Monday, February 13, 2017

Bill Mitchell — US labour market deteriorating

In September 2017, I assessed that – The US labour market is nowhere near full employment. This was in the context of an increasing number of commentators claiming that the US economy had already returned to full employment. The IMF World Economic Outlook is also estimating that the output gap in the US (actual relative to potential) has turned positive (meaning the US is beyond full employment). By way of contrast, the Congressional Budget Office considers the US had an output gap of around 0.9 per cent (actual below potential) in the December-quarter 2016. The facts point to even higher output gaps. The current BLS data release – Employment Situation Summary – January 2017 – has not altered my view. It showed that total non-farm employment from the payroll survey rose by 227,000 and the unemployment rate remained “little changed” at 4.8 per cent. But from the perspective of the labour force survey (Current Population Survey), total employment fell by 30 thousand. See below for an explanation of that paradox. The point is that employment still remains well below the pre-GFC peak and the jobs that have been created in the recovery are biased towards low pay. Additional research reveals that the losses from this sluggish economic performance will be long-lived and undermine the prospects of future generations. Fiscal austerity is bad for our grandchildren! In general, the problem is less job creation as quality of the work being created and the capacity of US workers to enjoy wage increases.
Bill Mitchell – billy blog
US labour market deteriorating – the losses from GFC will be long-lived
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

34 comments:

GLH said...

Tom Hickey: I have read two different views of the unemployment rate, one is Bill Mitchel's and the other is Bill McBride's in his column today at Calculated Risk on " Gary Cohn and the Participation Rate" where he disagreed with Cohn over the rate. Please tell me whether Mitchell or McBride is correct.

Tom Hickey said...

Yes, I saw both. It's beyond my job description to comment. Bill McBride is not an economist and he specializes in analyzing real estate. Bill Mitchell is an economist that has been specializing in employment since grad school. Based on that, my money would be on Bill's analysis. Former GS CEO Gary Cohn is not an economist and I doubt he has deep knowledge of employment, since his career is in finance.

Noah Way said...

Official statistics are bullshit. Every couple of years the BLS revises their methodologies, which invariably results in lower numbers.

ShadowStats has US unemployment at 23%.

http://www.shadowstats.com/alternate_data/unemployment-charts

Auburn Parks said...
This comment has been removed by the author.
Auburn Parks said...

Shadowstats is a fraudulent website.

Bill MIthcell being an economist is irrelevant to the point about the UE figures. If we've learned nothing else in this MMT community its that "X is true, because it was said by an economist" is just about the most vacuous comment possible.

Tom, you're just as qualified as anyone to discuss the UE numbers. That you havent looked deeply enough into the subject to have a good answer is another matter entirely.

Matthew Franko said...

Auburn its Tom's deference to the academe... remember Tom is also a member...

Andrew said...

One needs to revise methodologies when the old methodology no longer measures what you want to measure. Statisticians at the government are honest people who do their best to provide useful information. Maligning them isn't useful or fair. If there is some reason that you think that the numbers they generate don't reflect your notion of any attribute (unemployment, in this case), then fine, but then this is a political argument, not a statistical one.

Andrew said...

I think Bill and Bill are probably both correct. Will Bill Mitchell ever learn brevity? I'm thinking not.

There are many reasons that people don't look for work but aren't counted as unemployed. To my knowledge, we don't measure "Want a job that pays well and provides health insurance but can't find one near enough to my home to make it worthwhile to get in the car and drive." Perhaps we should.

My older daughter is not unemployed, but hardly has a job that's commensurate with her abilities. She gets frustrated and occasionally stops looking for better things. My younger daughter is busy racking up debt in school in hope it pays off in the long run.

Whatever we have going, it's not a particularly uplifting environment.

Noah Way said...

Shadowstats is a fraudulent website

Thanks for clearing that up.

Regarding unemployment statistics, Williams points out that under President Lyndon B. Johnson, the U-3 unemployment rate series was created, which excludes people who stopped looking for work for more than a year ago as well as part-time workers who are seeking full-time employment. Although the old unemployment rate series, which include part-time workers looking for full-time work and unemployed who stopped looking over a year ago, is still published monthly by BLS, the U-3 series is generally considered more meaningful and is the headline rate picked up by most media outlets. Williams calculates the U-6 rate as it was calculated until December 1993.

Regarding growth statistics, Williams reports that the official numbers for U.S. Gross Domestic Product (GDP) and jobs growth range from "deceptive" to "rigged" and "manipulated".

https://en.wikipedia.org/wiki/Shadowstats.com

Of course the "official" government numbers are never rigged ...

Tom Hickey said...

Auburn its Tom's deference to the academe... remember Tom is also a member..

Right, Matt. I have seen too many people step out of their field of expertise and get slaughtered.

