Quick thoughts on the new employment report

1. Labor force participation is down once again, and we cannot dismiss the notion that a new recession may be starting.  That said, at current margins I am not sure the traditional distinction between cyclical and structural factors still makes sense, so that word “recession” may be more misleading than illuminating.

2. Scott Sumner noted: “Some die hard opponents of “The Great Stagnation” had held out hope that a fall in U-6 unemployment (the broadest measure) would propel future growth.  Now even that option is mostly gone, as it plunged to 10.0% in September, the same level as in February 1996.)  It will go a bit lower, but it no longer represents a large cache of workers waiting in the wings to propel us forward.  Get ready for the new normal—3.0% NGDP growth—it’s coming soon.”

3. There is no wage acceleration gain to be seen in the report.

4. Paul Krugman is (correctly) morphing back into more of a supply-side interpretation of secular stagnation: “Second, secular stagnation — persistent difficulties in achieving full employment — is a real concern if potential growth is slowing due to a combination of demography and weak technological progress, which seems to be happening. Lower growth means lower investment demand, so getting the private sector to spend enough gets harder.”

5. The case for a Phillips curve appears weaker than ever.

6. There is more and more evidence that we’ve shifted into a new regime where wage growth for most income classes simply doesn’t happen to any significant degree.  This may not last forever, but it remains the status quo and too many people find it too hard to wrap their heads around that.  That to me is the single biggest takeaway.

Neil Irwin at the NYT summarizes the report.

Comments

Do real proponents of the Phillips Curve exist? I thought it died in 1968.

I dunno, it seems to me that it's not so much as the PC dying, but the shape of the curve and its position relative to the axes being in flux. Or it may be the relative downgrading of the importance of petroleum. I guess we'll see if something happens in the Strait of Hormuz and oil spikes back to $120/bbl.

I wonder if that could even get the price back up to $120 these days. $80 maybe....

msgkinds,

"I wonder if that could even get the price back up to $120 these days. $80 maybe…."

$200+ barrel would be more like it. See "These 8 narrow chokepoints are critical to the world's oil trade" (http://www.businessinsider.com/worlds-eight-oil-chokepoints-2015-4)

"The Strait of Hormuz is the world's primary oil chokepoint.

According to the EIA, 17 million barrels of oil, representing 30% of all maritime-traded petroleum, passed through the strait each day in 2013. Oil from Saudi Arabia, the UAE, Qatar, Iran, and Iraq all pass through the strait and head mostly towards Asia, although tankers can also head west towards the Suez Canal and the Red Sea. "

I guess it depends on what is meant by the "oil price". The US now needs to import relatively little oil. Imports are down 60% from the peak. So would US oil prices really increase by that much? Isn't there still an oil export ban?

brian h,

The U.S. currently imports about 5 MBD of crude and products. That's net imports. Actual imports are around 10 MBD. However, the U.S. also exports around 5 MBD of crude and products.

With 5 MBD of net imports, U.S. prices will match world prices instantly irrespective of any restrictions on crude oil exports.

brian h.

See "Petroleum & Other Liquids" over at the EIA.

It should be apparent that Stagnation is not what we thought it was either. We have had wholesale change in the products we use (real and virtual) over this decade, without "recovery."

It is not a lack of technological change.

Not really. The only products that have changed radically in the last 15 years are entertainment related. The other sections have not dramatically changed in the last 15 years.

How many models of hybrid and electric cars 15 years ago?

How many corporate accounting departments still used people?

Many corporate accounting departments still use people. They just have to use SAP now.

Down 40%

http://www.wsj.com/articles/BL-CFOB-7798

Your first example is a high-end product. Electric vehicles make up a whopping 0.72% of new car sales in the US and 0.61% of total market share. This screams "niche product."
https://en.wikipedia.org/wiki/Electric_car_use_by_country

I think electric cars will probably be a majority of new car sales in 2025. To ensure this happens, we need a very substantial carbon tax, to prevent global warming.

The argument for technology based stagnation certainly is not that it is high end products, the claim was that we have harvested low hanging fruit and are no longer making progress.

Wind and solar finally breaking through their price curves would be another example of nonstasis

"...To ensure this happens, we need a very substantial carbon tax, ..."

It would also force all those poor people into walking, biking or using the bus, thus freeing up the roads for the worthy. /sarcasm

Well, JWatts, they do suck at driving

JWatts,

Shouldn't that be ?

Hybrid and electric cars are mostly status symbols and signaling markers that offer no real gain (and actually negative value) to traditional consumers.

I.e., the lifetime cost (purchase price plus energy costs) are higher for hybrid and electrics than for traditional cars. The hype doesn't change this.

Sure, that's the case for the Tesla or an electric BMW, but I'm not convinced it's the case for a Nissan Leaf or Chevy Volt.

The solution to this problem of course is much tighter monetary policy.

While Krugman may be good at seeing the big picture (slack demand, etc.), Cowen is better at seeing the small things. Furman's presentation highlights not so much the big picture or the small things as the medium things, in particular the wide disparity in performance across firms and sectors. I tend to see lessons, such as this one: how does an economy built on advertising (albeit masquerading as high tech) grow, or grow across firms and sectors sufficient to sustain a high level of economic growth and widely-shared prosperity.

Five years ago Home Depot was all about CFL, today it is about LEDs. That rapid chandeover shows a very responsive tech society, especially compared to the reign of the incandescent.

We live in Future Shock, but with the unexpected wrinkle that change has become invisible.

Have you priced those LEDs though? I just went shopping for light bulbs since my stock was depleted, and I stuck with the CFLs for that reason.

There was a 2 for $5 deal there (40w equivalent) which seems like a big drop for LEDs.

If LEDs are like CFLs, the cheap store brands aren't worth buying. Yes, they're often half the price, but the cheap electronics will give out well before the life of the bulb.

I might agree in principle, but LEDs are solid state, harder to muck up. (Though I have heard some low end types skimp on heat sink.)

