Slow Recovery of Labor Markets

How long will the recession last? I don't know for sure, but we may be able to say something about how long labor markets will continue to struggle even after output growth begins to increase. The next two graphs show the unemployment rate and the employment to population ratio since 1948:

Notice that in the last two recessions, unlike those that came before, these measures of labor market performance continue to deteriorate even after the official end of the recession (as dated by the NBER). The delayed recovery can be seen more clearly in a graph of the two series since 1985:

This means that once the trough of the recession in output growth is reached - and we are not there yet - then there will be a considerable period of time before the labor market recovers if this downturn is like the last two.  How long of a time period?

Output growth troughs very near the NBER assigned date for the end of recessions:

Focusing on the last two downturns, the trough of the 1990-91 recession was in March 1991. However, the peak unemployment rate wasn't until June, 1992, 15 months later. The employment to population trough was a bit earlier, December, 1991, but it was still 9 months later (and there is a second, slightly higher trough a few months later - see the red line in the second graph above).

The 2001 recession has a trough in November, 2001, but unemployment doesn't peak until 20 months later in July, 2003. The employment to population trough is 22 months later in September, 2003. Summarizing:

Recession	Trough	Unemp Peak	Emp to Pop Trough
1990-91	Mar., 1991	June, 1992 (15)	Dec., 1991 (9)
2001	Nov., 2001	July, 2003 (20)	Sept., 2003 (22)

Thus, once the recession has officially ended, the average number of months until unemployment peaks is 17.5, and the average time until the employment to population ratio troughs is 15.5 months.

So, if the past two recessions are a reliable guide, expect around five quarters or so of additional labor market problems even after output growth turns around.

Is the past a reliable guide? I wish I could answer, but as far as I know the exact reason for the increased time until the labor market recovers observed in the last two recessions is unkown (there has always been some delay, but lately it has increased considerably). One reason could be that labor hoarding has increased due to higher training costs or some other reason. With firms retaining more labor through the downturn and hence more excess capacity than in the past, they can expand output once the recovery starts for a longer period of time without increasing the labor force, or at least not increasing it by much. With employment growing slower than population, and also growing slower than the number of people looking for jobs, the measures above would increase for awhile even after the economy turns around. If firms also install labor saving equipment at a greater rate than in the past as the recovery begins, or if the equipment is installed at the same rate but it is even less labor intensive than in the past, the growth in employment could be even slower. But as I said, even though there has been lots of research into this question, the exact reason for the change in labor market behavior is not known with certainty.

Comments

[Lafayette]

MT: If firms also install labor saving equipment at a greater rate than in the past as the recovery begins, or if the equipment is installed at the same rate but it is even less labor intensive than in the past, the growth in employment could be even slower.

Good stuff. Thanx.

I am not so sure that our fixation on "industry" is the correct one. Neither am I sure it is not. There is a lot of strength in the notion that industry cannot be done away with without considerable loss to an economy's potential to employ labor (as an input factor). But, neither is there any concrete evidence of this supposed truth. It is derived, I suggest, from historical fact. But, our economies transited from the Agricultural to the Industrial Age with similar discomforts and disconnects. So, why not yet again in our transition from Industrial Age to Information Age?

We like to harp about how productivity enhances labor output, but does it really prevent labor input? I accept the former but doubt the latter. Manufacturing managers, who see the benefit of automation in terms of productivity, could therefore conclude that to enable more production they must add more workers. The breakdown between productive machinery and number of bodies needed to run a production line depends upon the nature of the manufacturing operation. Example of two extremes: Semiconductors need fewer nimble hands and car assembly lines need more.

As well, I remain convinced that the paradigm is changing. We, in our modern economies, are transiting from the Industrial Age to the Information Age. This means, inexorably, that labor-intensive industries are heading off to lower-cost climates. But, are all industries labor-intensive?

Of course not. Semiconductors are not labor intensive to obtain significant output value. My point is therefore this: There is labor and there is labor, and it depends upon how we categorize it. Un- and semi-skilled labor is probably going or gone in those manufacturing processes of low value. But I doubt that is the case for those manufacturing processes of high value.

I doubt that dislocating abroad the production of complex hi-tech jet engines will see a significant cost reduction. I doubt as well that those manufacturing processes that employ automated systems will see any large dislocation of jobs to the Far East.

I conclude therefore that upscale skilled labor probably has a good chance of surviving, though it will meet with increasing global competition. Access to technology and technological education are not the sole property of the American educational system.

And I maintain that the onus on training our youth to the highest possible level of postsecondary education is a national priority. The higher the skill set (or competency) of our workforce, the better paid and more durable will be our employment.

But as I said, even though there has been lots of research into this question, the exact reason for the change in labor market behavior is not known with certainty.

