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Transcript
What Private Sector
Expansion? :
We Need a Massive Federal
Jobs Program Now!
Ron Baiman
Chicago Political Economy Group
www.cpegonline.org
June 30, 2010
Executive Summary
• US employment and job growth data from the last three
decades suggests that under the most “highly optimistic”
scenario it will take about 31 years to get back to the
employment levels of late 2007 (p. 14).
• This “highly optimistic” scenario is highly unlikely as the
longest continuous expansion on record is only 10 years (p.
14).
• Under all other: “optimistic” (p. 11), “pessimistic” (p. 18), and
“highly pessimistic” (p. 21), scenarios “real” unemployment
rates that include discouraged and involuntary part-time
workers increase from 16.9% (May 2010) to 23.8%, 26.7%,
and 29.5%, respectively, by May 2020.
• Recent (2010) private sector job growth has declined sharply,
and as federal stimulus and Census work winds down more
state and local government layoffs appear imminent (p. 23).
• We can’t wait for a private sector driven economic recovery.
We need a massive, federally funded, living wage, jobs
program now (p. 10) !
2
May 2010 Employment Conditions:
The Worst Since the Great
Depression
• Employment in May, 2010 was 139.4 million, over 7 million
less than the 146.5 million before the Great Recession in
November, 2007 (all employment data in this section are from
the CPS “household survey” conducted by the BLS).
• Over this period the official Unemployment Rate has more
than doubled from 4.7% to 9.7%, as the number of officially
unemployed has climbed from 7.3 million to 15 million, with
almost half unemployed for over 6 months - the largest share
since data has been collected.
3
Percent of Civilian Labor Force
Unemployed for 15 Weeks or More
(BLS – Seasonalized)
4
Young People Need Jobs
• Average annual 2008-2010 (May to May) over 16 Civilian
Non-institutionalized Population growth in the U.S. was 2.047
million.
• The average pre-Great Recession June 2006 to May 2007
“Labor Force Participation Rate” was 62.21%.
• Projecting the most recent population growth forward at the
pre-recession labor force participation rates gives us an
average of 113,000 (66.21% of 2.047 million divided by 12)
new entrants to the Labor Force every Month.
5
Employment Growth Over the Last
Decade
Over the last decade (May 2000 to May 2010) employment
growth averaged 555,000 a year or about 46,000 a month:
Figure 1: Annual Employment Change
2000 to 2010
4,000
3,000
2,000
0
Average
2010
-2,000
2009
2008
2007
2006
2005
2004
2003
2002
2001
-1,000
2000
Thousands Employed
1,000
-3,000
-4,000
-5,000
-6,000
-7,000
Year (May to May)
Source: BLS CPS Employment Level
6
Using 2000-2010 Employment
Growth to Estimate “Unadjusted
Official” Unemployment Rates
• If we assume employment growth of 46,000 a month (or
555,000 a year) and Labor Force growth of 113,000 a month
(or 1.355 million an year) we get increasing “unadjusted
official” future unemployment rates
• These are “unadjusted” unemployment rates as they don’t
adjust for more “discouraged workers” dropping out of the
Labor Force.
• They are also “official” unemployment rates because they
don’t take into account involuntary part-timer and pre-existing
(pre-recession) discouraged workers.
7
Estimating “Real” Unemployment
Rates from “Unadjusted Official”
Rates
• Official U3 unemployment rates do not take into account
persons without a job who have looked for work within the last
year but not within the last 30 days (people who are
“marginally attached” to the labor force) and those who have a
part-time job but would like a full-time job (involuntary parttime for economic reasons.)
• The “marginally attached” and “involuntary part-timers for
economic reasons” are both included in BLS U6
unemployment rates that we will call “real” unemployment
rates.
• We will estimate “real” U6 unemployment rates by holding the
U6/U3 ratio constant at its most recent pre-recession annual
value of 1.74. This ratio has ranged from 1.63 to 1.86 since
8
1994.
Optimistic Scenario
• Assuming average (May to May) 2000 to 2010 Employment
growth in the future is “optimistic” as our economy has
become weaker since the beginning of the 2008 Great
Recession:
• We no longer have a “housing bubble.”