I just saw those. They last 5,000 hrs instead of the normal 25,000

The difference I've found is that CFLs die faster than incandescents and then you can't throw them away. LEDs, you can toss, and they're covered by warranty by the manufacturer because they're supposed to last 20 years and it's clear they haven't yet.

LEDs are a massive improvement over CFLs, which still strike me as a scam. And LEDs last longer than incandescents, which is nice for hard-to-reach bulbs.

Plus, you can leave lights on without the slightest tinge of concern. I'm consuming a lot more light.

The only "shock" about this future is how little tech progress we have seen. TVs have gotten better, smartphones are nice, cars have gotten safer, the internet is a fairly big deal. And that's about it. Healthcare progress has been slow while prices rise exponentially, space travel has gone pretty much nowhere, no supersonic civilian transportation, no useful personal robotics, no nanobots, no fusion. For the most part, people claiming fast tech progress are just writing IOUs--sure we don't have X yet, but in 10 years we will!

Where's my jetpack?

Hype and progress are two different things. As I say, I suggest someone look at mean product life, before redesign and replacement.

How many products at a boring retailer like Petco or Trader Joes were on the books 10 years ago, and how many are new?

You didn't get a jetpack but you got 1000 new kinds of hot sauce, which is R&D, innovation, and should have brought jobs.

An anecdote but relevant? How much of Home Depot's sales are new LED lights versus older CFLs? How much of Home Depot's sales can be said to be made up of really new things versus variations of things that have existed for decades?

I would hope the answer is smarter fiscal policy, but there is the possibility that we can't get there from here.

We already had top economists calling the policy shots to fix the economy and they obviously failed. Quite discouraging if you have faith in the current conventional wisdom of American economics.

Is that fair? Top economists tended to argue more about top level stimulus or cts, and not the sausage being made.

When I say smarter fiscal policy I mean a dive to the details, and program by program review.

Remember that when we cut via sequestration it was across the board, and without any effort to find spending least conducive to growth or jobs.

Didn't economists argue for tax cuts and deregulation?

Didn't we get tax cuts virtually every year in the first decade of the century and lots of deregulation in the first decade of the century, so why didn't throwing crap against the wall in the first decade hit the target?

Didn't economists claim that war creates high employment rates and that's what ended the depression, so didn't two wars deliver?

Given the 20s and 30s were a dramatic shift in technology and job skills, from farming and manual labor to industry and machinery powered by the revolutionary electricity and gasoline, power sources that were non-existent for all practical purposes in 1920 and almost universal in 1940. The rate of job creation in the 30s with all the tax hikes and growth in government was far higher than at any time since WWII. Obviously the job growth in WWII was due to government spending.

Economists since 1980 have been trying to rewrite history to justify tax cuts and less government spending and most important, less government investment, as the path to higher job creation and growth. And those policies have been implemented to a significant degree.

I think the single most importantly thing to understand is why employment became unlinked from productivity in 2000 and has remained so through war and peace, Democrats and Republicans.

And no one knows?

(My program by program fiscal review is more putting ducks in a row, due diligence, than a sure cure.)

John,

"I think the single most importantly thing to understand is why employment became unlinked from productivity in 2000 and has remained so through war and peace, Democrats and Republicans"

The unlinking started in the early 1970s and took off around 1980. Why? Many reasons. However, the bottom line is that the people who really run each party like it that way. For a typical case in point, check out the properties owned by Nancy Pelosi and here very personal gains from illegal immigration. She is just one example, but nicely representative of the people who run the Democratic party. As for the Republicans... Hopefully, the name of Bush will be forgotten and forever lost to history.

mulp,

"The rate of job creation in the 30s with all the tax hikes and growth in government was far higher than at any time since WWII. Obviously the job growth in WWII was due to government spending."

Well, at least the second part is true. See the 1950 Economic Report of the President (Truman). Total employment (thousands)

1929 - 47,630

1930 - 45,480

1939 - 45,750

1949 - 58,710

Peter, I think I am going to go with 2000 as the inflection, and dot.com as the reason. Not its failure though, its success. It was the inflection for major disintermediation and automation. Never mind pets.com, it is salesforce.com and things like it ripping support staff out of everything.

Tyler's zero marginal product worker is the one for which there is a much less labor intensive web service.

John,

"Peter, I think I am going to go with 2000 as the inflection"

This is a matter of fact, not opinion. See "GDP per Capita versus Median Family Income" (Economist's View), "Why Wages Have Stagnated While GDP Has Grown: The Proximate Factors", "Where has US household income gone?" by John Quiggin (see the comments). See also "Where Did All The Productivity Gains Go?" (Slate). Quote from the Slate article (2012).

"By now the whole wonky set is familiar with the stylized fact that for thirty years after World War II, productivity gains fed into higher earnings for the median worker. In the past thirty years, that hasn't been the case. But people rarely dive deep into the question of where the "missing" gains went."

By the way, be careful with some of the online data. Many authors don't appear to know that NNP diverged from GDP some number of years ago. Even more important, many authors don't appear to know that the GDP deflator also diverged from the CPI many years ago. As a consequence, you will see exaggerated statements about the divergence of productivity from real wages. The divergence is very real, and did start many decades ago. However, it can be overstated.

I am confused by the 70s claim, when the graphs show a much more abrupt transition around 2000.

http://thebreakthrough.org/index.php/voices/roger-pielke-jr/its-not-about-the-machines

That article dances around the elephant in the room, the Y2K break in jobs expansion.

The TFP v employment graphic is like a lesson in how to lie with charts. The eye is drawn to the intersection of lines, which could be put anywhere with the right scaling. It is positioned where he wants you to look, meanwhile the employment griwth dies quietly at the edge of frame.

John,

Productivity growth and employment growth are apples and oranges. You can have massive employment growth with few gains in productivity and/or fast growth in productivity with only moderate (or negative) employment growth. A few examples.