Mark Thoma obviously knows this research better than most on this forum. Nonetheless, I wonder if we are doing enough research in the right areas.

The labor market is not only quantitative but qualitative, as I argued above. The total unemployment figure is a cocktail. For instance whilst total employment is pointing north of 6 percent, employment of university graduates is somewhere around half that amount according to some press articles. I cannot find the BLS stats to support these numbers however.

NB: All I can locate are figures for unemployment by educational level of 16/24 year olds, which I find not sufficiently significant a statistic. So, I have asked the BLS why a larger grouping was not assessed. It would be interesting to know if, or not, educational level makes a significant difference on unemployment rates.

[www.ownerearnings.blogspot.com]

15 reasons the US economy will get worse: Link Here

[save_the_rustbelt]

Michigan in now starting the seventh year of a recession, driven by job losses.

Answer: A VERY LONG TIME

[Beezer]

As well, I remain convinced that the paradigm is changing. We, in our modern economies, are transiting from the Industrial Age to the Information Age. This means, inexorably, that labor-intensive industries are heading off to lower-cost climates. But, are all industries labor-intensive?

Maybe we are headed into the sustainable age? Diminishing natural resources would imply sustainability be the paramount consideration for future health and welfare. Either we address this consideration at some level of coordination, or we face the piper and are dragged by the nape of our collective necks to some type of new reality.

Sustainability may be labor intensive, might it not? Massive power grids may end up being constructed, powered by renewable energy sources, but individual locations may be "off the grid," and independent in many ways. Who knows how this works out overtime.

One thing appears inevitable. Governments will play, at a minimum, some type of enabling role. As always, what you know is important, so education will be critical.

[Noni Mausa]

Lafayette said: As well, I remain convinced that the paradigm is changing. We, in our modern economies, are transiting from the Industrial Age to the Information Age. This means, inexorably, that labor-intensive industries are heading off to lower-cost climates...

I see our problem as one of overall balance. Suppose, as an extreme example, the USA became wholly a nation of small numbers of highly paid specialists and huge numbers of service workers (essentially poorly educated and poorly paid servants, but without the benefit of a room below stairs and Wednesday afternoons off). This is not the case in America, though it has certainly leaned that way in the past 20 years.

It might be efficient to farm out everything else to the second and third world. But such a specialized structure is inherently unsuited to adapt to new conditions.

Noni's Law for today is "Extremely efficient structures are also extremely vulnerable."

You want to make America a great nation? Get LESS efficient. Spend a lot on schooling and lifelong learning. Change jobs a lot, and provide enough social supports so that such changes are not catastrophic. Foster the idea that the average citizen has at least two or three areas of expertise. Foster not just current fad jobs, but old areas of expertise like ham radio, weaving, and raising small livestock. And provide breathing space in people's lives for social and political action.

As Bob Heinlein said, "Specialization is for insects."

It might be profitable in the short run to metaphorically outsource your kidneys to a third world nation, but I don't know many people who would be comfortable with that.

Noni

[Noni Mausa]

My apologies, Lafayette. Of course Beezer supplied the quote above.

Noni

[calmo]

We like to harp about how productivity enhances labor output, but does it really prevent labor input?
See? Maybe laffy does play the harp...at least calmo still hopes for some musical affliation (this is the foundation of The Suzuki Method, yes?) [calmo whips out kazoo and bleats out "absolutely" as only a kazoo can...]
And following in that same arpeggio...The labor market is not only quantitative but qualitative, as I argued above. We do need to note (make it a 10 note chord...get your nose into it!) that this redux of labor to a component of production (How productive were you today my friend? 15 accomplishment units? Well well.) is a heinous crime that obliterates so many social dimensions not tracked by the BLS.

And my final laffy steal:NB. So percussive, yes?

[ken melvin]

Something happened around 1980, what it is is not exactly clear, but, as someone in the work force since 1960, I am quite sure that the unemployment rate has been quite a lot higher than shown and that real E/P did not significantly increase as shown. I suspect that, as with unemployment, the population (denominator) has been systematically lowered (jiggered).

There was a gap of 7 million pulled after 2003 that was never closed. It appears that something similar happened in the eighties. What happened to these millions of people? How is that they have disappeared amongst improved numbers?

[robertdfeinman]

See this article by Alan Krueger:

http://economix.blogs.nytimes.com/2008/11/17/gallups-new-job-market-measure/

He discusses new measures of employment.

[calmo]

This is so un-melvinesque:Something happened around 1980, what it is is not exactly clear,I'm wondering if ken has entered ... the twilight zone...to an era where there was this popular tune ... which right now is not exactly clear (owing to nothing more serious than horrendous mental incapacities...say, what?)
I'm hoping, you?
Damn we are all old codgers...rdf, (I cannot be expected to follow directions at a time like this.) tell me you are not bald at least, otherwise I'm just going to pass out from old age osmosis and you can kiss that link good bye.