• We no longer have a rapidly growing financial sector.
• Since the 2001 recession the US has lost 42,400 factories
including 36% of plants employing more than 1000 workers
(which declined from 1,479 to 947) and 38% of factories
employing between 500 and 999 workers which declined from
3,198 to 1,972. An additional 90,000 factories are now at risk
of going out of business.1 When plants close they cannot reemploy workers even if demand picks up.
9
What will Propel a Private Sector
Driven Economic Expansion?
• There are four major sources of economic demand: consumption,
investment, government spending, and exports minus imports.
• As households (that are not experiencing unemployment) are
currently saving more of their income, increased household
consumption is not likely to drive an economic expansion.
• But with consumption demand sluggish at best and a persistent and
massive trade deficit, its hard to see what would propel increased
real (employment generating) private sector investment in the U.S.
• At this point, it appears that only a very large scale, permanent,
living wage, federal funded jobs program (requiring large increases
in government spending), that would complemented by major
changes in trade policy leading to reduced imports and increased
exports) will be able to get our economy started.2
• This is not “pie in the sky,” a modest financial transactions tax could
raise about $1 Trillion and finance most if not all of 20 million new
10
jobs at today’s median wages.3
Figure 2: Optimistic Scenario - Future Unemployment Rates
Assuming 2000-2010 Average Employment Growth
(Employment and Labor Force data in thousands)
Employment
New
Employment
139,420
139,975
140,530
141,085
141,640
142,195
142,750
143,305
143,860
144,415
144,970
555
555
555
555
555
555
555
555
555
555
Labor Force
154,393
155,748
157,103
158,458
159,813
161,168
162,523
163,878
165,233
166,588
167,943
New
Labor
Force
Entrants
1,355
1,355
1,355
1,355
1,355
1,355
1,355
1,355
1,355
1,355
"Unadjusted
Official" U3
Unemployment
Rate
4.4%
5.4%
9.4%
9.7%
10.1%
10.5%
11.0%
11.4%
11.8%
12.2%
12.6%
12.9%
13.3%
13.7%
"Real" U6
Unemployment
Rate
8.2%
8.8%
13.2%
16.9%
17.6%
18.4%
19.1%
19.8%
20.5%
21.2%
21.8%
22.5%
23.2%
23.8%
Ratio U6/U3
1.86
1.62
1.40
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
Year
(May)
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
11
Figure 3: Optimistic Scenario - Projected
Unemployment Rates Assuming a Revival of
2000 -2010 Emp Growth for a Decade
25.0%
Unemployment Rate
20.0%
"Unadjusted
Of f icial" U3
Unemployment
Rate
"Real" U6
Unemployment
Rate
15.0%
10.0%
5.0%
0.0%
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
Year (May)
Source: Calculations from BLS data, see Figure 2
12
Employment Growth During the
Last Economic Expansion
If we just look at years of employment expansion during the last
decade from 2003 to 2008 (May to May), we get employment
growth of 1,581 thousand jobs a year, or about 132,000 a
month.
Figure 4: Annual Employment Change
2003 to 2008
3,000
Thousands Employed
2,500
2,000
1,500
1,000
500
0
Average
2008
2007
2006
2005
2004
2003
Year (May to May)
Source: BLS CPS Em ploym ent Level
13
Highly Optimistic Scenario:
Using 2003-2008 Employment
Growth to Project Future
Employment Growth
• If we assume monthly employment growth of 132,000 and
Labor Force growth of 113,000 we get a net employment
increase of about 19,000 jobs a month.
• At this rate making up for the 7.1 million jobs lost since
November 2007 and employing new labor force entrants
would take 376 months (7.1 million divided by 19,000) or 31
years.
• This is “highly optimistic” as the longest period of continuous
U.S. economic expansion on record is only 10 years (March
1991 to November 2001).