From 1800 to 1850 U.S. per-capita GDP rose from $1,509 to $2,303 (52%). In other per-capita GDP didn't even double. However, population grew by 339% and GDP went up by 570%. By contrast, from 1850 to 1900, things were different. Per-capita GDP rose by 161%. Population grew by 227% and GDP went up by 752%. In other words, a lot more productivity growth combined with slower population growth yielded much more GDP growth.

From 1950 to 2000 the numbers are even more different. Per-capita GDP rose 209%. Population rose by 86% and GDP went up by 496%.

Also see "Japan’s problem is supply, not demand (updated)"

"Between 1990-2007, GDP per working age adult increased by 31.8% in the United States, by 29.6% in EU.15 and by 31.0% in Japan. The figures are nearly identical!"

Over the same period, Japan's working age population declined slightly and employment was essentially flat.

I am still pretty sympathetic to the upstream NYT article:

http://www.nytimes.com/2012/12/12/opinion/global/jobs-productivity-and-the-great-decoupling.html

John,

Let me try one more time. There is no inherent (or even logical) relationship between productivity (output per worker, per hour, etc.) and the number of jobs. Over the course of American history we have had very fast jobs growth with minimal productivity growth and the reverse. Let me give you another example.

From 1930 to 1939 the U.S. had no jobs growth. Output per-worker rose by 20%.

As stated above, Japan provides an even more extreme example. From 1990 to 2007, output per-worker has risen by 30%. Employment has been flat.

Failed? What if their advice had not been heeded? Where would we be?

All the important "policy shots" outside of monetary policy are called by Congress, not by economists and not even by the President and his team of advisers.

The teacher's dilemma: does she teach to the smartest person in the class, the average person in the class, or the dumbest person in the class.

Easy, the teacher isolates himself in a simpler world/model that conforms to the lesson plan.

Why can't we teach to an objective and set the composition of the class relative to how close they are to that objective?

Teach to the middle of the class, spend a bit of time on additional repetition/games/exercises on the most critical point so the dumbest person in the class learns SOMETHING, and offer a few extra tidbits for the smartest students, including optional exercises for the keeners.

"we cannot dismiss the notion that a new recession may be starting"

-Yes, we can. There is no sign of a recession on the horizon.

"There is more and more evidence that we’ve shifted into a new regime where wage growth for most income classes simply doesn’t happen to any significant degree."

-Nominal or real? Or both?

Inflation is at less than 2% so the distinction is pretty minor.

Right now, you're right, but that can be fixed by monetary policy.

What does this mean?

Get ready for the new normal—3.0% NGDP growth—it’s coming soon

What is NGDP? Nominal GDP? Haven't we been in the 2s? Isn't 3% better?

Nominal GDP has been higher than 3% for the last 4 years.

http://www.multpl.com/us-gdp-growth-rate/table/by-quarter

Ah, thank you.

It looks like the real GDP has been in the 2s:

http://www.multpl.com/us-real-gdp-growth-rate

1. Supply is slowly responding to the price signals screaming TOO MUCH LABOR.

Any economist who thinks people should not drop out of the labor force when the wages offered are below the capital asset costs and operating costs of being in the labor force might as well argue that buggy whip makers should be turning out a minimum of 10 million to signal a healthy economy but the stupid lazy buggy whip makers refuse to pay buyers $10 to take them.

It is clear businesses and conservatives want lower GDP because they want consumers to have less money in their pockets. After all, the best way to cut the $40,000 in income taxes of a worker is to cut his $200,000 to nothing. And no, cutting a worker's tax bill by $40,000 does not put $40,000 more money in his pocket 99.999% of the time.

And I wonder when economists stopped believing workers are consumers and consumers are workers, that labor costs are spending on consumption and investment in durable goods, so calling for lower labor costs is calling for lower GDP.

"It is clear businesses and conservatives want lower GDP because they want consumers to have less money in their pockets."

Yes clearly that's what they want. Well, it's not really clear to me. And frankly, I don't know anybody else that it's clear to. Umm, so wait, exactly why do you think this is "clear"?

He could be being sarcastic...but at any rate I fail to see a point in this comment.

Nah, it's just mulp is insane w/ his expensive lunch economics (lunch should be expensive because... WORKERS!).

Actually he is largely right.

The Bush wing of the Republican Party has been pushing for open borders and trade absolutism since forever. In combination with technical factors, this is sharply diminishing demand for labor in most industries. Meanwhile profits as a share of GDP and income inequality are at historic level. That we're now having persistent trouble with generating sufficient aggregate demand tells you what?

"“It is clear businesses and conservatives want lower GDP..."

"Actually he is largely right. The Bush wing of the Republican Party has been pushing for open borders and trade absolutism since forever. ..."

So, you are saying that open borders and trade absolutism lower GDP? Where's the evidence? GDP has grown substantially in the last 27 years. And what is trade absolutism?

I'm not really sure either are contributing to a prosperous society generally.

GDP gains from trade for a large, diverse economy are not large even when you have trading partners acting in good faith. Ours are not, and the ensuing perverse real results - the collapsing of industries that would thrive absent persistent currency manipulation - are eroding incentives in America for entrepreneurship, work, education, and investment. .

Moreover, I'm quite skeptical that the unending horde of illegal immigrants from Latin America are even net contributors in America. Illegals are an enormous strain on health, law enforcement, and education systems, and any surplus product goes home.

Finally, a low wage economy lowers the marginal product of investment. Labor saving investments and innovations are irrelevant when you can hire Juan for less than what minimum wage was in the 1960s. That investment and applied innovation have shriveled up in an age when real wages for unskilled and semiskilled are the same in Mexico City as they are in New York City or Los Angeles doesn't really surprise me.

But, man, it sure is nice to have domestic labor for less than what it cost to keep slaves in the South.

I'm totally against illegal immigration, but it certainly doesn't lower GDP in any way we can measure, or through any mechanism I've heard proposed. It can lower wages and per capita GDP, but adding people to the work force raises GDP.

