Employment Rates and the Recession

The Great Recession entailed a huge rise in unemployment; that is easy to track, as it is prominently featured in the monthly Bureau of Labor Statistics releases and is soon thereafter up on the St. Louis Fed FRED data site. Almost as well known is the rise in workers on (involuntary) short hours. That sort of correction is standard, reflected in the "U-6" series of "alternative measures of underutilization."

During the current US recession workers also dropped out of the labor force in unprecedented numbers. While that is a major component of adjustment to business cycles in Japan (and unemployment a smaller component), that has not been the case for the US. During the 2001 recession, employment as a share of the population for the middle of the labor market (ages 30-54) fell by 1.7 points. In contrast, between January 2007 and January 2010 the ratio fell by 5.1 points.

During the past decade, however, the age composition of the population shifted markedly; above all, the baby boomers are now entering retirement. This makes it more difficult to summarize in a single number. But it also turns out that the dynamics across different cohorts are quite different. My own prior was that the Great Recession led to a wave of early retirements, which would show up as a drop in the ration of employment to population. In fact, the ratio rose rather than fell.

This brief note focuses on presenting the data.

Finessing Norquist

Republicans can have their cake and eat it too

The "fiscal cliff" is in reality a slope that gets steeper and steeper. We need to strike a deal in early January, before the economy gathers downhill momentum, but there is room to maneuver. This opens up the possibility that Republicans can have their cake and eat it too. Once January 1st arrives, the "temporary" Bush taxes cuts will have expired. Any final package will reasonably provide a cut to the post-January-1st level of the alternative minimum tax. It will probably include other minor adjustments. So what asked to vote, what Republicans can say "aye" to a package that contains tax cuts and not tax increases.

Object to this as sophistry. Fine, but sophistry is better than demagoguery!

Have Americans given Obama a mandate? Well, he's been pretty clear about raising the rather low tax rates the truly rich face, rates significantly lower than what I pay. He won the election. So people had an opportunity to say "no" and ... didn't.

Locally, my House district re-elected the Republican incumbent, Bob Goodlatte, against token opposition, a virtually unknown Democratic candidate running for office for the first time. Goodlatte won by the expected wide margin. Does that mean that he has a mandate? I don't think so; a mandate comes only when you've contested against a serious candidate, and the voters chose you. Even then, few people vote on a single issue, and few elections are decided on a single issue. Goodlatte is good on constituent services, and has done a modest job of lobbying for local pork. Did we elect him to bring home more bacon for all, or to procure a piece of choice filet mignon for the few? I rather think the former.

We can step over the edge of the "cliff" and still step back. That provides room for creative and constructive bargaining. Lets hope our putative leaders in Washington, Republican and Democratic, are up to the task.

...mike smitka...

Confirmations and Continuity

...Obama is already on the ground and running...

Despite all the verbiage spilled this election, I've encountered no mention of the challenge that faces every new president of naming top administrators – secretaries, undersecretaries, assistant secretaries and deputy assistant secretaries, plus Executive Office staff, from the direct assistants to the president to the Council of Economic Advisors and other appendages. New Presidents also face a steep learning curve on operational matters, from dealing with intelligence briefings and to establishing personal ties (or not!) with key Congressional leaders.

The "Plum Book" drawn up every 4 years as an aid to new (and incumbent) presidents lists 7,996 positions subject to presidential appointment. While in practice many of will be filled through routine promotions of senior civil servants, in 2008 some 1,141 positions required Senate confirmation. Unless they both want to stay and an incoming president chooses to leave them in place -- as President Obama did in 2009 with Robert Gates as Secretary of Defense -- there is then no one to sign off on regulatory approvals and staff changes and so on until the Senate approves them. Making appointments takes months; confirmation the majority of candidates takes the better part of the year, particularly when the Senate objects to the initial nominee.

An incumbent who is re-elected need not spend time learning the ropes. (Hopefully they will also reflect on successes and failures during their first 4 years!) While many appointees will choose to move on before 2016, a second-term president likewise needs spend little time on personnel issues or other transition tasks.

So unlike 2009, when he faced transition tasks in the midst of a financial crisis, Obama is already on the ground and running. Of course he had the overhead of the election campaign, and so perforce was faced with performing two full-time jobs the past year or so. Crises (and routine tasks) kept intruding. On TV he appears visibly tired, for good reason. Our electoral system imposes a burden on maintaining efficient government operations. We've lessened that burden for the next four years, to our benefit.

...mike smitka...

More Employment

...more important is employment to population...

The data for October 2012 – the last "big" data release before the election -- are now available on the Bureau of Labor Statistics web page and on a select basis as graphs on the St Louis Fed FRED database. I do look at unemployment and other metrics, but here want to highlight the employment to population data, which avoids "noise" that comes from people dropping in and out of the labor force -- that is, I look at employment/population not employment/labor force. This measure also has the advantage that it automatically adjusts to population growth (unlike overall employment measures) and, when is disaggregated, is neutral to changes in the age composition of the population (such as the aging of the baby boom cohorts).

The data show a steady improvement in the economy. All data below are as a percent of population (or change in percentage points in the comparative rows). As with all employment data, there is some noise from month to month. In addition, these data aren't seasonally adjusted. But it's one more picture of our slowly improving economy, a process that whoever is president for the next four years can little to improve but that will by 2016 have brought us close to "normalcy".

age bracket	16-19	20-24	25-29	30-34	35-39	40-44	45-49	50-54	55-59	60-64	65-69	70-74	75+
Oct 2012	26.5	61.8	75	76.6	77.5	78.4	77.6	74.3	69.2	52.7	29.9	18.7	7.3
12 month average	26.0	61.4	73.6	75.5	76.5	77.5	76.6	73.9	67.9	51.7	30.0	18.2	7.2
change vs avg	0.5	0.4	1.4	1.1	1.0	0.9	1.0	0.4	1.3	1.1	-0.1	0.5	0.1
vs Oct 2011	0.2	-0.3	2.1	1.1	0.8	1.5	0.8	0.2	0.5	1.8	0	0	0
vs Oct 2009	0.3	1.5	1.5	1.3	0.9	2.1	0.4	-0.4	1	1.9	1	0.4	0.2

...mike smitka...