I was set up once, and got absolutely killed when I didn't realize that the person I was set up with was one the top experts in the field. She let me go on and they took me apart with evidence and citations I was unaware of. I still have the bruises.

I've done it to plenty of people who wandered from their field into mine, too.

Matt Franko said...

Tom imo if you put in all of that work to get that degree you are going to have a lot of respect for it no matter what...

This is probably the type of thing going on in the Economics discipline with all of the PhDs over there...

Probably means that the change over there is going to have come from within... ie will take a century....

Tom Hickey said...

It's called credentialism, Matt, and although it really key in academia, it's not limited to that. The big problem with this way of organization is the gatekeepers control it.

Bob said...

Sorry, but PhDs in Philosophy do not get much respect.

Tom Hickey said...

That may be true now, but they can destroy you by showing you don't know what you are talking about.

For example, as a grad student attending my first conference, I watched W. V. O. Quine, late chair of the Harvard philosophy department, take some very smart people apart at the seams by attacking their logic. Absolutely brutal. I was stunned.

Bob said...

How come we never get to see a politician have their logic taken apart?
Is logic even a factor when rhetoric is layered on thick?

Conferences shouldn't just be for academics, although they are boring. The failure of academics to convey their knowledge is society's loss.

Matt Franko said...

" PhDs in Philosophy do not get much respect."

I'm saying the ones THAT OBTAIN the degree are going to respect it...

Bob said...

Ask Bill Mitchell if his pedigree receives the same level of respect as his orthodox colleagues.

Schofield said...

With most mainstream economists failing to correctly understand Keynes's "Effective Demand" central theme of his "General Theory" book that it's rare for the private sector to achieve full employment equilibrium the tone is set to still hang onto the Classical economics belief that it's easy to come close in that sector:-

www.robinson.cam.ac.uk/postkeynesian/members/ahe/Jespersen.pdf

Auburn Parks said...

Noah
If shadowstats computes its unemployment rate with the same rigorous methodology they use to sit their inflation number then you can safely ignore them.

What is this rigorous methodology you might ask?

Well for the inflation number they just take whatever the official number is and then add 4% on to it. If the official number says 2% shadowstats has it at 6%. If that's not some fraudulent ideological garbage then I don't know what is

Tom Hickey said...

How come we never get to see a politician have their logic taken apart?
Is logic even a factor when rhetoric is layered on thick?


Political discourse in the US is geared to the lowest common denominator, which does't get critical thinking or logic and doesn't do nuance.

America is a deeply anti-intellectual country and as a result public discourse and analysis is below superficial.

Almost no one with more than half a brain runs for office unless they are in it for the $$$

America is ruled by morons and crooks and no one seems even to notice.

After Iraq who would believe that the public would be ready to fall for the same BS?

Bob said...

The quality of politicians is by no means a US only problem. Reasoned take downs are rare in today's sound-byte gotcha culture.

Noah Way said...

@Auburn Parks

ShadowStats has a well-described methodology for unemployment calcs.

http://www.shadowstats.com/article/c810x.pdf

Andrew said...

Political discourse in the US is geared to the lowest common denominator, which doesn't get critical thinking or logic and doesn't do nuance.

They overcomplicate the simple and trivialize the difficult.

A politician is by definition a salesman, not an expert in any particular field of knowledge -- or even in general knowledge.

I've been wondering about the problems inherent in a technocracy.

Auburn Parks said...

NOah-

that pdf is laughable. So let me get this straight, IN that idiots own graphs, his "special" UE lines up perfectly with the official numbers (he just adds 3% to the official u-6 measure) until 2010, when he just goes off the reservation. Maybe the BLS changed something significant in 2010? Maybe, I dont know as I dont care enough to look it up right now, but Williams certainly doesnt make any mention of it. The only thing he mentions as far as UE measurements goes is from 1994

"In 1994, the Bureau of Labor Statistics (BLS) overhauled its system for estimating unemployment,
including changing survey questions and unemployment definitions. In the new system, measurement of
the previously-defined discouraged workers disappeared. "

So yeah, he's a fraud. His work is trash and you should really refrain from referencing him because he hurts your credibility.

Oh and our GDP is not really $17trillion per year, its really only $10 trillion per year. So we are just making up 40% of our economy, yeah that sensible.

And UE is 23%, just as bad as the great Depression if you listen to his hack words.

Andrew said...

@Noah Way,

How would you classify someone who hasn't looked for work in 6 months? This is a serious question. I don't think the government is trying to hide anything. I have a relative who only works on occasion. He had surgery on his hand and stopped working and looking for work. How do you classify such a person? I don't think the government is nearly as nefarious as you assume.

Auburn Parks said...

andrew-

Anybody who wants a job but cant get one is unemployed in my book regardless of how long that person has been out of work.

If you dont want a job then you are not unemployed (not literally as you really are unemployed, just for the sake of our measuring system).