Again, it's the mulp. It is not a thing capable of reason.

Workers' consumption and investment in durable goods contribute to quality of life, not production potential.

I learned a new test recently : ctrl-f "immi" to see how serious the subject of the labor force is being discussed.

Jeff Sessions had a few things to say about labor force participation.

http://www.sessions.senate.gov/public/_cache/files/67ae7163-6616-4023-a5c4-534c53e6fc26/immigration-primer-for-the-114th-congress.pdf

Quoting the NY Times:
"Working, in America, is in decline. The share of prime-age men —those 25 to 54 years old —who are not working has more than tripled since the late 1960s, to 16 percent. More recently, since the turn of the century, the share of women without paying jobs has been rising, too. The United States, which had one of the highest employment rates among developed nations as recently as 2000, has fallen toward the bottom of the list...At the same time, it has become harder for men to find higher-paying jobs. Foreign competition and technological advances have eliminated many of the jobs in which high school graduates...once could earn $40 an hour, or more."

"Recent data from the Census Bureau confirmed that a stunning 3 in 4 Americans with a STEM degree do not hold a job in a STEM field—that’s a pool of more than 11 million Americans with STEM qualifications who lack STEM employment.This is a constantly growing number: Rutgers Professor Hal Salzman, a top national expert on STEM labor markets, estimates that “U.S. colleges produce twice the number of STEM graduates annually as find jobs in those fields.”22 Many of the students, no doubt choosing to pursue STEM degrees in part due to bogus claims of STEM labor shortages, now find themselves with massive amounts of debt and no prospects of a good-paying job.Salzman goes on to report this shocking fact: “guest workers currently make up two-thirds of all new IT hires”—so even as half of Americans with STEM degrees can’t find STEM work, 2 in 3 new jobs in the information technology field are going to labor imported from abroad.

In fact, even as IT firms clamor for more guest workers,they are laying off their existing workers in massive quantities.Bill Gates coauthored an op-ed demanding more foreign labor for companies like Microsoft the same week that Microsoft announced plans to lay off 18,000 of its employees. Perhaps before lobbying Congress for more H-1Bworkers, Mr. Zuckerbergcould phone Mr. Gates and ask for the resumes of some of the 18,000 who have been sent packing. Sadly, this phenomenon is far from uncommon. Many companies that employ IT workers and lobby for expanded guest worker admissions have been slashing jobs. As Byron York reported, large companies ranging from Hewlett-Packard to Cisco to American Express to Procter and Gamble to T-Mobile laid off more than 50,000 employees collectively over the last few years—yet each joined a letter in 2013 asking congressional leaders for more guest workers."

There was something there about the share of new jobs during the recovery which went to immigrants. Overall, more Americans dropped out of the labor force during the recovery than found new jobs. If they're all McDonald's part time jobs, I can't blame them.

Geez, what happen since 2000???

Oh, I know, tax cuts to create jobs 2001, tax cuts to create jobs 2002, tax cuts to create jobs 2003, tax cuts to create jobs 2004, tax cuts to create jobs 2005, tax cuts to create jobs 2006, tax cuts to prevent cuts in jobs, tax cuts to create jobs 2009, tax cuts to create jobs 2010,

The stretch of job gains have come without the tax cuts to create jobs.

The 90s started off with tax hikes and Clinton blocked tax cuts.

Mulp,

Show us how tax cuts are actually hurting the economy.

The US budget deficit has been easily financed by the current account surpluses of Asia/OPEC. Interest rates are at record lows. There's no evidence of government borrowing crowding out the private sector.

It might be plausible that government spending cuts reduce jobs (they certainly reduce jobs in the public sector) but it's utterly incomprehensible how tax cuts reduce jobs.

Other side of the coin: Show us how tax cuts are actually benefiting the economy.

Well, when you don't take money from somebody, it's pretty close to definitional that you're helping them.

And it's almost unfathomable that money will be better spent by the government than by individuals, right?

"Show us how tax cuts are actually benefiting the economy. "

LOL, why should anyone have to show that? You have an inherit right to your own money. Asking people to justify why they should get to keep their own money is similar to having to prove your own innocence.

"Well, when you don’t take money from somebody, it’s pretty close to definitional that you’re helping them."

You're reasoning about it, not showing it.

The government doesn't take that money and bury it in a hole, never to be seen again. It does something with it.

JWatts - You can't get rich unless there's a system that makes it possible to happen. Left to your own devices without a system, even a hard working genius makes $1 a day - that is true in almost all of history.

Sure, in a capitalist system we agree to let people think that they actually earn six figures, etc. But it's a convenient fiction that helps with incentives. Yes, technically you "earn" it in the market, but it's only an accident of history, good systems, etc., that it is remotely feasible for you to ever put yourself in the situation to do so.

The system will take its cut, in order to perpetuate itself and make sure that more and more people can make six figures.

My goal is not to tell you that you didn't earn it, rather, that indeed you DO "owe" something back. I doubt you like this line of thinking though ...

The tax cuts have been disproportionately for the wealthy and the wealthy do not spend like the middle and low classes. Mysterious aggregate demand issues, you say?

So taxing the wealthy would somehow make them spend more? And where do you think those rich peoples' money is?

Harding - you either misrepresent or misunderstand what he said.

What he said is that a tax cut to a millionaire will not make the millionaire spend more (he will have more left to invest), but a tax cut to middle and lower classes will be faced with a very high propensity to spend.

STEM is too big a bucket to use this way. General Biology is the 4th most popular major in the US. It is "STEM," it has few direct applications "in the field."

Recent data from the Census Bureau confirmed that a stunning 3 in 4 Americans with a STEM degree do not hold a job in a STEM field—that’s a pool of more than 11 million Americans with STEM qualifications who lack STEM employment

Does "lack STEM employment" imply unemployment? Is it possible many of these graduates are working in other fields, like finance, law, or for the government (like the patent office)? I knew some of my PhD classmates who didn't lack for academic or industrial job offers but went to work for hedge funds. I also knew people (masters or doctors) who worked for investment banks building up their IT infrastructure, making it scale and be secure; are these considered STEM jobs or non-STEM jobs?

