The challenges raised by the future of work look a lot like the same ones we’ve always wrestled with.

May 21st, 2018 at 8:40 am

Over at WaPo.

There’s a consensus of sorts that the future of work will be uniquely shaped by the gig economy and labor-displacing technology. At the risk of putting a damper on millions of conference sessions on this topic, I think we should be much less confident in our ability to predict the structure of work or the possibility of technological unemployment.

As new work from Larry Mishel reveals, the gig economy is a tiny share of the whole. We also do not see accelerated labor displacement in the productivity numbers (to the contrary).

But as I stress in the piece, that doesn’t mean we shouldn’t think about ways to improve the quality of future (and present!) jobs. In fact, there’s a robust policy agenda that should be brought to bear, some of which is highly responsive to the increase in “arms-length” employment, where the distance between employer and worker is growing in ways that can undermine labor protections.

A Multitude of Lynx

May 18th, 2018 at 12:59 pm

Various posts at WaPo for those interested:

Trump’s creating all sorts of waves in the oceans of international trade, and that’s led some analysts to worry that the reserve status of the US dollar could be under threat (63% of global reserve holdings are in dollars). While this isn’t the path I’d take to get there, of course–I’m solidly against Trumpian chaos–at this point, the costs of printing the premier reserve currency outweigh the benefits.

This one generated a fair bit of interest. It’s a local story with national implications about a head-tax on large businesses that the Seattle city council just passed to help them deal with their increasing homelessness problem. There are many levels to the story, including the basic revenue story, but also the costs engendered when large firms like Amazon come to town. Yes, they bring jobs, which is great, but they also raise housing prices and create more demand for city services. Yet, at least in this case, when you come to them for help, they stiff-arm you.

Dean Baker and I understand and support the motivation for a guaranteed jobs program.  But we’re wary of the public sector’s ability to create tens of millions of jobs to replace millions of lower quality jobs in the low-wage sector. That’s why Sen. Booker’s proposed 15-place pilot is a good idea to see how this works in practice before going national.

On a personal note, I’m sitting in a TV studio where my segment on the international trade fracas has been appropriately cancelled to report on the school shooting in Texas this morning. Of course, my cancellation is at should be–that’s not my issue.

According to the WaPo, this is the 16th school shooting this year. What should be shocking is how familiar this is to me and everyone else at the station. We all just go with the flow, as the anchors haul in commentators from their bench of experts in school shootings, and producers cut to whatever real time information they can glean.

The extent to which our country has normalized these horrific occurrences is the latest sign that there are ways in which the US is a failed state. I do not say that lightly, but a system that consistently fails to protect students and their teachers from death by firearms–that instead of solutions, has experts in school shootings on speed dial–cannot be called anything else but a failure.

Republicans’ “Jobs Gap” is a misleading measure that means nothing.

May 8th, 2018 at 11:21 am

The Republicans’ “Jobs Gap” is a meaningless measure that reveals nothing about the job market. It can, and is, easily manipulated to show any outcome you like.

On the other hand, the facts about the current labor market are as follows.

–The long-term trend of job growth remains solid, unemployment is low, and, contrary to claims related to the “jobs gap,” employment among working-age people is growing relative to their population.

–Anecdotes suggest that some particularly hot labor markets are helping workers overcome steep labor market barriers, like criminal records. Conversely, some groups of workers face skill or health deficits, the absence of necessary work supports, or live in places that have not yet been reached by strong labor demand.

–Even as the job market continues to tighten, wage growth has been relatively sluggish. Since late 2016, real earnings for middle-wage workers has been flat.

The phony jobs gap measure 

The Republicans “Jobs Gap” measure consists of two disparate series—the labor force participation rate (LFPR) and job openings—with very different scales and no substantive meaning. The commentary around the measure suggests its advocates think the jobs gap shows that people are not taking advantage of labor market opportunities, but the actual data belie that claim.

The LFPR is the percentage of the 16+ population that’s employed or unemployed (i.e., in the labor force), and job openings are millions of jobs. Importantly, the 16+ population includes persons of retirement age, an increasing share of the U.S. population, as well as teenagers in high school and young adults in college, so it is not a useful measure for the purpose it is intended (I show better measures below). Labor economists have long expected the overall LFPR to grow less quickly as the baby boomers age out of the labor force.

But the immediate problem with the “jobs gap” is that there’s no meaningful way to present these two series on one graph. In fact, by tweaking their different scales in ways that make no more or less sense than the Republicans’ version, you can get a gap of any size you like or no gap at all!

Here’s the Republicans’ version.

Here’s one with a much bigger gap. Oh no!

Here’s one with a negative jobs gap (LFPR appears greater than job openings)! Phew!

What do the job openings data show?

A more serious attempt to learn about the current labor market from the jobs opening data might make use of two figures that the BLS publishes every month when the openings data are released (new data came out this AM). Both show a tightening labor market with people filling available jobs in the way we’d expect at this point in the business cycle.

The first figure shows the unemployed per job opening. During the recession, there were almost 7 unemployed persons per job opening. Now, there’s only 1, and the measure is actually a bit below its pre-recession level.

 

The next figure shows job openings and hires as rates (shares of total employment). They’ve both been on the rise as the job market has improved and are at similar levels now. Again, there’s nothing in these data that show people not taking advantage of job opportunities.

