlier and decreased 4.0 percent in Dec
2018 relative to a year earlier. The level of unemployment decreased 8.7
percent in Dec 2019 relative to a year earlier. The level of unemployment
increased 157.5 percent in Jul 2020 relative to a year earlier in the
global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event.
Chart I-8, US, Unemployed, 12-month Percentage Change, NSA, 2001-2020
Source: US Bureau of Labor Statistics https://www.bls.gov/data/
Chart I-9 of the Bureau of Labor Statistics
provides the number of people in part-time occupations because of economic
reasons, that is, because they cannot find full-time employment. The number
underemployed in part-time occupations not seasonally adjusted rose from 3.732
million in Jan 2001 to 5.270 million in Jan 2004, falling to 3.787 million in
Apr 2006. The number underemployed seasonally adjusted jumped to 9.114 million
in Nov 2009, falling to 8.171 million in Dec 2011 but increasing to 8.305
million in Jan 2012 and 8.238 million in Feb 2012 but then falling to 7.943
million in Dec 2012 and increasing to 8.099 million in Jul 2013. The number
employed part-time for economic reasons seasonally adjusted reached 4.657
million in Dec 2018 and 4.322 million in Nov 2019. Without seasonal adjustment,
the number employed part-time for economic reasons reached 9.354 million in Dec
2009, declining to 8.918 million in Jan 2012 and 8.166 million in Dec 2012 but
increasing to 8.324 million in Jul 2013. The number employed part-time for
economic reasons NSA stood at 7.990 million in Dec 2013, 6.970 million in Dec
2014 and 6.179 million in Dec 2015. The number employed part-time for economic
reasons NSA stood at 5.707 million in Dec 2016. The number employed part-time
for economic reasons reached 5.060 million in Dec 2017. The level of employed
part-time for economic reasons stood at 4.740 million in Dec 2018 and 4.247
million in Dec 2019. The longer the period in part-time jobs the lower are the
chances
of finding another full-time job. The number of part-time for economic
reasons NSA jumped to 8.572 million in Jul 2020 in the global recession, with
output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event.
Chart I-9, US, Part-Time for Economic Reasons, Thousands, SA,
2001-2020
Source: US Bureau of Labor Statistics https://www.bls.gov/data/
Chart
I-10 of the Bureau of Labor Statistics repeats the behavior of unemployment.
The 12-month percentage change of the level of people at work part-time for
economic reasons jumped 84.7 percent in Mar 2009 and declined subsequently. The
declines have been insufficient to reduce significantly the number of people
who cannot shift from part-time to full-time employment. On an annual basis,
the number of part-time for economic reasons increased 33.5 percent in 2008 and
51.7 percent in 2009, declining 0.4 percent in 2010, 3.5 percent in 2011 and
5.1 percent in 2012. The annual number of part-time for economic reasons
decreased 2.3 percent in 2013 and fell 9.1 percent in 2014. The annual number
of part-time for economic reasons fell 11.7 percent in 2015 and fell 6.7
percent in 2016. The number of part-time for economic reasons decreased 7.6
percent in Dec 2016 relative to a year earlier. The level of part-time for
economic reason fell 11.7 percent in Dec 2017 relative to a year earlier. The
level of part-time for economic reasons fell 6.3 percent in Dec 2018 relative
to a year earlier and decreased 10.4 percent in Dec 2019 relative to a year
earlier. The level of part-time for economic reasons jumped 109.0 percent in Jul
2020 relative to a year earlier in the global recession, with output in the
US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event.
Chart I-10, US, Part-Time for Economic Reasons NSA 12-Month
Percentage Change, 2001-2020
Source: US Bureau of Labor Statistics https://www.bls.gov/data/
Chart I-11 of the Bureau of Labor Statistics
provides the same pattern of the number marginally attached to the labor force
jumping to significantly higher levels during the global recession and
remaining at historically high levels. The number marginally attached to the
labor force not seasonally adjusted increased from 1.295 million in Jan 2001 to
1.691 million in Feb 2004. The number of marginally attached to the labor force
fell to 1.299 million in Sep 2006 and increased to 2.609 million in Dec 2010
and 2.800 million in Jan 2011. The number marginally attached to the labor
force was 2.540 million in Dec 2011, increasing to 2.809 million in Jan 2012,
falling to 2.608 million in Feb 2012. The number marginally attached to the
labor force fell to 2.352 million in Mar 2012, 2.363 million in Apr 2012, 2.423
million in May 2012, 2.483 million in Jun 2012, 2.529 million in Jul 2012 and
2.561 million in Aug 2012. The number marginally attached to the labor force
fell to 2.517 million in Sep 2012, 2.433 million in Oct 2012, 2.505 million in
Nov 2012 and 2.427 million in in Dec 2013. The number marginally attached to
the labor force reached 2.260 million in Dec 2014 and 1.833 million in Dec
2015. The number marginally attached to the labor force stood at 1.684 million
in Dec 2016. The level marginally attached to the labor force reached 1.623
million in Dec 2017. The level of marginally attached to the labor force stood
at 1.556 million in Dec 2018 and 1.246 million in Dec 2019. The level of
marginally attached to the labor force reached 2.027 million in Jul 2020.
