Exchange Rate Fluctuations, 1.371 Million New Nonfarm Payroll Jobs in August and 1.027 Million New Private Payroll Jobs, Thirty-Five Million Unemployed or Underemployed in the Lost Economic Cycle of the Global Recession with Economic Growth Underperforming Below Trend Worldwide, Unemployment Rate 8.4 Percent in Aug 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, Job Creation, Cyclically Stagnating Real Wages, Increase of Real Personal Consumption Expenditures of 1.6 Percent in Jul, 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-Five 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

IB Stagnating Real Wages

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

 

IA1 Summary of the Employment Situation. Table I-1 provides summary statistics of the employment situation report of the BLS. The first four rows provide the data from the establishment report of creation of nonfarm payroll jobs and remuneration of workers (for analysis of the differences in employment between the establishment report and the household survey see Abraham, Haltiwanger, Sandusky and Spletzer 2009). Total nonfarm payroll employment seasonally adjusted (SA) increased 1.371 million in Aug 2020 and private payroll employment increased 1.027 million. The Bureau of Labor Statistics states (https://www.bls.gov/news.release/empsit.nr0.htm): “Our analysis suggests that the net effect of these hurricanes [Harvey and Irma] was to reduce the estimate of total nonfarm payroll employment for September. There was no discernible effect on the national unemployment rate. No changes were made to either the establishment or household survey estimation procedures for the September figures.” A hurdle in analyzing the labor market is 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/covid19/employment-situation-covid19-faq-august-2020.htm). The average monthly number of nonfarm jobs created from Aug 2018 to Aug 2019 was 157,667 using seasonally adjusted data, while the average number of nonfarm jobs reduced from Aug 2019 to Aug 2020 was minus 854 or decrease by 100.5 percent. The average number of private jobs created in the US from Aug 2018 to Aug 2019 was 145,417, using seasonally adjusted data, while the average from Aug 2019 to Aug 2020 was minus 794 or decrease by 100.5 percent. This blog calculates the effective labor force of the US at 172.489 million in Aug 2020 and 171.744 million in Aug 2019 (Table I-4), for growth of 0.745 million at average 62,083 per month. This situation will continue to challenge measurement (https://www.bls.gov/covid19/employment-situation-covid19-faq-august-2020.htm) and the return to fuller employment is unpredictable.

Closing the economy to mitigate the infection of COVID-19 could deepen the global recession. Gradual reopening in May-Aug 2020 is recovering jobs. The number employed in Aug 2020 was 147.224 million (NSA) or 0.091 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 260.558 million in Aug 2020 or by 28.600 million. The number employed decreased 0.1 percent from Jul 2007 to Aug 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 Aug 2020 would result in 165.454 million jobs (0.635 multiplied by noninstitutional civilian population of 260.558 million). There are effectively 18.230 million fewer jobs in Aug 2020 than in Jul 2007, or 165.454 million minus 147.224 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.

