Thursday, September 25, 2014

G20 Labor and Employment Report – What Does it Say?

Earlier this month, the International Labour Organization, the Organisation for Economic Co-operation and Development, and the World Bank Group issued a 30-page document explaining the situation, as they and a wide range of statistics saw it, of the jobs situation in the world’s 20 largest economies, or G-20.  These countries come from six continents:  7 in Europe, 3 in North America, 6 from Asia, and 2 in South America, along with South Africa and Australia.  Their level of prosperity runs from as low as India and Indonesia to Japan, Germany, the United Kingdom, and of course the United States. 

The report includes a great deal in both hard information and opinions, and covers the issue of what it terms the “jobs gap,” or worldwide employment shortage, quite comprehensively in the space it takes up.  So what are the most noteworthy conclusions it reaches?

First, labor force participation rates seem low all over.  Even though the American rate, listed at 62.8%, is about the smallest it has been since the 1970s, it is still seventh highest in the G20.  In Italy, fewer than half of people aged 15 to 64 are working, and the entire European Union (its data often included in the report) is under 60%.  These numbers, though, conceal wide variations in the share of women with jobs, and the rate among American men is only tied for 13th.    

Second, United States unemployment among people 15 through 24, while high at 13.1%, ranks sixth best among the 20.  Spain and Italy are worst here, with staggering rates, respectively, of 53.1% and 42.6%.  Although Germany was third at 7.8%, the European Union overall is at a near-depression level of 22.1%.         

Third, the trend of net new jobs, which had climbed steadily since at least 1999, fell way off in 2008, starting two years during which the number of positions broke about even in the “emerging” G20 countries and lost about 10 million in the “advanced” ones.  Although the number of jobs in both groups has been consistently increasing since then, the trend line from 1999 through 2008, if it had continued, shows about 25 million more jobs in G20 advanced countries and 35 million more for the developing than there are.  That means the Great Recession, and slower growth since then, have cost 60 million positions.

Fourth, the 30% share of unemployed United States workers being jobless for one year or more is about average among the 16 G20 countries for which that data was available.   The places with the worst problem here are almost all in Europe, with 45% of unemployed people in the EU being out for a year or more.  On the other hand, South Korea and Mexico, with rates around 1%, must be doing something very right.

Fifth, as I documented for the United States in Work’s New Age, productivity and wages have long since parted company in advanced G20 countries as a group as well.  Since 1999, inflation-adjusted pay is up about 5%, but labor productivity, after dipping in 2008-2009, rose 17%.       

Sixth, the labor share, or the percent of total domestic economic output equaling what is paid for people’s work, has been dropping in 17 of the 18 G20 countries presented.  The trend of automation, a large input into changes in the labor share, seems therefore steepest in Spain, Italy, South Korea, and the United States in the advanced countries named, and in Saudi Arabia and Turkey among developing ones.   

Seventh, another trend from Work’s New Age is also solidly affecting the rest of the G20 – in all twenty, the share of people aged 55 to 64 with jobs is higher than the share of those 15 to 24, which would not have been the case a generation ago.       

What actions does the ILO/OECD/WB report recommend, and how good would they be?  That will be the subject of the October 10th post.  In the meantime, you can view the entire report at


Friday, September 19, 2014

Reuters on Yesterday’s Employment-Related Data: Too Rosy

Yesterday, a report with commentary on jobless claims and residential building was published in The New York Times and elsewhere.  Titled “Housing Data Is Mixed, but Job Figures Show Strength,” with a byline only of Reuters, it showed how such data can be misunderstood.  What do I mean?   Going through the article…

“The number of Americans filing new claims for unemployment benefits fell more than expected last week, suggesting that a sharp slowdown in job growth last month was probably an aberration.”

We can’t reasonably assess the robustness of new job growth through how many people are officially dismissed from old ones, have reasonable grounds to get unemployment compensation, and are not retiring or leaving by their own choice.  Reuters is hardly the only source to do that, but it still just doesn’t make sense. 

“While other data on Thursday showed that housing starts declined in August, upward revisions for groundbreaking in July offered hope that the housing market was continuing to improve.  “We have broad-based growth in the economy, including the housing market,” said Gus Faucher, senior economist at PNC Financial Services Group.”

Fine, but a country of 318 million people and rising, when demonstrably not in a recession, had darn well better have “broad-based growth.”  The issue is whether the level of said growth is a sign of strength, or whether it is just at a neutral point. 

“Initial claims for state unemployment benefits dropped 36,000 to a seasonally adjusted 280,000 for the week ended Sept. 13, the lowest level since July, the Labor Department said Thursday.”

The lowest level since July?  That’s two months!  So what?

“Economists polled by Reuters had forecast claims falling to only 305,000 last week. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, slipped 4,750, to 299,500.”