And thank you rusty for recognizing my poor eyesight...maybe mo.

[Scarce]

The solution is new businesses to make products that didn't exist before. This means small business financing. Wasting limited financing on silly loans just dries up the financing that is needed to start new businesses. Destroying the nation's credit rating with silly loans makes small business financing even more scarce. Forcing people into inflation hedges means less is available to loan out in the first place.

[anne]

http://www.nytimes.com/2008/11/18/business/18citi.html?hp&pagewanted=print

November 18, 2008

Citi Plans Asset Sales and Job Cuts
By ERIC DASH

The banking giant Citigroup announced that it would cut 50,000 jobs in the coming quarters, largely by selling assets.

[Huh?]

[anne]

http://economistsview.typepad.com/economistsview/2008/11/slow-recovery-o.html

November 17, 2008

Slow Recovery of Labor Markets
By Mark Thoma

The 2001 recession has a trough in November, 2001, but unemployment doesn't peak until 20 months later in July, 2003. The employment to population trough is 22 months later in September, 2003. Summarizing:

Recession
Recession Trough
Unemployment Peak (Months)
Employment to Population Trough (Months)

1990-91
March, 1991
June, 1992 (15)
December, 1991 (9)

2001
November, 2001
July, 2003 (20)
September, 2003 (22)

[Nice.]

[anne]

http://www.nytimes.com/2008/11/17/us/17fiscal.html?hp&pagewanted=print

November 17, 2008

Facing Deficits, States Get Out Sharper Knives
By JENNIFER STEINHAUER

Rising unemployment and sharp drops in tax revenue are forcing states to face service cuts, hiring freezes, tax increases, or all of these.

[Private sector employment has declined by 1.4 million since January 2008, while total employment loss has been 1.2 million. Public employment has made a 200,000 worker difference from January to November, but states will be no help here in coming months unless there is federal-state assistance.]

[paine]

"as far as I know the exact reason for the increased time until the labor market recovers observed in the last two recessions is unkown "

but what is known

the direction of the job multiplier
when uncle opts for
bigger federal spending
from borrowed funds

its exact size ???

who cares
uncle can modify
as we go

create 10 million
pri sec jobs now
ask what next later

[paine]

nb

bigger fed sepends from borrowing

may mean simply cuts to tax income not additional spending

for fast action
automatic stabilizers need automatic
tax rate cuts to turbo charge
the job contraction off sets

brit econ con james meade
proposed building into the then UK system
a dash of the same

way back in the 40-41 period iirc

only real question then

if its so transparent
why isn't it already
part of
"the fiscal automatic system"

ask the wall street masters
of the army of the unemployed
and its draft board at the fed

"wage control"
" job discipline"

or as doc karl sez in kap I
its about keeping
the exploitation machine
in
BEST OF ALL POSSIBLE
running orders

[paine]

casting aside
the profit margin squeezery
and or price spiral effects ...long term
rational self interested agency wise

and
the payroll tax system
is ideal for such a counter cyclical job market
auto turbo

cut the rates of witholding
on the employee side of the SSI tax

use some plausible algorithmic basis or other
looped thru the job market's
spot performance

nothing more soothing to the electorate
then taking a chunk
of the pol pol discretion
out of macro managing
the job market
as by means of
such automatic effective demand stabilizers

[lineup32]

"According to a new CNN/Opinion Research Corp. poll, 41% of Americans believe the Secretary of the Treasury will be the Obama administration member who will matter most to the country's future. That compares to 25% who said the Secretary of State will be most important and 24% who said the Secretary of Defense will be the next president's most important cabinet decision."

The finance sector is clearly the most important part of the economy today and with the rise in layoff's at Citi Bank and other financial sector employers alarm bell's are loud and clear. Those that watched the mortgage industry unwind this Spring along with the investment banking industry which basically disappeared like smoke on a windy day should be wondering just how stable our information age economy is holding up. Direct factory labor continue's to be a smaller piece of the economic pie as our industrial automation's cranks out products at faster and faster rates but the soft spot seems to be the demand side as production creates excess inventory that the consumer driven economy cannot absorb.
May take longer then expected to sort through this downturn.

[paine]

net spending thrust
without lags or decider centralization
of expenditures
that is the beauty of tax cuts/rebates etc

the fine tuning knock

never got applied to automatic stabilizers
only dinosaurian speed and finesse discretionary spending lifts
got the too little now too much later kibosh
by thoughtful 80-90's neolibs

vide hog delong par example

[cm]

Lafayette: Part of the problem is that a certain degree (or at least "perceived degree") of productivity induces a phase transition — from close to full employment to the "two thirds society", where substantially fewer (domestic) workers are needed to sustain the prevailing social/economic paradigm.