Chart I-11, US, Marginally Attached to the Labor Force,
Thousands, NSA, 2001-2020
Source: US Bureau of Labor Statistics https://www.bls.gov/data/
Chart I-12 provides 12-month percentage
changes of the marginally attached to the labor force from 2001 to 2020. There
was a jump of 56.1 percent in May 2009 during the global recession followed by
declines in percentage changes but insufficient negative changes. On an annual
basis, the number of marginally attached to the labor force increased in four
consecutive years: 15.7 percent in 2008, 37.9 percent in 2009, 11.7 percent in
2010 and 3.5 percent in 2011. The number marginally attached to the labor force
fell 2.2 percent on annual basis in 2012 but increased 2.9 percent in the 12
months ending in Dec 2012, fell 13.0 percent in the 12 months ending in Jan
2013, falling 10.7 percent in the 12 months ending in May 2013. The number
marginally attached to the labor force increased 4.0 percent in the 12 months
ending in Jun 2013 and fell 4.5 percent in the 12 months ending in Jul 2013 and
8.6 percent in the 12 months ending in Aug 2013. The annual number of
marginally attached to the labor force fell 6.2 percent in 2013 and fell 6.5
percent in 2014. The annual number of marginally attached to the labor force
fell 11.4 percent in 2015. The number marginally attached to the labor force
fell 7.2 percent in the 12 months ending in Dec 2013 and fell 6.9 percent in the
12 months ending in Dec 2014. The number marginally attached to the labor force
fell 18.9 percent in the 12 months ending in Dec 2015 and decreased 8.1 percent
in the 12 months ending in Dec 2016. The level of marginally attached to the
labor force decreased 3.6 percent in the 12 months ending in Dec 2017. The
level of marginally attached to the labor force decreased 4.1 percent in the 12
months ending in Dec 2018 and decreased 19.9 percent in the 12 months ending in
Dec 2019. The level of marginally attached to the labor force increased 37.1
percent in Jul 2020 relative to a year earlier in the global recession, with output in the
US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event.
Chart I-12, US, Marginally Attached to the Labor Force
12-Month Percentage Change, NSA, 2001-2020
Source: US
Bureau of Labor Statistics https://www.bls.gov/data
Table I-4 consists of
data and additional calculations using the BLS household survey, illustrating
the possibility that the actual rate of unemployment could be 16.2 percent and
the number of people in job stress could be around 38.5 million, which is 22.3
percent of the effective labor force. Unemployment
increased sharply while employment declined rapidly in the
global recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event (https://www.bls.gov/cps/employment-situation-covid19-faq-june-2020.pdf). There is increasing employment and reduction of unemployment
in the gradual return of economic activity in May-Jul 2020. The first column provides for 2006 the yearly average population
(POP), labor force (LF), participation rate or labor force as percent of
population (PART %), employment (EMP), employment population ratio (EMP/POP %),
unemployment (UEM), the unemployment rate as percent of labor force (UEM/LF
Rate %) and the number of people not in the labor force (NLF). All data are
unadjusted or not-seasonally-adjusted (NSA). The numbers in column 2006 are
averages in millions while the monthly numbers for Jul 2019, Jun 2020 and Jul
2020 are in thousands, not seasonally adjusted. The average yearly
participation rate of the population in the labor force was in the range of
66.0 percent minimum to 67.1 percent maximum between 2000 and 2006 with the
average of 66.4 percent (https://www.bls.gov/data/). Table I-4b provides the yearly labor force participation rate
from 1979 to 2020. The objective of Table I-4 is to assess how many people