14
Figure 5: Highly Optimistic Scenario - Future Unemployment Rates
Assuming 2003 to 2008 Average Employment Growth
(Employment and Labor Force Data in Thousands)
Employment
139,420
141,001
142,581
144,162
145,743
147,323
148,904
150,485
152,065
153,646
155,227
New
Employment
1,581
1,581
1,581
1,581
1,581
1,581
1,581
1,581
1,581
1,581
Labor
Force
154,393
155,748
157,103
158,458
159,813
161,168
162,523
163,878
165,233
166,588
167,943
New Labor
Force
Entrants
"Unadjusted
Official"
Unemployment
Rate
"Real" U6
Unemployment
Rate
Ratio
U6/U3
Year
(May)
1,355
1,355
1,355
1,355
1,355
1,355
1,355
1,355
1,355
1,355
4.4%
5.4%
9.4%
9.7%
9.5%
9.2%
9.0%
8.8%
8.6%
8.4%
8.2%
8.0%
7.8%
7.6%
8.2%
8.8%
13.2%
16.9%
16.5%
16.1%
15.7%
15.3%
14.9%
14.6%
14.2%
13.9%
13.5%
13.2%
1.86
1.62
1.40
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
15
Figure 6: Highly Optimistic Scenario - Projected
Unemployment Rates Assuming 2003-2008 Employment
Growth for a Decade
18.0%
16.0%
Unemployment Rate
14.0%
"Unadjusted
Official" U3
Unemployment
Rate
12.0%
10.0%
"Real" U6
Unemployment
Rate
8.0%
6.0%
4.0%
2.0%
0.0%
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
Year (May)
16
Pessimistic Scenario
• If we try to take into account the weakening of the economy
since 2008,
• And note that since 1982 (the beginning of continuous and
growing trade deficits and “deindustrialization”), every
economic expansion has generated less monthly employment
growth (Nov 1982 to Jul 1990 228,000 a month, Mar 1991 to
Mar 2001 200,000 a month, Nov 2001 to Dec 2007 97,000 a
month).
• It seems reasonable to assume, as a “pessimistic” scenario,
that in the next decade an unaided (private sector driven)
expansion will generate about half of the average
employment growth of the last decade, or May 2010 to May
2020 average employment growth of about 278,000 a year
(=555,000/2, see Figure 1). Note that as this is average
employment growth over the previous decade and not just
during expansion months, it assumes some months of
employment contraction in the coming decade.
17
Figure 7: Pessimistic Scenario - Future Unemployment Rates
Assuming 50% of Average 2000 to 2010 Employment Growth
(Employment and Labor Force Data in thousands)
Employment
139,420
139,698
139,975
140,253
140,530
140,808
141,085
141,363
141,640
141,918
142,195
New
Employment
278
278
278
278
278
278
278
278
278
278
Labor Force
154,393
155,748
157,103
158,458
159,813
161,168
162,523
163,878
165,233
166,588
167,943
New Labor
Force Entrants
"Unadjusted Official"
Unemployment Rate
"Real" U6
Unemployment Rate
Ratio U6/U3
Year (May)
1,355
1,355
1,355
1,355
1,355
1,355
1,355
1,355
1,355
1,355
4.4%
5.4%
9.4%
9.7%
10.3%
10.9%
11.5%
12.1%
12.6%
13.2%
13.7%
14.3%
14.8%
15.3%
8.2%
8.8%
13.2%
16.9%
17.9%
19.0%
20.0%
21.0%
22.0%
22.9%
23.9%
24.8%
25.8%
26.7%
1.86
1.62
1.40
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
18
Figure 8: Pessimistic Scenario - Projected
"Real" Unemployment Rates Assuming Emp
Growth Equal to 50% of 2000-2010 Average for a
Decade
30.0%
Unemployment Rate
25.0%
20.0%
"Unadjusted
Official" U3
Unemployment
Rate
15.0%
"Real" U6
Unemployment
Rate
10.0%
5.0%
0.0%
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
Year (May)
19
Highly Pessimistic Scenario
• In this case we assume a near future “double dip,” recession,
and/or a farther away but within the next decade recession,
that result in employment declines that completely off-set
employment growth.
• This scenario thus assumes zero average employment growth
for the next decade.