That’s not much of a difference – less than 2%. 

““This is consistent with that the Federal Reserve is expecting to see,” Mr. Faucher said of the data.”

So it seems Mr. Faucher wasn’t impressed at all, in effect giving this data a grade of C.  The tone of the article is more positive than that.    

“The data came a day after the Federal Reserve renewed a pledge to keep interest rates near zero for a “considerable time,” while hinting at a faster pace of rate increases than the central bank was signaling a few months ago.”

Keep them low they should and keep them low they will.  Janet Yellen clearly seems to realize, correctly, that the unemployment rate is not the only story.  If she is not aware of the American Job Shortage Number (AJSN) showing the country could quickly absorb almost 20 million more positions, she seems to act as if she is.   

“In a separate report, the Commerce Department said housing starts fell 14.4 percent to a seasonally adjusted annual pace of 956,000 units.  July’s starts were revised to show a 1.12-million unit rate, the highest level since November 2007, instead of the previously reported 1.09-million unit rate.”

A tad better, but that’s all.  Most of that is due to pent-up demand, as housing starts have been poor for years. 

“That helped take some of the sting out of the report, which also showed that permits fell 5.6 percent, to a 998,000-unit pace in August.  Single-family starts in the South, where about half of the single-family construction takes place, increased last month to an eight-month high.  Permits in the South hit their highest level since April 2008.”

Some better, some worse.  The only other major reason for any improvement in housing may be more subprime loans, as the Times also reported this past week. 

“Housing is clawing back after a setback caused by a rise in mortgage rates last year.  However, it remains constrained by a relatively high unemployment rate and stringent lending practices by financial institutions.”

And fundamentally greater job insecurity, with the permanent crisis as the root cause. 

“With the labor market gaining traction, though, economists expect housing activity to accelerate next year.  “The underlying momentum in the housing sector remains quite favorable and we expect building activity to rebound next month,” said Millan Mulraine, deputy chief economist at TD Securities in New York.”

Rebound to what?  Accelerate how much?  There is no substantial good news, other than the prospect of continuing to inch forward, on the American employment front now. 

“Last week’s jobless claims data covered the period during which employers were surveyed for September’s nonfarm payrolls.  Claims fell 19,000 between the August and September survey periods.  The drop suggested that payroll growth rebounded from August’s eight-month low, which most economists dismissed as a fluke, noting that payroll gains tended to be smaller in August because of problems adjusting the data for seasonal hiring.”

As this data is already seasonally adjusted, that looks like bending the map to me.  And it doesn’t matter much anyway – whether 140,000 net new jobs gained or 240,000, it still projects to close to a decade to get to what anyone could reasonably call full employment. 

“Employers added only 142,000 jobs to their payrolls in August, snapping six consecutive months of job increases above 200,000.  The jobless claims report showed that the number of people still receiving benefits after an initial week of aid fell 63,000, to 2.43 million, in the week to Sept. 6.”

Actually, the number of people using up their unemployment benefits but not working would be a good indicator, with higher numbers being bad.  That points to August being not a good month, and once more the jobs crisis going nowhere.  And nothing – nothing at all – in this report contradicts that at all.   So being positive about this incremental and mixed data is a disservice.  That’s just the opposite of what we need now.

Friday, September 12, 2014

Guaranteed Government Jobs: A Fourth Possible Jobs Crisis Solution?

An article came out in Salon last week advocating a new, rather large social program.  Its author Bryan Williams showed some advantages of the United States federal government providing jobs, with pay about $30,000 per year, for everyone officially unemployed. 

Such an effort would be expensive.  Williams multiplied $30,000 by 9.8 million unemployed to get $294 billion annually, but when the cost of benefits, and expenses putting these people into work settings of some sort, are added, it would be more like $500 billion.  Some of that, immediately, would be saved from other programs – the author estimated $28 billion less in unemployment benefits, $49 billion less in Medicaid, and “billions” from food stamps.  As well, $25 billion per year would be collected from the workers in payroll taxes.  By comparison, the remaining amount, about $390 billion, is well under 2013’s $585 billion Medicare cost. 

Clearly, with the jobs crisis permanent, such a program is worthy of consideration.  What are its other good and bad points?

Another advantage would be the stimulus effect of putting more money in the hands of people who may not have much.  It’s almost impossible to quantify how much that would be, but, clearly, when formerly unemployed people buy things they wouldn’t have bought before, those who sell them gain income as well, meaning even more spending and even more taxes collected.  In poorer areas in particular, not only current businesses would be helped but new ones would appear to deal with the increased demand.  We do not need to debate exact or even approximate amounts, only to realize they would be real and substantial.