I would like to see deeper studies on this topic that shed some insight on whether STEM graduates have left their core areas because of wage and guest worker pressure, or by choice because greener pastures exist in other industries.

Using the latest UN Population projections for the United States for the next 10 years:

((2025 pop) - (2015 pop) / 120 months or

((345,085,000) - (321,774,000)) / (10 * 12) = 194258

So, we'll be adding ~195K people per month for the next 10 years (at least).

There is also the question whether US population is the right denominator, for all these questions.

I ask why US employment has been disconnected from US productivity since 2000, but developing country growth averaged 6% in 2000-10. If employment went elsewhere, it becomes a moral dilemma.

Towards the end of poverty

It may be that the "STEM" category doesn't accurately capture the workers being demanded. Your notion that Microsoft firing some workers means Microsoft doesn't have need for other kinds of workers is silly.

Unless the new jobs are very radically different why don't they train existing workers for the new jobs? Can it be that new hires, especially if fresh out of school (or fresh off the boat) can be paid lower salaries?

Lower salaries may be one factor. But most of these companies have stack-ranked performance review processes that forcefully deem an existing percentage of employees to be sub-par performers. Eventually such employees get fired, or when the next round of culling has to be undertaken, laid off. Per HR philosophy, it is considered anathema to move such people to other roles they might be better fits for, or train them for something else ("poor performers" become untouchable to most managers in the company.) Now this happens to a relatively small percentage of employees, like 5% would be my guess, which is why employees don't express more public dissatisfaction than they currently do.

I think big, or even moderate-sized, companies pay expensive consultants loads of money to establish hiring and firing systems, which are then left to run on autopilot in a completely bureaucratic manner. The public thinks that jobs are defined by precisely defined roles and responsibilities, with people hired to fulfill those exact responsibilities. But I don't see that happening in the real world, at least in big companies. Maybe it happens in mom 'n pop firms where employees have daily personal interactions with the guys who run the show. If one started thinking about retraining employees marked for layoff, or nationalistic concerns like whether any American is available to do the job (job and role having very fluid definitions), the hiring and firing system would get off the rails.

At least this is my impression of what goes on. Perhaps others have different perspectives?

In the case of programming, what we are seeing is that a degree might be useful, but that having a degree does not guarantee competency, or even ability to gain competency.

Even if we hand everyone the tools of their choice, the difference in productivity between programmers is immense, which is why we see that the same place can end up paying 4x the starting salary to their best people, despite the fact that their job responsibilities are not really that different from a new programmer: the difference is just competency expectations. So it's pretty healthy for companies hiring programmers to both hire and lay off at the same time, just to fix bad hiring decisions.

And no, people rarely fire the expensive devs to replace them with cheap ones: Normally it's the expensive ones that bring the better ROI: Hiring fresh out of school is so much of a crapshoot, some companies will just not hire anyone without 3 years of experience, hoping nobody that is really bad managed to even stay anywhere for 3 years.

We're also assuming that STEM = Four Year College Degree. That's probably not true.

Some of the fastest growing fields are in the medical technology sector like medical sonographers, physical therapy assistants and dental hygienists.

These jobs pay above average wages and require only an associates degree with certifications. They might not be high status jobs but they're solid middle class jobs.

How do we convince men who in an earlier era would have worked in factories or drove trucks to move into these types of fields instead?

Don't confuse us with facts!

STEM surplus:

A STEM graduate who doesn't work in "STEM" might still apply significant STEM knowledge to their new position.

Consider a trained engineer who works in marketing, but is good at selling highly engineered products because he/she understand engineering. Or a trained pharmacist, who sells drugs, and is good at it because he/she understands chemistry/pharmaceuticals. Or a physicist who is a good science writer because he/she understands phyics. Innumerable examples could be mentioned.

Not sure if that's remotely enough to counter the ginormous figures you quote though ...

Guest workers:

if it's similar to Canada, my impression is that firms simply don't want to pay the prevailing wage and so prefer to hire guest workers even though there are "enough" workers in the market to meet demand in many (most?) subsectors. The Canadian guest worker program finally got significantly curtailed shortly after media coverage of a coffee chain who brought in large numbers of guest workers rather than paying slightly than higher minimum wage to the fairly large number of available job seekers ...

coffee chain who brought in large numbers of guest workers

Guest workers for programming jobs or to be baristas? Do you have a link that contains details of this story?

Not even baristas. Tim Horton's is like a slightly upscale Dunkin Donoughts. The program was originally for temporary agricultural sector workers, but then they modified some things specifically to cut red tape and make it easier to fill highly demanded (under-supplied) skilled positions, quite notably for the oil sector but I think also some tech areas were intended to benefit.

I couldn't find something that provides a good summary on the angle I was providing, but the following two articles refer to its use in fast food chains.

http://globalnews.ca/news/474208/who-hires-temporary-foreign-workers-youd-be-surprised/
http://www.vancouversun.com/life/Hortons+McDonald+face+criticism+over+foreign+worker+program/9768838/story.html

NW,

"The Canadian guest worker program finally got significantly curtailed shortly after media coverage of a coffee chain who brought in large numbers of guest workers rather than paying slightly than higher minimum wage to the fairly large number of available job seekers …"

Racism, bigotry, anti-immigrant hysteria, discrimination, hate... In Canada? Who knew?

It never really received that angle. While racism and bigotry exists in Canada, every party across the political spectrum has very staunchly supported all manner of immigration for a very very long time.

In this context, even though the right wing government HAS been playing all manner of dog whistle politics oriented around race and religion, and basically everyone knows it, and some people TRIED to criticize them as anti-immigrant for about a week, all they had to do was say "look at the numbers, we accepted more immigrants then any government in all of history, so it's a complete lie to say we're anti-immigrant" and the matter was essentially over.

