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 II

 

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

 

IA4 Job Creation. What is striking about the data in Table I-8 is that the numbers of monthly increases in jobs in 1983 and 1984 are several times higher than in 2010 to 2019. The civilian noninstitutional population grew by 48.8 percent from 174.215 million in 1983 to 259.175 million in 2019 and labor force higher by 46.6 percent, growing from 111.550 million in 1983 to 163.539 million in 2019.

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.

 

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

 

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

 

The argument that anemic population growth causes “secular stagnation” in the US (Hansen 1938, 1939, 1941) is as misplaced currently as in the late 1930s (for early dissent see Simons 1942). There is currently population growth in the ages of 16 to 24 years but not enough job creation and discouragement of job searches for all ages (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). The proper explanation is not in secular stagnation but in cyclically slow growth. The US maintained growth at 3.0 percent on average over entire cycles with expansions at higher rates compensating for contractions. 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-8, US, Monthly Change in Jobs, Number SA

Month	1981	1982	1983	2008	2009	2010	Private
Jan	90	-330	219	11	-784	2	-7
Feb	72	-2	-73	-79	-743	-92	-77
Mar	105	-129	173	-49	-800	181	139
Apr	73	-284	274	-240	-695	231	180
May	13	-43	280	-177	-342	540	113
Jun	194	-242	377	-171	-467	-139	117
Jul	111	-344	416	-196	-340	-84	87
Aug	-36	-158	-308	-278	-183	-5	144
Sep	-88	-180	1118	-460	-241	-65	108
Oct	-97	-276	273	-481	-199	268	218
Nov	-209	-121	355	-727	12	125	135
Dec	-276	-15	355	-706	-269	72	93
			1984			2011	Private
Jan			443			19	27
Feb			484			212	255
Mar			272			235	258
Apr			363			314	322
May			306			101	156
Jun			381			236	201
Jul			310			60	175
Aug			243			126	158
Sep			312			233	267
Oct			285			204	189
Nov			353			132	159
Dec			125			202	219
			1985			2012	Private
Jan			265			354	362
Feb			131			262	261
Mar			339			240	244
Apr			196			82	94
May			274			100	120
Jun			147			73	54
Jul			189			152	169
Aug			192			172	169
Sep			205			187	178
Oct			188			159	181
Nov			210			156	176
Dec			166			239	235
			1986			2013	Private
Jan			123			191	209
Feb			115			278	266
Mar			87			139	150
Apr			187			191	192
May			127			222	227
Jun			-93			181	205
Jul			318			112	137
Aug			115			242	226
Sep			346			187	183
Oct			187			225	230
Nov			187			264	251
Dec			201			69	92
			1987			2014	Private
Jan			169			175	181
Feb			241			166	155
Mar			245			254	246
Apr			335			325	305
May			229			218	239
Jun			172			326	263
Jul			347			232	226
Aug			173			188	234
Sep			227			309	267
Oct			491			252	232
Nov			234			291	276
Dec			289			268	253
			1988			2015	Private
Jan			92			191	178
Feb			461			271	253
Mar			275			71	79
Apr			243			284	249
May			230			331	324
Jun			364			174	171
Jul			224			302	267
Aug			124			125	115
Sep			339			155	175
Oct			263			306	290
Nov			341			237	212
Dec			281			273	257
			1989			2016	Private
Jan			263			73	52
Feb			266			263	237
Mar			194			229	193
Apr			170			187	181
May			122			42	31
Jun			114			267	280
Jul			42			354	253
Aug			51			135	152
Sep			249			269	234
Oct			107			145	156
Nov			276			151	153
Dec			84			230	212
			1990			2017	Private
Jan			363			185	191
Feb			236			188	171
Mar			209			129	123
Apr			42			197	192
May			153			155	153
Jun			17			216	202
Jul			-32			215	202
Aug			-208			184	186
Sep			-98			18	9
Oct			-151			267	264
Nov			-153			225	201
Dec			-48			130	142
			1991			2018	Private
Jan			-111			121	147
Feb			-321			406	355
Mar			-160			176	178
Apr			-210			137	127
May			-115			278	261
Jun			85			219	191
Jul			-42			136	133
Aug			18			244	216
Sep			26			80	81
Oct			21			201	205
Nov			-61			134	133
Dec			32			182	173
			1992			2019	Private
Jan			41			269	258
Feb			-58			1	-6
Mar			54			147	132
Apr			154			210	185
May			130			85	87
Jun			66			182	180
Jul			78			194	160
Aug			132			207	157
Sep			34			208	195
Oct			180			185	190
Nov			133			261	247
Dec			223			184	164
			1993			2020
Jan			299			214	179
Feb			250			251	220
Mar			-50			-1373	-1356
Apr			302			-20787	-19835
May			272			2725	3236
Jun			181			4781	4729
Jul			306			1734	1481
Aug			151			1371	1027
Sep			242
Oct			285
Nov			251
Dec			330