Note, the "paradigm" has been changing as well, e.g. cutting out most activities from the mainstream economic sphere that didn't fit the "high efficiency" streamlined process or otherwise couldn't demonstrate a tangible contribution or being necessary to the bottom line. Example, where do you get real customer service anymore, including the concept of repairing a product vs. tossing and repurchasing?

This generates an increasing "surplus" of labor capacity that can apparently no longer be usefully integrated into the mainstream economy, and one approach of employing it is to define and install a "padding" of new middleman occupations and marginal services — marginal mostly in the sense of being largely discretionary to both customers and businesses. The former category is fairly large and varied, but let me just single out finance-related activities. In the latter we have all those N+1st strip mall businesses where there is large overbuilt capacity, which has been largely supported by escalating consumer credit that has now come to a stop (whether "to an end" has to be seen).

Workforce education is fine, but I don't see the mechanism by which there will be a (paying) market for all those great skills. What we have is good enough for muddling along, which we have been doing for a good while. That's not to say there has been no progress in technology and general state of the art, that always happens, but with a strictly bounded need for a skilled workforce. (By all appearances — I cannot conclude otherwise.)

[kthomas]

I know this will not futher the discussion(s), but I often wonder how different our situation would be if Al Gore or Kerry had won the Presidency. What would they have done differently?

...no matter.

[paine]

"Part of the problem is that a certain degree.... of productivity (growth)..."

ie job cuts thru tech change exceeding
job creation by tech change

and this ".. induces a phase transition ...
from close to full employment
to the "two thirds society",
where substantially fewer (domestic) workers
are needed to sustain the prevailing social/economic paradigm."

this is in essence true but pre keynesian

the effect of higher corporate earnings
and lower wage earnings
on macro demand may indeed
lead to chronic
over saving by pwnership households
and far more so
by their agents
the firms

answer recycle the savings thru the gub budget eh ???

maintain a full employment level of demand

problem

this induces the wage profit price mark up spiral

answer

mark up cap and trade

problem

profit squeeze stagnation

answer

well when the whole system proves
to be sub optimal even on its own terms
you can retreat
as we did in the 80's
gain time till the next internally generated system crisis
or
you scrap the present system and ....
brave new world it.... eh ???

[paine]

"I often wonder how different our situation would be if Al Gore or Kerry had won the Presidency."

as fellow neoliberals
the two would have guided us into this very same global crisis

good emperors only make life easier for future bad emperors
like wise bad emperors do the same in turn for good emperors

four more years of bush
has made the incoming obama admin's political road
ahead an easier slog
then a kerry admin would have faced

no bush years at all..
poor prez gore
he'd have been
at best the truman of the new millenium

[paine]

bob reich on why i'm wrong
about massive payroll tax rebates now

"people tend to use those extra dollars to pay off their debts rather than buy new goods and services.."

okay so there'll be some household balance sheet adjustment

how much ??
off set that by increasing the rebate
but there's more then one leak owen

"... even when individuals purchase goods and services, those purchases tend not to generate as many American jobs as government spending on the same total scale because much of what consumers buy comes from abroad"

ie there's the import leak

odd seeing cosmopolite reich pull this
out of his conical cap
when it comes to jobs programs
bobby has a double standard
two classes of world citizens
and only domestic ones
are first class and worthy beneficiaries
of a jobs program
the rest of the planet
must be
made up of
second class citizens of the world

okay call for co ordinated fiscal stimulus by all state systems
even try jaw boning the laggards and free riders
but to be a secular humanist and
begrudge a few foreigners
a few job externalities....

btw bob

if u want to plug the trade leak
fix the forex fiddle dee diddle

but as with all the other grand systemic refoms
they must follow recovery
not pre empt it

[Lafayette]

calmo: And my final laffy steal: NB. So percussive, yes?

Nota Bene: Resonant. Truly resonant.

Ad vitam lunga, calmissimus.

[Lafayette]

cm: Part of the problem is that a certain degree (or at least "perceived degree") of productivity induces a phase transition — from close to full employment to the "two thirds society", where substantially fewer (domestic) workers are needed to sustain the prevailing social/economic paradigm.

You presume that the labor pie is constant in size, are you not?

What if it is increasing? Meaning this, your statement above holds true "all other things being equal". Economics is a dynamic situation, not static. The graphs and charts are snapshots of activity within a continuity.

When the dynamic slows, yes, fewer workers are needed. So, socialist European economies, under the fallacy of the "quantum of labor", suggest that retirement be brought forward in order to create jobs for the young.