Meanwhile, curtailing the program had vast public support because a ridiculous number of recent college graduates can't even find minimum wage work, at the very same time as we were importing temporary labour.

Our prime minister plays on racial/religious tension and insecurity to the absolute maximum extent that is fathomable in Canada, but even then, we are so pro-immigration that it was utterly impossible to paint them as racist bigots, specifically with regard to the matter of closing down the temporary worker program.

Race was never mentioned (it very rarely is in Canada). It was all about employment numbers and national interest.

"Our prime minister plays on racial/religious tension and insecurity to the absolute maximum extent that is fathomable in Canada."

In the last election, Harper got 42% of votes from immigrants and 37% from native born. 18 of his 166 MPs are immigrants.

The conservatives general receive a lot of support from ethnic Chinese and South Asian voters.

In other words, you are talking a lot of tosh.

NW,

I was not accusing Canada of "Racism, bigotry, anti-immigrant hysteria, discrimination, hate…" when it shut down a guest worker program. That's how a decision along those lines would be described in the U.S.

As for immigration in general, Canada is one of those rare countries where immigrants are generally successful, including the children of immigrants. Why? Because Canada runs an elitist ("skill-based") immigration system that attracts talented folks, and tends to exclude the less-skilled. Immigration to Canada is weighted toward Asia and against Latin America. The U.S. is the other way around.

Take a look at "Berlin Gets Bad News From PISA - The world as it will be, not as we want it to be…". In Canada, PISA scores for immigrants come close to the natives. In Australia, immigrants (and their children) do better than the natives.

By contrast, immigrants to the U.S. don't reach native levels of performance even in the second generation (actually the second generation does worse than the first). Of course, the U.S. is a success story compared to Germany, France, etc. In Germany, immigrants massively under perform the natives in the first generation and only marginally improve in the second.

Of course, Canada also runs a rather tough guest-worker program that would also be denounced as "racists, bigoted, etc" in the U.S. See "Canada’s guest worker program could become model for U.S. immigration changes" in the Washington Post. Quote

"At the end of the season last year, all 274 guest workers from Zacatecas returned home from Canada, according to state officials and the migrants. This, of course, was by design. Only married men are eligible for the Canadian program, preferably those with young children, and their families must remain in Mexico. Another incentive to return home: a cut of the migrants’ wages is placed in a Canadian pension fund, receivable only if they return to Mexico."

Some number of years ago, I took the test for immigration into Canada. I very barely passed.

Chip - the prime minister is making an ELECTION issue of TWO women wearing the niqab.

Last week, after looking at bad polls ... who does he hire? An elections advisor who SPECIALIZES in inserting racial-oriented dogwhistle politics in a campaign (like he did in Australia and UK).

I don't deny your statistics, but you're willfully blind if you wish to pretend that what I say is not true.

Peter - Yes, Canada's immigration policy is very elitist. In my younger years, I worked with boatloads of immigrants in various minimum wages jobs. Sooo much learning opportunities to work with people in PhDs in everything under the sun ... it takes them a while to build a network, get recertified, etc. and get going. Broadly speaking, Canadian immigrants are successful (less so than the native with equivalent education, but it's not surprising given how difficult it is to navigate a new system/network), and yes, probably this is because we are very selective.

NW,

"Yes, Canada’s immigration policy is very elitist. In my younger years, I worked with boatloads of immigrants in various minimum wages jobs. Sooo much learning opportunities to work with people in PhDs in everything under the sun … it takes them a while to build a network, get recertified, etc. and get going."

No doubt true. If I landed in China tomorrow, it would be very hard for me to get established... Even if I spoke fluent Chinese... The only possible exception would be as an English language teacher/interpreter/etc. Of course, it is generally a waste for PhDs to take minimum wage jobs (assuming that the PhD is in a technical field). However, the good news is that the children of immigrant PhDs with minimum wage jobs, will typically do quite well, both academically and economically.

Translated. Even if Canada doesn't exploit the talents of smart immigrants in the first generation, it (most likely) will in the second generation. The reverse is true as well. Under-performance by low-skill immigrants is multi-generational (at best). In 2050, the children of the high-skill immigrants coming to Canada will still be doing well. In 2050, the children of today's German immigrants will still be failing (most likely).

Wages is one factor, but don't underestimate CEO sociopathy. You can treat H1B workers like dirt and they'll say thank you sir may I have another.

I don't see how any free market economist can support a program that chains H1B workers to their employer. Minimum conditions for H1B is that they should be allowed to work anywhere they choose.

The corporations just have to make good decisions about who they invest in for an H1B

Minimum conditions for H1B is that they should be allowed to work anywhere they choose.

That's possible currently as per the visa law. Someone working on an H1B can move to a different employer if the latter is willing to sponsor the worker for an H1B. Since this worker was already counted against the visa cap (85000 per year), he/she does not have to leave the country and can move from one job/location to another just like any US citizen or resident can. This happens all the time.

What a guest worker cannot do is remain in the country in an unemployed state. That's where his/her vulnerability comes in. An employer could threaten such a person with being fired, and since being fired implies unemployment, the worker is liable for immediate deportation. It's not that big a deal for single people with no assets, but for someone with family and a mortgage (yes, guest workers can get social security numbers and buy property), it's an intimidating enough prospect to keep them tied to their employers unless (as mentioned above) they can find another job and visa sponsor.

The current provisions of the H1B visa work quite well for those it was originally intended for: say, a PhD from MIT who has done much peer approved research and has multiple patents, and whom the best employers will fight over. But since the provisions of the visa do not specify what a "skilled" worker is and how those skills can be validated (anyone with a degree labeled "bachelor's" from any podunk university in the world theoretically qualifies), there is a great deal of abuse in practice.