Source: US Bureau of Labor Statistics

https://www.bls.gov/data

Charts numbered from I-38 to I-41 from the database of the Bureau of Labor Statistics provide a comparison of payroll survey data for the contractions and expansions in the 1980s and after 2007. Chart I-38 provides total nonfarm payroll jobs from 2001 to 2020. The sharp decline in total nonfarm jobs during the contraction after 2007 has been followed by initial stagnation and then inadequate growth in 2012 and 2013-2020 while population growth continued. There is sharp contraction in the final data point 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, with recovery in May-Aug 2020 in partial return to economic activity.

Chart I-38, US, Total Nonfarm Payroll Jobs SA 2001-2020

Source: US Bureau of Labor Statistics

https://www.bls.gov/data

Chart I-39 provides total nonfarm jobs SA from 1979 to 1993. Recovery is strong throughout the decade with the economy growing at trend over the entire economic cycle. 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 third recession explains the decline of the curve in 1990 followed by incipient recovery.

Chart I-39, US, Total Nonfarm Payroll Jobs SA 1979-1993

Source: US Bureau of Labor Statistics

https://www.bls.gov/data

Most job creation in the US is by the private sector. Chart I-40 shows the sharp destruction of private payroll jobs during the contraction after 2007. There has been growth after 2010 but insufficient to recover higher levels of employment prevailing before the contraction. At current rates, recovery of employment may spread over several years in contrast with past expansions of the business cycle in the US. There is sharp contraction 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, with recovery in May-Aug 2020 in partial return to economic activity.

Chart I-40, US, Total Private Payroll Jobs SA 2001-2020

Source: US Bureau of Labor Statistics

https://www.bls.gov/data

In contrast, growth of private payroll jobs in the US recovered vigorously during the expansion in 1983 through 1985, as shown in Chart I-41. Rapid growth of creation of private jobs continued throughout the 1980s. 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 third recession explains the decline of the curve in 1990 followed by recovery.

Chart I-41, US, Total Private Payroll Jobs SA 1979-1993

Source: US Bureau of Labor Statistics

https://www.bls.gov/data

Types of jobs created, and not only the pace of job creation, may be important. Unemployment decreased 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). Aspects of growth of payroll jobs from Aug 2019 to Aug 2020, not seasonally adjusted (NSA), are in Table I-9. Data are in thousands. Total nonfarm employment decreased by 10,543,000 (row A, column Change), consisting of decrease of total private employment by 9,757,000 (row B, column Change) and decrease by 786,000 of government employment (row C, column Change). Manufacturing employment decreased 718,000 while private service providing employment decreased by 8,619,000. An aspect in Table I-9 is that jobs in professional and business services decreased 1,301,000 with temporary help services decreasing 475,000. This episode of jobless recovery was characterized during significant part of the lost cycle of the global recession by part-time jobs and creation of jobs that are inferior to those that have been lost. Monetary and fiscal stimuli fail to increase consumption and investment in a fractured job market. The segment leisure and hospitality decreased 3,995,000 jobs in 12 months. An important characteristic is that the loss of government jobs has stabilized in federal government with increase of 309,000 jobs while states decreased 211,000 jobs and local government reduced 884,000 jobs. Local government provides the bulk of government jobs, 13.003 million, while federal government provides 3.176 million and states’ government 4.706 million.