Subsection IA4 Job Creation analyzes the types of jobs created, which are lower paying than earlier. Average hourly earnings in Aug 2020 were $29.47 seasonally adjusted (SA), increasing 5.5 percent not seasonally adjusted (NSA) relative to Aug 2019 and increasing 0.4 percent relative to Jul 2020 seasonally adjusted. The Bureau of Labor Statistics states (https://www.bls.gov/cps/employment-situation-covid19-faq-june-2020.pdf https://www.bls.gov/covid19/employment-situation-covid19-faq-july-2020.htm https://www.bls.gov/covid19/employment-situation-covid19-faq-august-2020.htm): “Similarly, changes in average hourly earnings in recent months must be interpreted with caution. Average hourly earnings of all employees on private nonfarm payrolls declined by 35 cents in June to $29.37, following a decrease of 31 cents in May and a gain of $1.34 in April. The increase in average hourly earnings in April largely reflects the disproportionate number of lower-paid workers who went off payrolls, which put upward pressure on the total private average hourly earnings estimate. Some of these workers returned to payrolls in May and June, and job gains among lower-paid workers put downward pressure on average hourly earnings, though the effect is more muted given the smaller magnitude of employment changes in the past 2 months.” In Jul 2020, average hourly earnings seasonally adjusted were $29.36, increasing 4.7 percent relative to Jul 2019 not seasonally adjusted, and increasing 0.1 percent seasonally adjusted relative to Jun 2020. These are nominal changes in workers’ wages. The following row “average hourly earnings in constant dollars” provides hourly wages in constant dollars calculated by the BLS or what is called “real wages” adjusted for inflation. Data are not available for Aug 2020 because the prices indexes of the BLS for Aug 2020 will only be released on Sep 11, 2020 (https://www.bls.gov/cpi/), which will be covered in this blog’s comment on Sep 13 or Sep 20, 2020 together with world inflation. The third column provides changes in real wages for Jul 2020 and the fourth for Jun 2019. Average hourly earnings adjusted for inflation or in constant dollars increased 3.8 percent in Jul 2020 relative to Jul 2019 and increased 3.6 percent from Jun 2019 to Jun 2020 but have been decreasing/stagnating during multiple months. World inflation waves in bouts of risk aversion (https://cmpassocregulationblog.blogspot.com/2020/08/d-ollar-devaluation-and-yuan.html and earlier https://cmpassocregulationblog.blogspot.com/2020/07/contraction-of-household-wealth-by-14.html) mask declining trend of real wages. The fractured labor market of the US is characterized by high levels of unemployment and underemployment together with cyclically stagnating real wages or wages adjusted for inflation (Section I and earlier https://cmpassocregulationblog.blogspot.com/2020/08/thirty-eight-million-unemployed-or.html). The following section IB Stagnating Real Wages provides more detailed analysis. Average weekly hours of US workers seasonally adjusted had remained virtually unchanged, moving to 34.6 in Jun 2020, 34.5 in Jul 2020 and 34.6 in Aug 2020, which could affect additional work on a labor force of 160.838 million SA in Aug 2020. Another headline number widely followed is the unemployment rate or number of people unemployed as percent of the labor force. The unemployment rate calculated in the household survey decreased from 3.6 percent in Jan 2020 to 3.5 percent in Feb 2020, increasing to 4.4 percent in Mar 2020. The rate jumped to 14.7 percent in Apr 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, decreasing to 13.3 percent in May 2020 and 11.1 percent in Jun 2020. The unemployment rate SA decreased to 10.2 percent in Jul 2020 and 8.4 in Aug 2020. This blog provides with every employment situation report the number of people in the US in job stress or unemployed plus underemployed calculated without seasonal adjustment (NSA) at 34.8 million in Aug 2020 and 38.5 million in Jul 2020. The final row in Table I-1 provides the number in job stress as percent of the actual labor force calculated at 20.2 percent in Aug 2020 and 22.3 percent in Jul 2020.

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

	Aug 2020	Jul 2020	Jun 2020
New Nonfarm Payroll Jobs	1,371	1,734	4,781
New Private Payroll Jobs	1,027	1,481	4,729
Average Hourly Earnings	$29.47 ∆% Aug 20/Aug 19 NSA: 5.5 ∆% Aug 20/Jul 20 SA: 0.4	$29.36 ∆% Jul 20/Jul 19 NSA: 4.7 ∆% Jul 20/Jun 20 SA: 0.1	$29.32 ∆% Jun 20/Jun 19 NSA: 4.2 ∆% Jun 20/May 20 SA: -1.3
Average Hourly Earnings in Constant Dollars		∆% Jul 20/Jul 19 NSA: 3.8	∆% Jun 20/Jun 19 NSA: 3.6
Average Weekly Hours	34.6 35.2 NSA	34.5 34.5 NSA	34.6 34.6 NSA
Unemployment Rate Household Survey % of Labor Force SA	8.4	10.2	11.1
Number in Job Stress Unemployed and Underemployed Blog Calculation	34.8	38.5	41.2
In Job Stress as % Labor Force	20.2	22.3	23.9

Source: US Bureau of Labor Statistics

https://www.bls.gov/cps/

 