This is stupid policy. Such a notion overlooks the fact that the retired are sustained by the output value of the employed. The retired are riding on the backs of the next generations, which is socially unfair.

Which is why many European economies are lengthening the age of retirement. It is an absolute necessity, or the younger generations will have, necessarily, lower standards of living.

And which is also a good reason for assuring that our youth will obtain the competence/skills necessary obtain the wages the taxes of which will sustain a retired population. Even if the Federal government must guaranty that outcome by subsidizing it.

Such a Social Commitment is the cornerstone of our society.

[Patricia Shannon : workable links]

So we supported our parents and grandparents generations, but we shouldn't expect the generations that follow ours to support us.

[im1dc]

NOT ON TOPIC

"calmo says...I see im1dc has dissed the Economists." on November 14, 2008 in regard to blog "Paul Krugman: Depression Economics Returns"

calmo, it was not my intention to diss Economists only their (your) ability to forecast with accuracy.

This topic has come up before I believe in posts between you and 2slugsbaits, wogie1, et.al., some years back on the old NYTimes Paul Krugman Comments blog and you said essentially what my post of Nov 14th said in regard to Economists' ability to forecast with accuracy: no better or not much better than a coin toss. Maybe 60% for the Economist and 55% for the educated guess of a non-economist.

Do you recall posting something like that?

However, stung by your criticism, I re-read my post and see that I should have worded the comment differently.

Thank you for pointing it out to me.

Here's the offending 11-14 post: "My response to all of this hand wringing and dire prognostication (Thoma, Krugman, the commenters, et. al.) is: What me worry?"

"Fact is Economists are not to be trusted. The best they can do is to predict the economy part of the time, about what you can do if you were to make an educated guess of your own."

It would have been more accurate had I posted 'Fact is Economists are not to be trusted anymore than the rest of us when it comes to making informed predictions. While Economists may get it right 60% of the time, our own judgments are right 55% of the time.'

I apologize for the perceived insult to you and your profession.

A careful reading of the remainder of my post would have found the following which I don't believe is consistent with taking my original comment as a diss on Economists: "Today's best Economic Prognosticator is Economist Nouriel Roubini since he's been right for a couple of years now and called this recession. But even his Doomsday forecasts will one day be wrong.'

Dr. Roubini has been prescient. He's an economist just like you.

And the Floyd Norris comment I included said this: "But the sad fact is that economists as a group have a horrid forecasting record. I think they are overly optimistic, again."

Economics is an extremely difficult field with incredible complexity. Economists do their best but as a profession Economists have a poor forecasting record. That was my point.

I was not "dissing Economists." Just pointing out relative poor performance.

Thus the comment:"What me worry."

I hope you accept this heartfelt apology.

[paine]

laff up to your usual chaotic thinking

but i snatch this internally consistent passage

"When the dynamic slows, yes, fewer workers are needed. So, socialist European economies, under the fallacy of the "quantum of labor", suggest that retirement be brought forward in order to create jobs for the young.

This is stupid policy. Such a notion overlooks the fact that the retired are sustained by the output value of the employed. The retired are riding on the backs of the next generations, which is socially unfair "

imagine a policy that first assumes
the national economy generates
a natural number of jobs
and then decides to shift
n of those jobs
that would otherwise naturaly
remain within one generation
to the next generation

this obviously nets out
by assumption
with no increase or decrease
in society wide dependents ..right ???

no additional burden here sport

did u momentarily forget
under the old regime
where later retirement created
a larger pool of unemployed young

justice buedens

young folks idled by jobless ness
are social dependents too

the point is to increase the job stock eh ???
as you say
in another wrinkle of thought

and how is that if at all
accomplished i ask you sir ???

enter effective demand price level and forex mangement

[paine]

ps
the reblooming
calmo /laff love fest
makes some of us
yeatsian
digital eunichs jealous

[cm]

Laffayette: "You presume that the labor pie is constant in size, are you not? - What if it is increasing?"

Valid point, and I'm not fundamentally disagreeing with it, but by appearances the "what if" is not materializing.

Apparently in the absence of government "meddling", the size of the labor force will always be about the minimum needed to execute the volume of business that can be generated at a certain rate of profit. Which is obviously linked to the circulation of means of exchange, or failing that growing consumer credit.

I and a number of people I know would very much want jobs where our intellectual capacity and aspiration (result of higher ed) can expand, but looks like there is not enough paying demand for it, in the aggregate. So we are biding our time as intellectually underemployed staffers doing effectively maintenance and incremental evolution of long existing products, as long as our jobs are still here.

I'm getting a vibe that something similar holds in other sectors of the economy that are not asking for higher ed but more "down to earth" skills.