could have left the labor force because they do not think they can find another
job. Abraham, Hatiwanger, Sandusky and Spletzer (2016) find that “unemployment
duration has a strongly negative effect on the likelihood of subsequent
employment.” Row “LF PART 66.2 %” applies the participation rate of 2006,
almost equal to the rates for 2000 to 2006, to the noninstitutional civilian
population in Jul 2019, Jun 2020 and Jul 2020 to obtain what would be the labor
force of the US if the participation rate had not changed. In fact, the
participation rate fell to 63.6 percent by Jul 2019 and was 61.8 percent in Jun
2020 and 62.0 percent in Jul 2020, suggesting that many people simply gave up
on finding another job. There is also abrupt decrease in employment and
increase in unemployment in the global recession, with output in the US reaching a
high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event. Row “∆ NLF UEM”
calculates the number of people not counted in the labor force because they
could have given up on finding another job by subtracting from the labor force
with participation rate of 66.2 percent (row “LF PART 66.2%”) the labor force
estimated in the household survey (row “LF”). Total unemployed (row “Total
UEM”) is obtained by adding unemployed in row “∆NLF UEM” to the unemployed of
the household survey in row “UEM.” The row “Total UEM%” is the effective total
unemployed “Total UEM” as percent of the effective labor force in row “LF PART
66.2%.” The results are that:
- there
are an estimated 10.993 million unemployed in Jul 2020 who are not counted
because they left the labor force on their belief they could not find
another job (∆NLF UEM), that is, they dropped out of their job searches
- the
total number of unemployed is effectively 27.875 million (Total UEM) and
not 16.882 million (UEM) of whom many have been unemployed long term
- the
rate of unemployment is 16.2 percent (Total UEM%) and not 10.5 percent,
not seasonally adjusted, or 10.2 percent seasonally adjusted
- the
number of people in job stress is close to 38.474 million by adding the 10.993
million leaving the labor force because they believe they could not find
another job, corresponding to 22.3 percent of the effective labor force.
The row “In Job Stress” in Table I-4 provides the number of
people in job stress not seasonally adjusted at 38.474 million in Jul 2020,
adding the total number of unemployed (“Total UEM”), plus those involuntarily
in part-time jobs because they cannot find anything else (“Part Time Economic
Reasons”) and the marginally attached to the labor force (“Marginally attached
to LF”). The final row of Table I-4 shows that the number of people in job
stress is equivalent to 22.3 percent of the labor force in Jul 2020. The number
employed in Jul 2020 was 144.492 million (NSA) or 2.823 million fewer people
with jobs relative to the peak of 147.315 million in Aug 2007 while the
civilian noninstitutional population of ages 16 years and over increased from
231.958 million in Jul 2007 to 260.373 million in Jul 2020 or by 28.415
million. The number employed decreased 1.9 percent from Jul 2007 to Jul 2020
while the noninstitutional civilian population of ages of 16 years and over, or
those available for work, increased 12.3 percent. The ratio of employment to
population in Jul 2007 was 63.5 percent (147.315 million employed as percent of
population of 231.958 million). The same ratio in Jul 2020 would result in 165.337
million jobs (0.635 multiplied by noninstitutional civilian population of 260.373
million). There are effectively 20.845 million fewer jobs in Jul 2020 than in
Jul 2007, or 165.337 million minus 144.492 million. There is actually not
sufficient job creation in merely absorbing new entrants in the labor force
because of those dropping from job searches, worsening the stock of unemployed
or underemployed in involuntary part-time jobs.