The balance of this section considers the second approach. Charts I-1 to I-12 explain the reasons for considering another approach to calculating job stress in the US. Chart I-1 of the Bureau of Labor Statistics provides the level of employment in the US from 2001 to 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 Aug 2020 was 147.224 million (NSA) or 0.091 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 260.558 million in Aug 2020 or by 28.600 million. The number employed decreased 0.1 percent from Jul 2007 to Aug 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 Aug 2020 would result in 165.454 million jobs (0.635 multiplied by noninstitutional civilian population of 260.558 million). There are effectively 18.230 million fewer jobs in Aug 2020 than in Jul 2007, or 165.454 million minus 147.224 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

https://www.bls.gov/data

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

https://www.bls.gov/data/

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 3.0 percent higher at 160.966 million in Aug 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 160.966 million in Aug 2020 to the noninstitutional population of 260.558 million in Aug 2020 was 61.8 percent. The labor force of the US in Aug 2020 corresponding to 66.8 percent of participation in the population would be 174.053 million (0.668 x 260.558) The difference between the measured labor force in Aug 2020 of 160.966 million and the labor force in Aug 2020 with participation rate of 66.8 percent (as in Jul 2007) of 174.053 million is 13.087 million. The level of the labor force in the US has stagnated and is 13.087 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 Aug 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 13.742 million in Aug 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 8.5 percent in Aug 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

https://www.bls.gov/data/

https://www.bls.gov/data/

Chart I-8 of the Bureau of Labor Statistics provides 12-month percentage changes of the level of unemployed. There was a jump of 81.8 percent in Apr 2009 with subsequent decline and negative rates since 2010. On an annual basis, the level of unemployed rose 59.8 percent in 2009 and 26.1 percent in 2008 with increase of 3.9 percent in 2010, decline of 7.3 percent in 2011 and decrease of 9.0 percent in 2012. The annual level 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 121.5 percent in Aug 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 7.488 million in Aug 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 73.5 percent in Aug 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 2.083 million in Aug 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 33.2 percent in Aug 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.

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

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 14.6 percent and the number of people in job stress could be around 34.8 million, which is 20.2 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 https://www.bls.gov/covid19/employment-situation-covid19-faq-july-2020.htm https://www.bls.gov/covid19/employment-situation-covid19-faq-august-2020.htm). There is increasing employment and reduction of unemployment in the gradual return of economic activity in May-Aug 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 Aug 2019, Jul 2020 and Aug 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 Aug 2019, Jul 2020 and Aug 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 63.2 percent by Aug 2019 and was 62.0 percent in Jul 2020 and 61.8 percent in Aug 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 11.523 million unemployed in Aug 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 25.265 million (Total UEM) and not 13.742 million (UEM) of whom many have been unemployed long term
• the rate of unemployment is 14.6 percent (Total UEM%) and not 8.5 percent, not seasonally adjusted, or 8.4 percent seasonally adjusted
• the number of people in job stress is close to 34.836 million by adding the 11.523 million leaving the labor force because they believe they could not find another job, corresponding to 20.2 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 34.836 million in Aug 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 20.2 percent of the labor force in Aug 2020. The number employed in Aug 2020 was 147.224 million (NSA) or 0.091 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 260.558 million in Aug 2020 or by 28.600 million. The number employed decreased 0.1 percent from Jul 2007 to Aug 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 Aug 2020 would result in 165.454 million jobs (0.635 multiplied by noninstitutional civilian population of 260.558 million). There are effectively 18.230 million fewer jobs in Aug 2020 than in Jul 2007, or 165.454 million minus 147.224 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/2020/08/nonfarm-hires-jump-64.html and earlier https://cmpassocregulationblog.blogspot.com/2020/07/collapse-of-united-states-dynamism-of.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 second estimate of GDP for IIQ2020 (https://www.bea.gov/sites/default/files/2020-08/gdp2q20_2nd.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/d-ollar-devaluation-and-yuan.html and earlier https://cmpassocregulationblog.blogspot.com/2020/08/contraction-of-united-states-gdp-at-32_57.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/d-ollar-devaluation-and-yuan.html and earlier https://cmpassocregulationblog.blogspot.com/2020/08/contraction-of-united-states-gdp-at-32_57.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 $5525.4 billion than actual $17,282.2 billion. There are more than five trillion dollars of GDP less than at trend, explaining the 34.8 million unemployed or underemployed equivalent to actual unemployment/underemployment of 20.2 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/2020/08/thirty-eight-million-unemployed-or.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 IIQ2020 is 24.2 percent lower than at trend. US GDP grew from $15,762.0 billion in IVQ2007 in constant dollars to $17,282.5 billion in IIQ2020 or 9.6 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 Jul 1919 to Jul 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 155.1850 in Jul 2020. The actual index NSA in Jul 2020 is 94.7916 which is 38.9 percent below trend. The underperformance of manufacturing in Jul 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 162.9490 in Jul 2020. The actual index NSA in Jul 2020 is 94.7916, which is 41.8 percent below trend. Manufacturing output grew at average 1.6 percent between Dec 1986 and Jul 2020. Using trend growth of 1.6 percent per year, the index would increase to 132.2418 in Jul 2020. The output of manufacturing at 94.7916 in Jul 2020 is 28.3 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 95.7434 in Jul 2020 or 10.8 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 164.4646 in Jul 2020. The NAICS index at 95.7434 in Jul 2020 is 41.8 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 131.8850 in Jul 2020. The NAICS index at 95.7434 in Jul 2020 is 27.4 percent below trend under this alternative calculation.