Not tying the H1B to an employer might seem to be an easy way to fix at least one end of the problem (abuse and wage levels), but since such a visa would be equivalent to an immigrant visa (green card) for all practical purposes, it would likely violate federal immigration laws that enforce national quotas, and never pass muster in court. I think that's why they started this exceedingly flawed program in the first place; as a backdoor for skilled immigration, something like the points system that Canada and Australia have.

What does "immi" mean in this context? (A Google search doesn't tell me anything useful here.)

Thanks!

4. Krugman is clearly too much indoctrinated into free lunch economic norms.

The demographics are that conservatives are mostly old and like old people see no reason to invest in capital assets because they will die soon and won't reap the benefits.

Why replace the roof when a patch, or bucket will do, because why pay for 50 years of roof when you will be dead in 10, 20 max?

Likewise, why fix the leaky sewer systems paid for by your father when you will not benefit from the century of service of the investment? Why pay for replacing those rusty bridges when the odds of any of them falling while you are on them is near zero and who cares if it takes longer to cross over the other bridge when you don't need to get to work anymore and can take your time?

Why borrow to pay for building capital assets when the borrowing can be used to pay for your Social Security and Medicare?

Besides, building infrastructure should be done as cheap as possible and that means buying Chinese steel, imported oil, so it is not like building roads and bridges will increase US incomes and thus GDP....

Nice argument against inheritance taxes!

Can you (or someone) elaborate on "...at current margins I am not sure the traditional distinction between cyclical and structural factors still makes sense, so that word “recession” may be more misleading than illuminating." It's a pretty dense sentence.

The traditional treatment was that after cyclical effects, productivity growth follows, then jobs. There was no anticipated break between productivity/technology and jobs.

"6. There is more and more evidence that we’ve shifted into a new regime where wage growth for most income classes simply doesn’t happen to any significant degree. This may not last forever, but it remains the status quo and too many people find it too hard to wrap their heads around that. That to me is the single biggest takeaway."

Germany in the 1930s and the US in the 1940s both showed much lower inflation than would be anticipated with given levels of growth in employment.

I don't think that the job market for those not already entrenched in a high quality professional position when the music stopped in 2008 was that much better than the labor market during the 1930s - only the best and luckiest of workers got stable, respectable jobs.

"the US in the 1940s both showed much lower inflation than would be anticipated with given levels of growth in employment. "

The US in the 1940's was subject to some pretty pervasive price and wage controls. So, it's not really particularly relevant as an example of any other time period. Or at least any other time period that didn't involve a major war.

I must disagree. The U-6 going down is a very good sign. The economy is consolidating and all those part time jobs during the April 14 to July 15 "surge" are being put into full time jobs....finally.

There is a bunch of consolidation to go through. Wage inflation is a lagging indicator the government will miss and real wages are at their highest peak since the late 90's.

Dangerous to read so much into a single jobs report.

“Second, secular stagnation — persistent difficulties in achieving full employment — is a real concern if potential growth is slowing due to a combination of demography and weak technological progress, which seems to be happening. Lower growth means lower investment demand, so getting the private sector to spend enough gets harder.”

When I read things like this, it strikes me that economists are not really prone to think outside their textbooks. Could it be that one significant reason for the low labor participation rate and "not getting the private sector to spend enough" is that the US is undergoing a cultural change?

It appears to me that the younger generation doesn't really give priority to "spending enough" as my generation did (Baby Boomer) in our heyday. Cultural change always starts with the younger set. They don't seem to place as much value on consumption as we did, and they place more value on leisure. They don't seem to have such an urgent need or desire for automobiles (much less a large one), a McMansion, a third large screen television, etc, etc. And, segments of the Baby Boomer generation seem to be coming to the same conclusion (based, perhaps, from experience, after we abandoned "turn on, tune in, drop out" to become the most consumption-oriented generation ever): there is a diminishing marginal benefit to additional consumption, particularly at the level of affluence the average American has achieved. Those young folks perhaps look at mom and dad and concluded that buying all that crap didn't add much to the quality of their lives. What, exactly, were they busting their asses off all those years in those cubicles for? You won't see the value of leisure show up in GDP (nominal or real) statistics. But, maybe the "stagnation" is as simple as this: a lot of those old studs and mares have had about enough to drink and many of their colts and fillies are not quite as thirsty---this is not just "demographics"; it is cultural. Perhaps this "slow growth" and "stagnation" is largely an inevitable result and evolutionary product of our relative economic success and not, per se, a "real concern", except for the fact that we need to pay for our prior excesses. Were it not for that, should we be forced, or even nudged, to drink?

I imagine a lot of youth would quite like to spend/work more, but there are few jobs available for new entrants which make this possible.

I.e., I don't think that materialism is in decline, rather, pursuit of material gain is more difficult than it used to be, so for lack of better options many take solace in a second best option, which includes more leisure, no car, smaller house (yes, I know average sizes have increased, but surely that's not on the backs of purchases by millennials)

Your both just sort of making assertions without evidence. Although I think there's still some truth to both perspectives. I tend to agree that employment is getting dated as a means of taking the temperature of our society. If we have the tech to eat bacon and have sex all day in a sustainable way then why work?

A pretty large fraction of my friends are artists, writers, activists, etc. who make around 30k/year and with no kids or saving it's enough for a really great lifestyle. These are mostly really intelligent and educated people who could make more money if they felt the overwhelming urge. This is a key reason I think a $15/hour min wage is a very bad policy. Destroying the incentive for a massive swath of the population to increase their productivity seems like a disastrous idea.

Ok, but where's your evidence, Mike?

Ok, but what about starting a family, Mike? Most people want to do that, no matter how they might temporarily fall into the trap of thinking that blinging it up can fill that void.

How does $15 an hour minimum wage destroy incentive to be productive? You won't get a job unless you're worth at least $15 an hour.