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

	Aug 2019	Aug 2020	Change
A Total Nonfarm	151,141	140,598	-10,543
B Total Private	129,470	119,713	-9,757
B1 Goods Producing	21,433	20,295	-1,138
B1a Manufacturing	12,929	12,211	-718
B2 Private service providing	108,037	99,418	-8,619
B2a Wholesale Trade	5,927	5,627	-300
B2b Retail Trade	15,597	14,999	-598
B2c Transportation & Warehousing	5,545	5,216	-329
B2d Financial Activities	8,835	8,713	-122
B2e Professional and Business Services	21,521	20,220	-1301
B2e1 Temporary help services	2950	2475	-475
B2f Health Care & Social Assistance	20,489	19,594	-895
B2g Leisure & Hospitality	17,244	13,249	-3,995
C Government	21,671	20,885	-786
C1 Federal	2,867	3,176	309
C2 State	4,917	4,706	-211
C3 Local	13,887	13,003	-884

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

Source: US Bureau of Labor Statistics

https://www.bls.gov/

Greater detail on the types of jobs created is provided in Table I-10 with data for Jul 2020 and

Aug 2020. Strong seasonal effects are shown by the significant difference between seasonally adjusted (SA) and not-seasonally-adjusted (NSA) data. The purpose of adjusting for seasonality is to isolate nonseasonal effects. . Unemployment decreased 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 improvement in May-Aug 2020 in the return to economic activity. The 1.371 million SA total nonfarm jobs increased in Aug 2020 relative to Jul 2020 actually correspond to increase of 1535 thousand jobs NSA, as shown in row A. Most of this difference in Jan 2020 is due to the necessary benchmark and seasonal adjustments in the beginning of every year. The 1027 thousand total private payroll jobs SA increased in Aug 2020 relative to Jul 2020 actually correspond to increase of 933 thousand jobs NSA. The analysis of NSA job creation in the prior Table I-9 does show improvement over the 12 months ending in Aug 2020 that is not clouded by seasonal variations but is inadequate number of jobs created. In fact, the 12-month rate of job creation without seasonal adjustment is stronger indication of marginal improvement in the US job market but that is still insufficient in reducing about 35 million people unemployed or underemployed. Benchmark and seasonal adjustments affect comparability of data over time. 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/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).

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

	Jul 2020	Aug 2020	∆	Jul   2020	Aug 2020	∆
A Total Nonfarm	139,543	140,914	1371	139,063	140,598	1535
B Total Private	117,973	119,000	1027	118,780	119,713	933
B1 Goods Producing	19,920	19,963	43	20,231	20,295	64
B1a Constr.	7198	7214	16	7426	7459	33
B Mfg	12,103	12,132	29	12,175	12,211	36
B2 Private Service Providing	98,053	99,037	984	98,549	99,418	869
B2a Wholesale Trade	5593	5606	13	5619	5627	8
B2b Retail Trade	14,768	15,017	249	14,784	14,999	215
B2c Couriers     & Mess.	916	923	7	877	884	7
B2f Leisure & Hospit.	12,554	12,728	174	13,139	13,249	110

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

Source: US Bureau of Labor Statistics

https://www.bls.gov/

 

 

Industrial production increased 3.0 percent in Jul 2020 and increased 5.7 percent in Jun 2020 after increasing 0.9 percent in May 2020, with all data seasonally adjusted. The Board of Governors of the Federal Reserve System conducted the annual revision of industrial production released on Mar 27, 2019 (https://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm):

“The Federal Reserve has revised its index of industrial production (IP) and the related measures of capacity and capacity utilization.[1] On net, the revisions to the growth rates for total IP for recent years were small and positive, with the estimates for 2016 and 2017 a bit higher and the estimates for 2015 and 2018 slightly lower.[2] Total IP is still reported to have increased from the end of the recession in mid-2009 through late 2014 before declining in 2015 and rebounding in mid-2016. Subsequently, the index advanced around 7 1/2 percent over 2017 and 2018.

Capacity for total industry expanded modestly in each year from 2015 to 2017 before advancing 1 1/2 percent in 2018; it is expected to advance about 2 percent in 2019. Revisions for recent years were very small and showed slightly less expansion in most years relative to earlier reports.

In the fourth quarter of 2018, capacity utilization for total industry stood at 79.4 percent, about 3/4 percentage point above its previous estimate and about 1/2 percentage point below its long-run (1972–2018) average. The utilization rate in 2017 is also higher than its previous estimate.”