The argument
that anemic population growth causes “secular stagnation” in the US (Hansen
1938, 1939, 1941) is as misplaced currently as in the late 1930s (for early
dissent see Simons 1942). There is currently population growth in the ages of
16 to 24 years but not enough job creation and discouragement of job searches
for all ages (https://cmpassocregulationblog.blogspot.com/2020/07/collapse-of-united-states-dynamism-of.html and earlier https://cmpassocregulationblog.blogspot.com/2020/06/global-recession-with-output-in-us.html). This is merely another case of theory without reality with
dubious policy proposals. The number of hiring relative to the number
unemployed measures the chances of becoming employed. The number of hiring in
the US economy has declined by 10 million and does not show signs of increasing
in an unusual recovery without hiring. 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 1.2
percent on average in the cyclical expansion in the 44 quarters from IIIQ2009
to IIQ2020 and in the global recession with output in the US reaching a high in
Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event. 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 IIQ2020 (https://www.bea.gov/sites/default/files/2020-07/gdp2q20_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 2.8 percent obtained by dividing GDP
of $15,557.3 billion in IIQ2010 by GDP of $15,134.1 billion in IIQ2009
{[($15,557.3/$15,134.1) -1]100 = 2.8%], or accumulating the quarter on quarter
growth rates (https://cmpassocregulationblog.blogspot.com/2020/08/contraction-of-united-states-gdp-at-32_57.html and earlier https://cmpassocregulationblog.blogspot.com/2020/06/mediocre-cyclical-united-states.html). The
expansion from IQ1983 to IQ1986 was at the average annual growth rate of 5.7 percent, 5.3 percent from
IQ1983 to IIIQ1986, 5.1 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, 4.9 percent from IQ1983 to
IIQ1988, 4.8 percent from IQ1983 to IIIQ1988, 4.8 percent from IQ1983 to
IVQ1988, 4.8 percent from IQ1983 to IQ1989, 4.7 percent from IQ1983 to IIQ1989,
4.6 percent from IQ1983 to IIIQ1989, 4.5 percent from IQ1983 to IVQ1989. 4.5
percent from IQ1983 to IQ1990, 4.4 percent from IQ1983 to IIQ1990, 4.3 percent
from IQ1983 to IIIQ1990, 4.0 percent from IQ1983 to IVQ1990, 3.8 percent from
IQ1983 to IQ1991, 3.8 percent from IQ1983 to IIQ1991, 3.8 percent from IQ1983
to IIIQ1991, 3.7 percent from IQ1983 to IVQ1991, 3.7 percent from IQ1983 to
IQ1992, 3.7 percent from IQ1983 to IIQ1992, 3.7 percent from IQ1983 to
IIIQ2019, 3.8 percent from IQ1983 to IVQ1992, 3.7 percent from IQ1983 to
IQ1993, 3.6 percent from IQ1983 to IIQ1993, 3.6 percent from IQ1983 to
IIIQ1993, 3.7 percent from IQ1983 to IVQ1993 and at 7.9 percent from IQ1983 to
IVQ1983 (https://cmpassocregulationblog.blogspot.com/2020/08/contraction-of-united-states-gdp-at-32_57.html and earlier https://cmpassocregulationblog.blogspot.com/2020/06/mediocre-cyclical-united-states.html). The
National Bureau of Economic Research (NBER) dates a contraction of the US from
IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The
expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP
contracted 1.3 percent from the pre-recession peak of $8983.9 billion of
chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm). 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 IIQ2020 and in the global recession with output in the US
reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event would have accumulated to
44.7 percent. GDP in IIQ2020 would be $22,807.6 billion (in constant dollars of
2012) if the US had grown at trend, which is higher by $5601.8 billion than
actual $17,205.8 billion. There are more than five trillion dollars of GDP less
than at trend, explaining the 38.5 million unemployed or underemployed
equivalent to actual unemployment/underemployment of 22.3 percent of the
effective labor force with the largest part originating in the global recession
with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event (Section I and earlier https://cmpassocregulationblog.blogspot.com/2020/07/increase-of-total-nonfarm-payroll-jobs.html). Unemployment is decreasing while employment is increasing in
initial adjustment of the lockdown of economic activity in the global recession
resulting from the COVID-19 event (https://www.bls.gov/cps/employment-situation-covid19-faq-june-2020.pdf). US GDP in IQ2020 is 24.6 percent lower than at trend. US GDP
grew from $15,762.0 billion in IVQ2007 in constant dollars to $17,205.8