While crass materialism may be on the wane among a subset of people (replaced by other forms of status seeking, like crowing on Facebook about refugees), there is another angle to this. Forgoing buying a car and a bigger house (or a house - that godawful trend of buying micro-homes is an abomination) is actually deferring the process of starting a family, which is a very bad thing. Or it is a de facto admission of the lack of affordable family formation, due to reduced opportunities, increased competition for attractive real estate (good schools etc) and generational wealth transfers through debt. I have my doubts regarding the fungibility of people and the possibility of maintaining successful institutions and habits with the decline of the majority that instituted them, so I am very keen on the idea of making it as easy as possible (culturally, as well) for young people to start a stable family.

if potential growth is slowing due to a combination of demography and weak technological progress

1) The Developed World Baby Bust is having a more significant impact on both AS & AD curves. And the Great Recession is accelerating the Baby Bust because of working class stagnant wages.
2) What if the decrease in IT investment is coming from Strong Technological Progress not from businesses deciding to invest less money. (Software is more defaltionary than we are calculating.)

Where can I find data on the net number of people that enter the labor market each month? How many jobs do we need to create each month just to keep pace with population growth and immigration?

It isn't complicated. Regulation is strangling the economy -- obamacare, dodd-frank, draconian EPA rules. Add higher tax rates and a Dem president and Dem candidates making it clear that they hate investors (that aren't their cronies), hate entrepreneurs (that aren't political donors), and haven't got the first clue of how economics works.

Who wants to start new companies or new initiatives when Washington and blue state politicians are doing everything possible to punish businesses and promise to do even more punitive measures as soon as possible?

Sure, raise taxes. What could go wrong? Make energy more expensive. Threaten to do far worse. Crush coal and the communities which produce it. Double the price of entry labor. Force banks to hire massive numbers of compliance personnel. Strangle community banks. Wreck the healthcare system while leaving enormous uncertainty about the impact of future changes that STILL haven't been fully implemented. What could go wrong? Promise to attack capitalism if elected. Entrepreneurs just LOVE the thought of Bernie Sanders as president. And they know that the more Dem voters who fall in love with his anti-business, anti-free enterprise rhetoric, the more dangerous the future is for them whether Bernie gets nominated or not.

Clueless economists don't have numbers to put in their models to reflect the way animal spirits have been clubbed into submission. And if they don't have a number for something, it didn't happen. At least not in Ivy-Walled Unicorn Land. It only happens out here in the real world.

Right, was it strangling it last year when 260,000 jobs a month was being created? Get over yourself and one misread report.

I think the reference to coal is the real gem in this. It could have been better though, say an attack on the jobs killing ban on whaling.

AND GET OFF MY LAWN!

Before you take this too far you might want to look at some actual data.

Here is a starting point.

Maybe its the refugee-crisis-media-coverage talking in me, but why do societies that are fully developed don't embrace low-skill immegration more? Let's utilize cheap labor and lower our welfare states limitations? Yes, many would deem that as further deprivation of the middle- and lower class, but when there is no growth left to meet our welfare state's liabilities, why not massively lower the costs (of labour)?

Alex,

We can solve all of our problems with lower wages? who knew?

However, you seemed to have missed the memo showing that immigrants (in essentially every country) are such heavy users of welfare state (cradle-to-grave) that they make the "welfare state’s liabilities" much worse, not better

What if we ship Syrians to China, to work for Foxconn? Surely then they will not affect US wages!

John,

"What if we ship Syrians to China, to work for Foxconn? Surely then they will not affect US wages!"

Go read "Learning to Speak Lingerie - Chinese merchants and the inroads of globalization" (recommended by MR). You will learn a number of useful things.

Sending Syrians to China won't work because they are very unlikely to work.

Sending Syrians to Europe won't work because they are very unlikely to work.

The actual article is about Egyptians. However, it is (among other things) a crash course in the causes of Middle-Eastern underdevelopment.

No need to insult. It seems that you missed my memo while simultaneously proving my point: Low-skilled immigrants can only end up as welfare-recipients in a developed country's welfare state.

The welfare state is another end of a function that includes high-productivity-workers and expensive labor. But the latter two also produce our 'Great Stagnation'. When the high-skilled nationals are too saturated to spend, produce and reproduce their society's economy out of stagnation territory, why not create growth by allowing cheaper goods in?

The welfare state prohibits the existence of low-skill-jobs (minimum-wage, licensing etc) and acts like a tariff. The immigrants will come anyway. Why not deny them most of the welfare, but allow most of what they could offer to sell?

We've been doing that, which is what causes the push to legalize them.

Alex,

Sorry. No desire to insult.

Cheap labor in a high cost society is the most expensive labor there is. The taxpayer subsidizes everything about the immigrants' standard of living, while the productivity of the immigrant stays low because that's where his price point is. If the immigrant manages to escape the underclass trap (by being very talented or lucky), then another immigrant is brought in to mow the lawn at a huge yearly cost to the taxpayer. Maybe the first immigrant will wind up needing his own lawn mowing immigrant too.

"5. The case for a Phillips curve appears weaker than ever"

Agreed. Ditto for the theory of a natural rate of unemployment that economists have any ability to calculate.

1. Monthly numbers on labor force participation are too volatile to read anything from a one-month drop.

2. Stagnation is a claim about real output, not nominal. Real growth per working-age person is strong.

3. Meanwhile BPO is still booming.

4. There is no evidence that technological progress is slowing. If all there is to stagnation claims is slower population growth, there's really nothing to them at all.

5-6: Labor markets still aren't tight, and tightness of labor markets isn't the only factor in inflation

PS re 4: I'm a bit puzzled how slower population growth is supposed to make it more difficult to reach full employment.

"There is more and more evidence that we’ve shifted into a new regime where wage growth for most income classes simply doesn’t happen to any significant degree. This may not last forever, but it remains the status quo and too many people find it too hard to wrap their heads around that."

How do we see people not wrapping their heads around it? Does it help cause this problem (eg, people hold out for higher wages that they don't realize aren't going to happen)?

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