The report of the Board of Governors of the Federal Reserve System states (https://www.federalreserve.gov/releases/g17/current/default.htm):

“Total industrial production rose 3.0 percent in July after increasing 5.7 percent in June; even so, the index in July was 8.4 percent below its pre-pandemic February level. Manufacturing output continued to improve in July, rising 3.4 percent. Most major industries posted increases, though they were much smaller in magnitude than the advances recorded in June. The largest gain in July—28.3 percent—was registered by motor vehicles and parts; factory production elsewhere advanced 1.6 percent. Mining production rose 0.8 percent after decreasing for five consecutive months. The output of utilities increased 3.3 percent, as unusually warm temperatures increased the demand for air conditioning. At 100.2 percent of its 2012 average, the level of total industrial production was 8.2 percent lower in July than it was a year earlier. Capacity utilization for the industrial sector increased 2.1 percentage points in July to 70.6 percent, a rate that is 9.2 percentage points below its long-run (1972–2019) average but 6.4 percentage points above its low in April.”  In the six months ending in Jul 2020, United States national industrial production accumulated change of minus 8.2 percent at the annual equivalent rate of minus 15.8 percent, which is lower than growth of minus 8.2 percent in the 12 months ending in Jul 2020. Excluding growth of 0.1 percent in Feb 2019, growth in the remaining five months from Feb 2019 to Jul 2020 accumulated to minus 8.3 percent or minus 18.8 percent annual equivalent. Industrial production increased 5.7 percent in one of the past six months, 3.0 percent in one month, 0.9 percent in one month, 0.1 percent in one month, minus 12.8 percent in one month and minus 4.3 percent in one month. Industrial production increased at annual equivalent 45.6 percent in the most recent quarter from May 2020 to Jul 2020 and decreased at 51.3 percent annual equivalent in the prior quarter from Feb 2020 to Apr 2020. Business equipment accumulated change of minus 11.7 percent in the six months from Feb 2020 to Jul 2020, at the annual equivalent rate of minus 22.1 percent, which is lower than growth of minus 13.9 percent in the 12 months ending in Jul 2020. The Fed analyzes capacity utilization of total industry in its report (https://www.federalreserve.gov/releases/g17/Current/default.htm): ” Capacity utilization for the industrial sector increased 2.1 percentage points in July to 70.6 percent, a rate that is 9.2 percentage points below its long-run (1972–2019) average but 6.4 percentage points above its low in April.”  United States industry apparently decelerated to a lower growth rate followed by possible acceleration, weakening growth in past months and deep 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.

Manufacturing decreased 22.3 percent from the peak in Jun 2007 to the trough in Apr 2009 and increased 18.3 percent from the trough in Apr 2009 to Dec 2019. Manufacturing increased 8.6 percent from the trough in Apr 2009 to Jul 2020. Manufacturing in Jul 2020 is lower by 15.6 percent relative to the peak in Jun 2007. 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-13 provides national income by industry without capital consumption adjustment (WCCA). “Private industries” or economic activities have share of 87.1 percent in IIQ2020. Most of US national income is in the form of services. In Aug 2020, there were 140.598 million nonfarm jobs NSA in the US, according to estimates of the establishment survey of the Bureau of Labor Statistics (BLS) (https://www.bls.gov/news.release/empsit.nr0.htm Table B-1). Total private jobs of 119.713 million NSA in Aug 2020 accounted for 85.1 percent of total nonfarm jobs of 140.598 million, of which 12.211 million, or 10.2 percent of total private jobs and 8.7 percent of total nonfarm jobs, were in manufacturing. Private service-providing jobs were 99.418 million NSA in Aug 2020, or 70.7 percent of total nonfarm jobs and 83.0 percent of total private-sector jobs. Manufacturing has share of 9.2 percent in US national income in IQ2020 and durable goods 5.5 percent, as shown in Table I-13. Most income in the US originates in services. Subsidies and similar measures designed to increase manufacturing jobs will not increase economic growth and employment and may actually reduce growth by diverting resources away from currently employment-creating activities because of the drain of taxation.

Table I-13, US, National Income without Capital Consumption Adjustment by Industry, Seasonally Adjusted Annual Rates, Billions of Dollars, % of Total

	SAAR IQ2020	% Total	SAAR IIQ2020	% Total
National Income WCCA	18,092.3	100.0	15,769.0	100.0
Domestic Industries	17,849.1	98.7	15,638.6	99.2
Private Industries	15,767.2	87.1	13,648.5	86.6
Agriculture	147.5	0.8
Mining	155.5	0.9
Utilities	204.1	1.1
Construction	954.2	5.3
Manufacturing	1671.5	9.2
Durable Goods	995.5	5.5
Nondurable Goods	676.0	3.7
Wholesale Trade	1010.9	5.6
Retail Trade	1204.8	6.7
Transportation & WH	589.2	3.3
Information	692.0	3.8
Finance, Insurance, RE	3192.4	17.6
Professional & Business Services	2737.7	15.1
Education, Health Care	1873.3	10.4
Arts, Entertainment	795.8	4.4
Other Services	538.4	3.0
Government	2081.9	11.5	1990.1	12.6
Rest of the World	243.2	1.3	130.3	0.8