[cm]

paine: Of course, I left the conclusion open that when the for-profit economy sectors cannot, or will not, make use of the labor surplus, there are social and economic policy options, and fiscal policy mechanisms to facilitate them within a money-based system. Getting there by some sort of consensus/evolution is probably preferrable to most varieties of scraping the plate. We have seen some plate-scraping attempts last century that generated non-unemployment (and in practice many were just showing up and not much more) but not sustained prosperity.

[Joen]

Ken Melvin: ...and that real E/P did not significantly increase as shown...

Just look at women's labor force participation. It doubled during that period. You know they are part of the population too.

Other things to consider. The last two recessions were 8 months each. The previous 3 recessions were 16, 8 and 16 months in length. Maybe the NBER changed their recession dating algorithm and before they only called of the recession when the UR started to fall.

[paine]

wpa
to many equals non unemployment
nice term
non unemployment

too often goo goos want to increase the public good by increasing public goods

i'd rather increase pri sec demand for labor
by increasing demand for pri sec products
by increasing labors take home pay

[kthomas]

Just a reminder: there is no more dangerous an animal than a young man without a job.

I hope our new President realizes this, because the last one was to coked up to give a shyt.

[ken melvin]

Joen - Look at the curves. The curve afore was that of pop growth, there's a recession, 7 million jobs are lost, recession ends, job creation continues at rate of pop growth; what happened to the 7 million? Either 7 million coming on line were denied or the 7 million stayed unemployed.

[ken melvin]

Work needs be redefined to include anything that improve the well being of mankind. Methinks the brainwashing begins in the cradle. How much of what's held dear is valid?

[Meh]

I'm with cm on this. Lafayette's "what if" is certainly possible, the problem is:

a) It hasn't been sighted yet.
b) No-one actually has a model under which it turns up, just some hand-waving.

Please to note "it worked when we moved from an agricultural to an industrial society" is not a model - it is... hand-waving.

I'm not sure what the problem is - I sort of suspect that income/wealth inequality leads to allocation of resources for the benefit of those who own the majority of the wealth...

[OhNoNotAgain]

"And I maintain that the onus on training our youth to the highest possible level of postsecondary education is a national priority. The higher the skill set (or competency) of our workforce, the better paid and more durable will be our employment."

Yes, but while we have an electorate that completely believes the one side, i.e. that we aren't getting our manufacturing back and that we need to adapt, they don't quite believe or understand the flip side, i.e. that this is going to require that we stop educating our kids for a blue-collar economy. The cost of a university education has to come down significantly or be something that can be offset completely for some, and it has to target specific areas like engineering, chemistry, etc. Every kid that doesn't go to college and gain a marketable knowledge base is one more adult on the wrong side of the ledger. How on earth would the "market" solve such a problem ? I can't think of any way in which it could.

[Blissex]

The analysis in this post is ridiculous because it posits "business as usual", that is a closed economy and a steady level of indebtness.

Instead in the "anomalous" period where job losses lasted much longer than recessions imports, capital exports and indebtedness all rose very rapidly, fueled by exceptionally loose lending. Superimposing graphs of these would be quite revealing.

In other words, recoveries in the USA in the recent past were funded largely by borrowing, and the borrowing was spent largely buying capital or goods abroad, creating jobs abroad.

Every jobless recovery in America had a matching explosion in investment and employment in China and in India.

Yes, keynesian stimulus still works, and recoveries fueled by colossal deficits and cheap money in the USA still create huge inflationary booms in jobs, but in India and China nowadays.

[Lafayette]

Unemployment rate by level of educational attainment

Here is, for 2007, the unemployment rate by attainment of education. (Thanks to some kind help from the people at the BLS who found the data amongst the mass they have):
*Less than a HS diploma (7.1%)

*High School graduates, but no college (4.4%)

*Bachelor's degree and higher (2.0%)

Note that, by level higher achieved, the employment rate was almost halved.

If we are to lower unemployment rates amongst the general population, it seems fairly straightforward, to me at least, that our quest should be to enhance education and/or professional training uniformly across the nation.

And, the high cost of postsecondary education is NOT conducive to that objective. It is rationale to assume that ambitious (and costly) measures must be taken for Federal action to move all students from the lowest category above to at least a HS diploma, even if it is one that has a heavy content of tradesman (semi-skilled) training for a good many who are not fit for book-learning.

It should be the national objective of the Department of Education that the throughput of HS Graduates to Postsecondary Schooling should be as close to 100% as is humanly possible. Such is not Mission Impossible, even if it will take perhaps a decade to do it. (It took us that long to go to the moon. This national objective is FAR MORE important.)

And, if all that is to cost an arm and a leg, then that is a low price to pay for an economy in which all citizens can thrive to their utmost abilities to earn a decent wage for themselves and their families.