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

	2006	Aug 2019	Jul 2020	Aug 2020
POP	229	259.432	260.373	260.558
LF	151	164.019	161.374	160.966
PART%	66.2	63.2	62.0	61.8
EMP	144	157.816	144.492	147.224
EMP/POP%	62.9	60.8	55.5	56.5
UEM	7	6.203	16.882	13.742
UEM/LF Rate%	4.6	3.8	10.5	8.5
NLF	77	95.413	98.998	99.592
LF PART 66.2%		171.744	172.367	172.489
∆NLF UEM		7.725	10.993	11.523
Total UEM		13.928	27.875	25.265
Total UEM%		8.1	16.2	14.6
Part Time Economic Reasons		4.316	8.572	7.488
Marginally Attached to LF		1.564	2.027	2.083
In Job Stress		19.808	38.474	34.836
People in Job Stress as % Labor Force		11.5	22.3	20.2

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

https://www.bls.gov/cps/

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

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

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

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

 

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

 

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

 

Y = ∑_is_iy_i           (1)

 

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

 

∆Y = ∑_i∆s_iy*_i + ∑_i∆y_is*_i         (2)

 

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

 

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

 

Table I-4b and Chart I-12-b provide the US labor force participation rate or percentage of the labor force in population. It is not likely that simple demographic trends caused the sharp decline during the global recession and failure to recover earlier levels. The civilian labor force participation rate dropped from the peak of 66.9 percent in Jul 2006 to 62.6 percent in Dec 2013, 62.5 percent in Dec 2014, 62.4 percent in Dec 2015 and 62.4 in Dec 2016. The civilian labor force participation rate reached 62.4 in Dec 2017, and 63.1 percent in 2019.  The civilian labor force participation rate was at 62.9 percent in Nov 2018 and 62.8 percent in Dec 2018. The civilian labor force participation was 63.0 in Dec 2019. The civilian labor force participation rate was 61.8 in Aug 2020. The civilian labor force participation rate was 63.7 percent on an annual basis in 1979 and 63.4 percent in Dec 1980 and Dec 1981, reaching even 62.9 percent in both Apr and May 1979.  The civilian labor force participation rate jumped with the recovery to 64.8 percent on an annual basis in 1985 and 65.9 percent in Jul 1985. Structural factors cannot explain these sudden changes vividly shown visually in the final segment of Chart I-12b. Seniors would like to delay their retiring especially because of the adversities of financial repression on their savings. Labor force statistics are capturing the disillusion of potential workers with their chances in finding a job in what Lazear and Spletzer (2012JHJul22) characterize as accentuated cyclical factors. The argument that anemic population growth causes “secular stagnation” in the US (Hansen 1938, 1939, 1941) is as misplaced currently as in the late 1930s (for early dissent see Simons 1942). There is currently population growth in the ages of 16 to 24 years but not enough job creation and discouragement of job searches for all ages (https://cmpassocregulationblog.blogspot.com/2020/08/nonfarm-hires-jump-64.html and earlier https://cmpassocregulationblog.blogspot.com/2020/07/collapse-of-united-states-dynamism-of.html). “Secular stagnation” would be a process over many years and not from one year to another. This is merely another case of theory without reality with dubious policy proposals.