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

Source: US Bureau of Economic Analysis

https://apps.bea.gov/iTable/index_nipa.cfm

Chart I-42 provides output of durable manufacturing from 1972 to 2020. Output fell sharply during the global recession, recovering at relatively high pace. Output is lower than extrapolation of trend. Output contracted 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. There is recovery in May-Jul 2020.

Chart I-42, US, Output of Durable Manufacturing, 1972-2019

Source: Board of Governors of the Federal Reserve

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

The NBER dates recessions in the US from peaks to troughs as: IQ80 to IIIQ80, IIIQ81 to IV82 and IVQ07 to IIQ09 (https://www.nber.org/cycles.html). Table I-12 provides total annual level nonfarm employment in the US for the 1980s and the 2000s, which is different from 12-month comparisons. Nonfarm jobs rose by 4.859 million from 1982 to 1984, or 5.4 percent, and continued rapid growth in the rest of the decade. In contrast, nonfarm jobs are down by 7.636 million in 2010 relative to 2007 and fell by 951,000 in 2010 relative to 2009 even after six quarters of GDP growth. Monetary and fiscal stimuli have failed in increasing growth to rates required for mitigating job stress. The initial growth impulse reflects a flatter growth curve in the current expansion. Nonfarm jobs declined from 137.981 million in 2007 to 136.364 million in 2013, by 1.617 million or 1.2 percent. Nonfarm jobs increased from 137.981 million in 2007 to 150.939 million in 2019, by 12.958 million or 9.4 percent. The US noninstitutional population or in condition to work increased from 231.867 million in 2007 to 259.175 million in 2019, by 27.308 million or 11.8 percent. The ratio of nonfarm jobs of 137.981 million in 2007 to the noninstitutional population of 231.867 was 59.5. Nonfarm jobs in 2019 corresponding to the ratio of 59.5 of nonfarm jobs/noninstitutional population would be 154.209 million (0.595x259.175). The difference between actual nonfarm jobs of 150.939 million in 2019 and nonfarm jobs of 154.209 million that are equivalent to 59.5 percent of the noninstitutional population as in 2007 is 3.270 million fewer jobs. The proper explanation for this loss of work opportunities is not in secular stagnation but in cyclically slow growth. The NBER dates recessions in the US from peaks to troughs as: IQ80 to IIIQ80, IIIQ81 to IV82 and IVQ07 to IIQ09 (https://www.nber.org/cycles.html). 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-12, US, Total Nonfarm Employment in Thousands

Year	Total Nonfarm	Year	Total Nonfarm
1980	90,533	2000	132,011
1981	91,297	2001	132,073
1982	89,689	2002	130,634
1983	90,295	2003	130,331
1984	94,548	2004	131,769
1985	97,532	2005	134,034
1986	99,500	2006	136,435
1987	102,116	2007	137,981
1988	105,378	2008	137,224
1989	108,051	2009	131,296
1990	109,526	2010	130,345
1991	108,425	2011	131,914
1992	108,799	2012	134,157
1993	110,931	2013	136,364
1994	114,393	2014	138,940
1995	117,400	2015	141,825
1996	119,828	2016	144,336
1997	122,941	2017	146,608
1998	126,146	2018	148,908
1999	129,228	2019	150,939

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

Chart I-43 provides annual nonfarm jobs from 2000 to 2019. Cyclically slow growth in the expansion since IIIQ2009 has not been sufficient to recover nonfarm jobs. Because of population growth, there are 3.270 million fewer nonfarm jobs in the US in 2019 than in 2007.

Chart I-43, US, Annual Nonfarm Jobs, NSA, Thousands, 2000-2019

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

Chart I-44 provides annual nonfarm jobs in the US from 1980 to 1999. Much more rapid cyclical growth as in other expansions historically allowed steady and rapid growth of nonfarm job opportunities even with similarly dynamic population growth.

Chart I-44, US, Annual Nonfarm Jobs, NSA, Thousands, 1980-1999

Source: 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.