billion in IQ2020 or 9.2 percent at the average annual equivalent rate of 0.7
percent. Professor John H. Cochrane (2014Jul2) estimates US GDP at more than 10
percent below trend. Cochrane (2016May02) measures GDP growth in the US at
average 3.5 percent per year from 1950 to 2000 and only at 1.76 percent per
year from 2000 to 2015 with only at 2.0 percent annual equivalent in the current
expansion. Cochrane (2016May02) proposes drastic changes in regulation and
legal obstacles to private economic activity. 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. There is classic
research on analyzing deviations of output from trend (see for example
Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term
trend is growth of manufacturing at average 2.9 percent per year from Jun 1919
to Jun 2020. Growth at 2.9 percent per year would raise the NSA index of
manufacturing output (SIC, Standard Industrial Classification) from 108.2987 in
Dec 2007 to 154.8159 in Jun 2020. The actual index NSA in Jun 2020 is 95.097
which is 38.6 percent below trend. The underperformance of manufacturing in Jun
2020 originates partly in the earlier global recession augmented by the current
global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19. Manufacturing grew at the
average annual rate of 3.3 percent between Dec 1986 and Dec 2006. Growth at 3.3
percent per year would raise the NSA index of manufacturing output (SIC,
Standard Industrial Classification) from 108.2987 in Dec 2007 to 162.5089 in
Jun 2020. The actual index NSA in Jun 2020 is 95.0970, which is 41.5 percent
below trend. Manufacturing output grew at average 1.6 percent between Dec 1986
and Jun 2020. Using trend growth of 1.6 percent per year, the index would
increase to 132.0671 in Jun 2020. The output of manufacturing at 95.0970 in Jun
2020 is 28.0 percent below trend under this alternative calculation. Using the NAICS (North American Industry Classification
System), manufacturing output fell from the high of 110.5147 in Jun 2007 to the
low of 86.3800 in Apr 2009 or 21.8 percent. The NAICS manufacturing index
increased from 86.3800 in Apr 2009 to 96.1857 in Jun 2020 or 11.4 percent. The
NAICS manufacturing index increased at the annual equivalent rate of 3.5
percent from Dec 1986 to Dec 2006. Growth at 3.5 percent would increase the
NAICS manufacturing output index from 106.6777 in Dec 2007 to 163.9940 in Jun
2020. The NAICS index at 96.1857 in Jun 2020 is 41.3 below trend. The NAICS
manufacturing output index grew at 1.7 percent annual equivalent from Dec 1999
to Dec 2006. Growth at 1.7 percent would raise the NAICS manufacturing output
index from 106.6777 in Dec 2007 to 131.6999 in Jun 2020. The NAICS index at
96.1857 in Jun 2020 is 27.0 percent below trend under this alternative
calculation.
Table I-4, US, Population, Labor Force and Unemployment, NSA
|
2006 |
Jul 2019 |
Jun 2020 |
Jul 2020 |
|
|
POP |
229 |
259.225 |
260.204 |
260.373 |
|
LF |
151 |
164.941 |
160.883 |
161.374 |
|
PART% |
66.2 |
63.6 |
61.8 |
62.0 |
|
EMP |
144 |
158.385 |
142.811 |
144.492 |
|
EMP/POP% |
62.9 |
61.1 |
54.9 |
55.5 |
|
UEM |
7 |
6.556 |
18.072 |
16.882 |
|
UEM/LF Rate% |
4.6 |
4.0 |
11.2 |
10.5 |
|
NLF |
77 |
94.284 |
99.321 |
98.998 |
|
LF PART 66.2% |
171.607 |
172.255 |
172.367 |
|
|
∆NLF UEM |
6.666 |
11.372 |
10.993 |
|
|
Total UEM |
13.222 |
29.444 |
27.875 |
|
|
Total UEM% |
7.7 |
17.1 |
16.2 |
|
|
Part Time Economic Reasons |
4.102 |
9.306 |
8.572 |
|
|
Marginally Attached to LF |
1.478 |
2.486 |
2.027 |
|
|
In Job Stress |
18.802 |
41.236 |
38.474 |
|
|
People in Job Stress as % Labor Force |
11.0 |
23.9 |
22.3 |
Pop: population; LF: labor force; PART: participation; EMP:
employed; UEM: unemployed; NLF: not in labor force; ∆NLF UEM: additional
unemployed; Total UEM is UEM + ∆NLF UEM; Total UEM% is Total UEM as
percent of LF PART 66.2%; In Job Stress = Total UEM + Part Time Economic
Reasons + Marginally Attached to LF
Note: the first column for 2006 is in average millions; the
remaining columns are in thousands; NSA: not seasonally adjusted
The labor force participation rate of 66.2% in 2006 is applied
to current population to obtain LF PART 66.2%; ∆NLF UEM is obtained by
subtracting the labor force with participation of 66.2 percent from the
household survey labor force LF; Total UEM is household data unemployment plus ∆NLF
UEM; and total UEM% is total UEM divided by LF PART 66.2%
Source: US Bureau of Labor Statistics
© Carlos M. Pelaez, 2009,
2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020.
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