• This is not what any of us wish for, but the current obsession
with cutting federal deficits (which was $ -1.4 Trillion or -9.9%
of GDP in 2009, and is estimated at $ -1.35 T or -9.2% of GDP
in 2010), leaves in doubt continued employment expansion, as
9-10% of current economic output is dependent on federal
deficit spending.4
20
Figure 9: Highly Pessimistic Scenario - Future Unemployment Rates
Assuming 0% Average 2000 to 2010 Employment Growth
(Employment and Labor Force Data in thousands)
Employment
New
Employment
Labor
Force
New Labor
Force
Entrants
0
0
0
0
0
0
0
0
0
0
154,393
155,748
157,103
158,458
159,813
161,168
162,523
163,878
165,233
166,588
167,943
1,355
1,355
1,355
1,355
1,355
1,355
1,355
1,355
1,355
1,355
139420
139,420
139,420
139,420
139,420
139,420
139,420
139,420
139,420
139,420
139,420
"Unajusted
Official"
"Real" U6
Unemployment Unemployment
Rate
Rate
4.4%
8.2%
5.4%
8.8%
9.4%
13.2%
9.7%
16.9%
10.5%
18.2%
11.3%
19.6%
12.0%
20.9%
12.8%
22.2%
13.5%
23.5%
14.2%
24.7%
14.9%
26.0%
15.6%
27.2%
16.3%
28.4%
17.0%
29.5%
Ratio
U6/U3
1.86
1.62
1.40
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
1.74
Year
(May)
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
21
Figure 10: Highly Pessimistic Scenario - Projected
Unemployment Rates Assuming No Employment
Growth on Average for a Decade
35.0%
Unemployment Rate
30.0%
"Unadjusted
Official" U3
Unemployment
Rate
25.0%
"Real" U6
Unemployment
Rate
20.0%
15.0%
10.0%
5.0%
0.0%
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
Year (May)
22
Employment and Job Growth Since
January 2010
• Though employment began to increase again in January 2010
at a fairly rapid pace, this does not appear to be sustainable.
Note that the Official NBER business cycle dating group has
not yet designated this as an “expansion”.
• In June 2010 private sector (payroll) jobs growth was just
83,000, which coupled with a loss of 208,000 jobs, led to a net
job decline of 125,000. Overall employment (from household
survey) dropped by 301,000 – see Figures 11 and 12.
• These recent declines suggest that much of the earlier growth
was dependent on the massive run-up in federal “stimulus,”
direct and indirect Federal Reserve subsidies, and temporary
Census jobs (in May), that are now being cut back.
23
Figure 11: BLS Data on Employment and Job Growth in 2010
(Change from Prior Month in Thousands)
Month
CPS Household Survey
Total Employment
(Household Survey)
Jan
Feb
Mar
Apr
May
June
Average
541
308
264
550
-35
-301
221.2
CES Payroll Survey
Total Private
Total
Total NonJobs
Government Farm Jobs
(Payroll) Jobs (Payroll) (Payroll)
16
62
158
218
41
83
96.3
-2
-23
50
72
390
-208
46.5
14
39
208
290
431
-125
142.8
24
Figure 11: Monthly Employment and Job Change
January to June 2010
600
500
300
Total
Employment
(Household
Survey)
200
Total Private
Jobs (Payroll)
100
0
Average
-200
June
May
Apr
Mar
Feb
-100
Jan
Thousands Employed
400
Total
Government
Jobs (Payroll)
-300
-400
Source: BLS CPS and CES Data
25
References:
1)
2)
3)
4)
Richard McCormick, “The Plight of American Manufacturing,”
American Prospect, Jan/Feb 2010.
“Toward a New Political Economy for the U.S.” at:
http://www.cpegonline.org/workingpapers/CPEGWP20101.pdf
“A permanent Jobs Program for the U.S.: Economic
Restructuring to Meet Human Needs,” at:
http://www.cpegonline.org/jobsprogram.html and for financial
transactions tax estimates:
http://www.cpegonline.org/workingpapers/CPEGWP20102.pdf
“The Linkage Between the Three Types of National Economic
Deficits,” at:
http://www.cpegonline.org/multimedia/DeficitLinkages.ppt.
26