En passant

Let's build Infrastructure into our educational system -- and let no child be left behind. To do that, we need to
(1) Spend money on better teaching facilities/resources for primary/secondary schooling, and
(2) Offer fully subsidized education at state universities for a four year degree and more (for graduate students), and
(3) Assure that professional training is available at all times to individuals throughout their professional careers, who, for purposes of employment, must recycle themselves into other work skills or qualifications.

Our country is rich enough to assure the above. Our country will be richer for having assured the above.

[Blissex]

«So we are biding our time as intellectually underemployed staffers doing effectively maintenance and incremental evolution of long existing products, as long as our jobs are still here.»

That sounds like it is written in french. In plain american that is written "So we are sore losers".

In America winners get huge bonuses from screwing suckers, and then huge bailouts from the suckers' representatives.

Let's hear again Newt Gingrich describe WINNERS:

http://classwebs.SPEA.Indiana.edu/bakerr/v600/a_new_look_at_environmental_poli.htm

«If you have a society where almost every middle class person routinely fudges the law, that's telling us something. We have laws that matter - murder, rape, and we have laws that don't matter. [ ... ] The first thing that every good American says each morning is "What's the angle?" "How can I get around it?" "What does my lawyer think?" "There must be a loophole!" Then he proceeds to work the angle, and the bureaucracy spends its time chasing that and writing new regs to stop him. America is the most incentive-driven society on the planet.»

[calmo]

im1dc flatters me beyond recognition: some years back on the old NYTimes Paul Krugman Comments blog and you said essentially what my post of Nov 14th said in regard to...

Do you recall posting something like that?"years"? Please..dc, I'm not that good.
Not really...not ever...of course I could've had a memory then, that was that good...and right now I need all the support I can get, so if you are sure my memory was that good then, then maybe my current problems are just temporary soft spots. If I could afford you as my Press Secretary, you'd B it...Of course, you'd need to remind me.
Dang.
Don't do this to me:
I apologize for the perceived insult to you and your profession.

Dr. Roubini has been prescient. He's an economist just like you.
I am not an economist.
I do not have a profession.
I am exactly as well educated as Lily T.
I am not well equipped to handle your kindness now bugger off and feel quite... thrashed at having given you this larger, competent, mindful, possibly educated, impression.
Some days I am funny (as close as I get to the profession thingie: funny boy)...but not lately.
If it matters to you...now...I read you seriously as contributing thoughtfully, a role model for me who needs it. [It doesn't matter now I bet. Not now..dang.]
If I have criticized your posts in the past, it is only me trying to find you and your view.
I B no mighty hammer...glancing blows aside, not well placed obviously by this damn amateur.

[Julio]

Noni Mausa:

Noni's Law for today is "Extremely efficient structures are also extremely vulnerable."

You want to make America a great nation? Get LESS efficient. Spend a lot on schooling and lifelong learning. Change jobs a lot, and provide enough social supports so that such changes are not catastrophic. Foster the idea that the average citizen has at least two or three areas of expertise. Foster not just current fad jobs, but old areas of expertise like ham radio, weaving, and raising small livestock. And provide breathing space in people's lives for social and political action.

As Bob Heinlein said, "Specialization is for insects."

[I'm going out to buy a frame.]

[david]

I think there's even more to this- big business has one over on people like never before, to the point where everyone is so afraid they'll lose their job, their cashflow is strapped, and their hours are maxed out, that the monoliths (the ones that survive) are able to put us in jobless recovery after jobless recovery. The 1991 case, 2001, and the current case are basically forcing dislocation that people have to sort out for themselves, with ever deeper and deeper trailing employment troughs dragging behind the curves as indicated above, and for future pullbacks as well.

[im1dc]

calmo, perhaps I confused you with another poster that back then that went by the logon cliff33, however, my apology was sincere to you and the all Economists especially those who may have thought, like you, that I was dissing them.

[ken melvin]

What right economics to turn the peoples' lives into hell?

[cm]

Lafayette: I'm all for more and better education, but I don't buy the argument that it will fundamentally fix unemployment.

To an extent, people of a certain credential level will be preferred over people of one or maybe two lower credentials levels for jobs compatible with their credential range, so people with lower credentials have a higher chance of ending up without a chair when the music stops.

For example, a PhD may be preferred over an MS over a BS for a given engineering job, and a BA may be preferred over somebody with only HS (I actually quoted an example of the latter here, "massage operations coordinator" at Google). Will the same job pay more for the higher degree? Not so sure.

Your argument would work when the problem is that there are many unfilled "high credential" jobs but too few high credential candidates, and lower-credentialed people can move into those jobs after a credential upgrade. Otherwise credential upgrades will only lead to more competition among higher credential workers.