A second good thing about an automatic employment program is that it would get necessary tasks  done, in particular infrastructure work.  A recent estimate claimed the country now needs $3.6 trillion of that by 2020 alone, and no other program to greatly step up its activity has even been seriously proposed.  The effort could potentially cover almost all of the infrastructure labor needed, with room left over to do many other constructive things. 

How about the downside?  Three problems come to mind.

First, assured government jobs would damage incentive for people to work at other positions much more than either a guaranteed income or the current safety net.  Giving people, say, $10,000 per year just for being American citizens would take some off the working rolls, but the bulk would still want to have cars, meals out, good private houses, and other things such a stipend would not cover.  If people knew they would always be employed, though, they would often care less about keeping their existing jobs, and quality and quantity of work would suffer across the country.  The same problem would happen with the government positions themselves.  As well, if everyone unemployed were assured of working for $30,000 per year, many would find ways of losing their lower-paying positions.  Both practices would be seriously destructive.     

Second, such a program would overemphasize official unemployment.  The latest American Job Shortage Number (AJSN) shows a national deficit of 19.6 million jobs, of which only an estimated 8.8 million would be filled by the country’s technically jobless.  The proposed effort would provide nothing for people in other categories who would work if the opportunities were truly there:  700,000 of the 775,000 discouraged; 2.9 million of the 3.6 million who did not look in the previous year; 1.1 million or one-tenth of those institutionalized, in the military, and off the grid; and even 4.2 million representing only 5% of those claiming no interest whatever in jobs.  Those people, more willing to work than many think, arguably need such a program more than many whose skills are fresher and contacts more current.

Third, a guaranteed jobs effort would be very hard to manage.  Dealing with the highly variable numbers of people needing it, assigning them to workplaces, anticipating how many could be used where, and handling those suddenly leaving would mean a lot of inefficiency, and a lot of $600 weeks for no work at all.  Especially given that it would take years to develop and implement the logistics of assigning people, there would be chaos for quite a while.  

So how much promise does assured federal jobs have?  It could be an improvement over long-term falling employment, but would need changes to be truly good, which could make it even more gigantic and unwieldy.  The stimulus effect, as well, could be offset by what could become an effective $15 per hour minimum wage, as most jobs paying less would be quickly vacated in favor of government opportunities.  There would also be temptations to go further with the program, as those on the left would not only lose little time in labeling jobs there as holding a stigma, but would push to make them pay closer to what they considered a living wage. 

Therefore, while the idea of guaranteed government jobs has some appeal, it would not be the right way to go.  Full marks to Bryan Williams, though, for presenting it – with a crisis this profound, we need more people doing just what he did.  His idea, as flawed as it is, gets a place with three other possibilities:  guaranteed income, shorter work hours, and payments for online contributions.  We need more. 

Friday, September 5, 2014

AJSN Down as USA Now 19.6 Million Jobs Short on Dull August Jobs Report

The new Employment Situation Summary is out – and it’s small wonder that there was little eager anticipation of what it would contain.  Nothing happened.

Official seasonally adjusted unemployment moved to 6.1% from 6.2%, going back to where it was the month before.  The same happened with the labor force participation rate, which returned to 62.8%.  There were 142,000 more jobs in August, again seasonally adjusted, than in July, a smaller gain than in previous months but still more than were absorbed by the population increase. 

The best news was on long-term unemployed and those working part-time for economic reasons.  Both declined, from 3.2 to 3.0 million jobless for 27 weeks or longer and from 7.5 to 7.3 million with work and wanting but not finding full-time hours.  The employment to population ratio held at 59.0%.

The largest components of the American Job Shortage Number (AJSN) generally improved.  The total number of unemployed, as with all of the figures in this section not seasonally adjusted, fell more than 500,000 to just under 9.8 million.  About 150,000 fewer reported they wanted work but had not looked for it for at least a year, and now add up to about 3.6 million.  After those, August’s results were mixed, with the two largest categories of people away from the labor force well up, including almost 1.6 million more Americans saying they did not want a job at all, and the total of those in the armed forces, institutionalized, and off the grid or otherwise unaccounted for up a high 1.3 million.  Overall, the AJSN’s drop of 378,000 adds up this way:


In the past year the AJSN has fallen 1.3 million.  In August 2013, there were about 1.7 million more officially unemployed, but 1.7 million fewer reporting no interest at all in a job, and over 200,000 fewer wanting work but not having looked for it for a year or more. 

So, not much change anywhere here.  The improvements in long-term jobless and part-time for economic reasons could be the start of something good, but they look like fluctuations within their ranges for now.  The same thing goes in the other direction for the higher count of people saying they did not want to work.  Otherwise, we couldn’t ask for a more neutral jobs report. 

One thing stood out, though.  Curiously, those unaccounted for jumped in August last year as well – perhaps there’s something about summer weather that makes people disappear for a while.  We’ll see if they come back this month, when the new federal jobs data, and the new AJSN, are released October 1.