Table I-4b, US, Labor Force Participation Rate, Percent of Labor Force in Population, NSA, 1979-2020

Year	Apr	May	Jun	Jul	Aug	Dec	Annual
1979	62.9	62.9	64.5	64.9	64.5	63.8	63.7
1980	63.2	63.5	64.6	65.1	64.5	63.4	63.8
1981	63.6	63.9	64.6	65.0	64.6	63.4	63.9
1982	63.3	63.9	64.8	65.3	64.9	63.8	64.0
1983	63.2	63.4	65.1	65.4	65.1	63.8	64.0
1984	63.7	64.3	65.5	65.9	65.2	64.3	64.4
1985	64.3	64.6	65.5	65.9	65.4	64.6	64.8
1986	64.6	65.0	66.3	66.6	66.1	65.0	65.3
1987	64.9	65.6	66.3	66.8	66.5	65.5	65.6
1988	65.3	65.5	66.7	67.1	66.8	65.9	65.9
1989	65.9	66.2	67.4	67.7	67.2	66.3	66.5
1990	66.1	66.5	67.4	67.7	67.1	66.1	66.5
1991	66.0	66.0	67.2	67.3	66.6	65.8	66.2
1992	66.0	66.4	67.6	67.9	67.2	66.1	66.4
1993	65.6	66.3	67.3	67.5	67.0	66.2	66.3
1994	66.0	66.5	67.2	67.5	67.2	66.5	66.6
1995	66.4	66.4	67.2	67.7	67.1	66.2	66.6
1996	66.2	66.7	67.4	67.9	67.2	66.7	66.8
1997	66.7	67.0	67.8	68.1	67.6	67.0	67.1
1998	66.6	67.0	67.7	67.9	67.3	67.0	67.1
1999	66.7	67.0	67.7	67.9	67.3	67.0	67.1
2000	67.0	67.0	67.7	67.6	67.2	67.0	67.1
2001	66.7	66.6	67.2	67.4	66.8	66.6	66.8
2002	66.4	66.5	67.1	67.2	66.8	66.2	66.6
2003	66.2	66.2	67.0	66.8	66.3	65.8	66.2
2004	65.7	65.8	66.5	66.8	66.2	65.8	66.0
2005	65.8	66.0	66.5	66.8	66.5	65.9	66.0
2006	65.8	66.0	66.7	66.9	66.5	66.3	66.2
2007	65.7	65.8	66.6	66.8	66.1	65.9	66.0
2008	65.7	66.0	66.6	66.8	66.4	65.7	66.0
2009	65.4	65.5	66.2	66.2	65.6	64.4	65.4
2010	64.9	64.8	65.1	65.3	65.0	64.1	64.7
2011	63.9	64.1	64.5	64.6	64.3	63.8	64.1
2012	63.4	63.8	64.3	64.3	63.7	63.4	63.7
2013	63.1	63.5	64.0	64.0	63.4	62.6	63.2
2014	62.6	62.9	63.4	63.5	63.0	62.5	62.9
2015	62.6	63.0	63.1	63.2	62.7	62.4	62.7
2016	62.7	62.7	63.2	63.4	62.9	62.4	62.8
2017	62.8	62.8	63.3	63.5	63.0	62.4	62.9
2018	62.7	62.8	63.4	63.5	62.7	62.8	62.9
2019	62.7	62.8	63.4	63.6	63.2	63.0	63.1
2020	60.0	60.7	61.8	62.0	61.8

Source: US Bureau of Labor Statistics

https://www.bls.gov/cps/

 

Chart I-12b, US, Labor Force Participation Rate, Percent of Labor Force in Population, NSA, 1979-2020

Source: Bureau of Labor Statistics

https://www.bls.gov/data/

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

Chart I-12c, US, Civilian Noninstitutional Population, Thousands, NSA, 1948-2020

Sources: US Bureau of Labor Statistics

https://www.bls.gov/data/

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

Chart I-12d, US, Labor Force, Thousands, NSA, 1948-2020

Sources: US Bureau of Labor Statistics

https://www.bls.gov/data/

The rate of labor force participation in the US is in Chart I-12E from 1948 to 2020. There is sudden decline during the global recession after 2007 without recovery explained by cyclical factors (Lazear and Spletzer2012JHJul22) as many potential workers stopped their searches disillusioned that there could be an opportunity for them in sharply contracted markets.

Chart I-12E, US, Labor Force Participation Rate, Percent of Labor Force in Population, NSA, 1948-2020

Sources: US Bureau of Labor Statistics

https://www.bls.gov/data/

 

© Carlos M. Pelaez, 2009, 2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020.