Like with all public policy. The simpler the better. Technocrats eat the lay public for lunch when you start to make complicated policy as the lay public doesnt know and largely doesnt care.

Noah Way said...

@Auburn

I don't trust government numbers on anything. The Gov. has been dumbing down the numbers for years. Even the BLS recognizes that Labor Force Statistics are still 5% lower than 2007. Participation growth was flat 2000-2010 and has been negative ever since. Yet the "official" unemployment rate is only 4.9%. If you believe their numbers nothing adds up.

There are some definite problems with ShadowStats and William's inflationary POV but his employment stuff makes a lot of sense.

Andrew said...

@Auburn Parks,

Fine. How do you know that someone wants a job? The metric the government uses is "looked for a job recently." That doesn't seem unreasonable to me.

Perhaps we aren't disagreeing. My point was that the government is earnest in its attempt to define unemployment. It's not trivial.

Auburn Parks said...

Noah-

I completely agree with you that Govt numbers should be looked at with a rigorous and skeptical eye. However, shadowstats is an unreliable source, williams is just another right wing wacko slanting things for ideology's sake.

As far as the 4.9% UE number goes. I dont think its made up, its just the result given BLS methodology. That at least is one point Williams is right about (however, he's far from the only one who has made that point and probably just about the least credible one). If you've given up looking for work (notice that this is different than not wanting a job), you're not counted as unemployed, how stupid is that? So yes, the number is rather misleading given the current state of the economy. Before 2000, that methodology probably resulted in a fairly accurate picture of the employment situation. But after the GFC especially, the U-3 number seems to have come unhinged from the underlying job market conditions and should be judged harshly IMHO.

However, you cant expect Dems to make the argument that U-3 is no longer a reliable measure when a Dem was prez, as that would be way more honesty then they are capable of, likewise with Republican team fans.

If you want a UE source that lays all of this out comprehensively and without the unnecessary ideological baggage and fraud please check out the economic populist on UE numbers

http://www.economicpopulist.org/content/unemployment-report-starts-year-breaking-5-unemployment-rate-barrier-big-deal-5915

Auburn Parks said...

Andrew

"Fine. How do you know that someone wants a job? The metric the government uses is "looked for a job recently." That doesn't seem unreasonable to me."

Apparently, the Govt just asks them: http://www.economicpopulist.org/content/unemployment-report-starts-year-breaking-5-unemployment-rate-barrier-big-deal-5915

Towards the bottom of the link

"Within the CPS survey is how many people who are considered not in the labor force who report they want a job now. It is a direct survey question. The Census asks people who are not being counted in the unemployment statistics and official unemployment rate if they want a job. The number who answer yes currently stands at 5,973,000. Those who are not counted yet report they want a job includes the discouraged workers and marginally attached and is seasonally adjusted. This figure has not changed from a year ago."


BTW, that number looks like it stands at about 6 million. And given that there are 2.2 million newly unemployed and 2.1 long term unemployed and we have a U-3 rate of 5%, the math says to me that with more people who say they want a job when asked then those offically counted as "unemployed" (6 million being greater than 4.3 million:) we are probably looking at a true U-3 of about 12%. Still pretty fucking terrible.

"Perhaps we aren't disagreeing. My point was that the government is earnest in its attempt to define unemployment. It's not trivial."

Oh yes. There are many millions of earnest Govt bureaucrats helping to do their honest part to help administer a society of 330 million people, unfortunately we mere citizens have to be extremely weary of those Bureaucrats' bosses.....elected politicians and their political appointees. Because there arent very many at all that seem to be earnest and honest brokers for the body politic.

Auburn Parks said...

Andrew-

So basically it comes down to:
should the denominator in the UE rate calculation (Labor force) include people who self report that they would like a job or only include people who have actively looked for a job in some given time period?

Seems pretty stupid to do it the way BLS does which is to ask if theyve actively sought a job, because what the hell does that even mean? Did you cruise the internet? Did you put out some feelers on social networks? Did you beat the pavement and fill out 10 applications? Did you go see our nice private contractor temporary employment partners (Ka-ching!)? Arent these people just self reporting that they actually looked for a job?

Now Im more confused and pissed then ever. Anyone know any good sources on why the BLS does it this way specifically?

Tom Hickey said...

Bill Mitchell, US labour market is in a deplorable state, October 16, 2012, on surveys.

Auburn Parks said...

Christ Tom

How does Bill find the time to write so much every day just for his blog? Its ridiculous!

Didnt see anything in there wrt the specific point I mentioned above about why the headline UE rate number doesnt include people who say they want a job instead of just those who actively sought a job. Especially since it seems the difference between the two is not minor, it more than doubles the offical headline U3 number.

jrbarch said...

"How does Bill find the time to write so much ..."

Voice recognition software and a well organised library to cut and paste?

The message behind the content is always justice and respect, a better society; plus a healthy slice of 'rage against the machine'.