Where is the evidence that people getting higher credentials creates higher credential jobs (instead of job credential requirements just being raised, of which there has been ample evidence)?

[cm]

Also note the distinction between "education" and "credentials". The latter is often mistaken for the former.

[Noni Mausa]

Thanks, Julio!

[cm]

paine: The "plate scraping" I was referring to was the "socialist"/"communist" revolutions and subsequent economic regimes of top-down central planning. There was no nominal unemployment, but there was a lot of slack in many workplaces, for lack of useful work to do -- only in part due to lack of material inputs, machine downtime, and mismanagement, and otherwise workers' refusal to make an effort that did not translate into a tangible difference in living conditions. Overall that version of plate scraping was not very successful.

[Lafayette]

The objective of Infrastructural Social Investment

cm: Lafayette: I'm all for more and better education, but I don't buy the argument that it will fundamentally fix unemployment.

Goodness, cm, you soooo surprise me. ;^) We've been down this road together before, haven't we?

For me, the unemployment figures I posted above speak for themselves. Which is why I spent an afternoon begging the people at the BLS to find them for me -- because they did not know, at first, where to locate them. They're a Big Secret, one must suppose.

For example, a PhD may be preferred over an MS over a BS for a given engineering job, and a BA may be preferred over somebody with only HS (I actually quoted an example of the latter here, "massage operations coordinator" at Google). Will the same job pay more for the higher degree? Not so sure.

You're nitpicking.

The challenge is that we move young adults up to an HS degree achievement level, and -- since this is the level at which the bulk of unemployment is noted -- as many as possible throughput into tertiary education as far as they can go. (What degrees pay what amount of money is not largely relevant.) But greater opportunity for employment certainly is, and higher salaries are generally associated with higher skill set levels. Not always, for sure, but generally.

We cannot guaranty either employment or salary levels. But we can make the opportunity for employment more easily accessible through subsidized postsecondary education, which is the objective of Infrastructural Social Investment.

It is human nature to better ourselves, but that urge must sometimes be assisted along -- especially when the hurdle is purely financial. Which is THE major problem for the lower classes of our society.

And, we must do it. Before we get to the point were we start shipping those MSc/Phd jobs to the Far East.

[Lafayette]

Creative Destruction

cm: Note, the "paradigm" has been changing as well, e.g. cutting out most activities from the mainstream economic sphere that didn't fit the "high efficiency" streamlined process or otherwise couldn't demonstrate a tangible contribution or being necessary to the bottom line. Example, where do you get real customer service anymore, including the concept of repairing a product vs. tossing and repurchasing?

This generates an increasing "surplus" of labor capacity that can apparently no longer be usefully integrated into the mainstream economy* ...

You are presuming certain evolutions that are dictated by the market and not by either the state or BigBusiness.

We've had a throw-away society for decades. Nothing has changed that, except the fact that we've engineered products such that it is easier to throw them away than repair them. There is nothing inherently wrong with that "paradigm change", if you insist on misappropriating the term.

If Americans wanted quality, they'd get it. They have opted for the "cheapest product at the cheapest price". Wal-Mart and others have provided what Americans want. Of course it has to do with the Bottom Line. Businesses respond to market needs or they go out of business. Is that not so?

And, I must admit, that trend is world-wide -- so let's consider it an inalterable consumer market tendency.

So what? We shall need less repairmen? We shall have expensive repair services -- which is what I am witnessing in France. People cost money and they have thus priced themselves out of the market for less-expensive customer repair services.

What in heavens name is wrong with such an outcome? You decry "advancement" because it implies unemployment? Such is the nature of a market driven economy -- and the phenomenon was first described by Schumpeter in the 20th century. It's called Creative Destruction, seemingly a contradiction in terms, but nonetheless applicable to today's economy. We tear down old buildings to build new ones, don't we?

All the more reason for establishing permanent educational recycling resources. I know engineers who were creatively destroyed out of their jobs. What is more efficient? BlogBitching about how unfair the system is, or finding ways to remedy the problem?

I suspect you prefer the former of the two options. (Anyway, it does make for a spirited exchange of opinion, does it not? ;^)

[Patricia Shannon]

Lafayette, I can't speak for anybody else, but I don't want the "cheapest product at the cheapest price". But it seems that that is all than is available.

[Lafayette]

PS: I can't speak for anybody else, but I don't want the "cheapest product at the cheapest price". But it seems that that is all than is available.

Then you are a highly singular shopper. The Wal-Marters do want cheapness and the Walton Family is highly pleased to please them.

The Chinese have been pouring cheap junk onto World Markets for fifteen years. We're hooked on it.

[Sandwichman]

European economies, under the fallacy of the "quantum of labor"...

Awk! The infamous lump-of-labor fallacy has yet another disguise!