In fact, for prime-age (25-54) workers, employment rates have been rising at a solid clip.

As noted, due to our aging population, the total LFPR can be misleading when evaluating the job market. In fact, the increased share of older persons in the LFPR is one reason for the recent flat trend in the LFPR in the jobs gap figures above, which is why many labor market analysts prefer to look at the prime-age population, age 25-54, as this excludes persons aging out of the labor force.

The simplest way to discern if working-age people are taking advantage of job opportunities is simply to look at their employment rates (the share of the working-age population with jobs). The next two figures look at the employment rates for men and women in this 25-54 age range. In a trend that clearly contradicts conservative stories about prime-age workers unresponsive to opportunities, both series have climbed steadily in the expansion and both are closing in on their pre-recession peaks.

Some anecdotal accounts reveal that in some parts of the country, the tight labor market is providing opportunities for people who in less hot job markets face steep barriers to entry into the job market. From the NY Times:

“A rapidly tightening labor market is forcing companies across the country to consider workers they once would have turned away. That is providing opportunities to people who have long faced barriers to employment, such as criminal records, disabilities or prolonged bouts of joblessness.”

In sum, the labor market is on a long-term, tightening trend, and working-age people are increasingly employed. Unemployment per job opening is low, hires and openings rates are up, and employment rates for prime-age workers are steadily climbing back to pre-recession levels.

Are there any downsides to the current job market?

One significant shortcoming in the current labor market is that national wage growth has disappointed, especially for middle-wage workers, both in nominal and real terms. As I show in this recent analysis, wages have typically grown faster at current levels of unemployment, and in real terms, middle-class worker pay is not up at all since 2016.

It is also the case that even at low unemployment, regional pockets of above-average joblessness still exist. Recent research published by the Brookings Institution, for example, shows that potential workers in some places remain unreached by low unemployment, emphasizing, for example, the gaps between employment rates for prime-aged workers in the hot coastal markets versus places hurt by manufacturing job losses. Moreover, as is far too often the case, minority jobless rates remain well above those of whites, even controlling for education.

Congress could therefore do more to address the structural barriers that even at low unemployment stand between too many Americans and the job market. These barriers occur on both the demand side (too few job opportunities) and the supply side (skill or health deficits, discrimination, criminal records) of the labor market. Workers whose skills don’t align with today’s employers’ demands will need robust training and apprenticeship programs. Others will require work supports including higher minimum wages, housing and nutritional support, and, in some places, direct job creation programs.

Two new papers from CBPP provide excellent guidance in terms of what sort of interventions have been found to be most effective in helping left-behind workers overcome this spate of labor market barriers.

It should be noted that because they fail to address these structural barriers, adding work requirements to anti-poverty programs will backfire. And yet, instead of investing in jobs, training, and work supports, the Congressional majority passed a regressive, deficit-financed tax cut that adds almost $2 trillion to the 10-year budget deficit. If we truly hope to help workers left behind, these resources are sorely misdirected.

Note: All data are from the BLS. Thanks to Somin Park for lots of great help.

Three musical interludes to start the weekend on the good foot: Soul/funk edition

May 4th, 2018 at 1:55 pm

I’ve once again been remiss in sharing what I’m listening to, but here are three jams that will make you smile. The second two will also make you get up and dance, whether you want to or not.

First, I loved this carpool karaoke with Stevie Wonder. Even when he’s screwing around, his genius can’t help but flow out. And it’s a reminder of the so many masterpieces he’s penned!

Second, I was walking by a store the other day and they were blaring this great, old Curtis Mayfield hit–put me in a great mode for the rest of the day, if not the week. What a voice!

Finally, if this doesn’t immediately make you stand up and shake that thang, head to the ER, cuz you probably dead!

April Jobs: More moderate than strong, with no wage acceleration.

May 4th, 2018 at 9:30 am

Today’s employment report revealed labor market gains that were more moderate than strong. The unemployment rate fell to 3.9%, an 18-year low, but this was mostly due to a tick down in the labor force. Employment gains, at 164,000, came in slightly below expectations for 190,000, though the prior two months’ gains were revised up by a cumulative 30,000. Wages grew 2.6% for the third month in a row; this continued lack of acceleration is one indicator that some labor market slack remains.

That said, the labor market is still clearly closing in on full employment with sizable, steady month gains. To boost the signal-to-noise ratio in these noisy monthly data, our smoother shows average monthly gains over 3, 6, and 12-month periods. These are all clocking in at around 200,000, which should be enough to continue pushing down the jobless rate.

The wage story told by these monthly reports continues to underwhelm. Despite persistently low unemployment, as the figure below reveals, wage growth on a yearly basis, before inflation, has been stuck in the mid-2’s for about two years. In a truly tight labor market, more wage pressure would be visible in this series, the inverse of the sharp decline in wage growth during and after the downturn.

To be clear, recessions typically whack nominal wage growth more sharply than recoveries boost them: nominal wages take the elevator down and the stairs up. But the gradual gains in 2015-16, from about 2% to 2.5% ceased around mid-2016, even as the job market clearly tightened further. Other dynamics are in play here, including people entering and leaving the job market (lower-wage workers coming into the job market can reduce the pace of wage gains); some other series show better wage outcomes than this one. But even given these considerations, this indicator should definitely be taken as a signal that some slack still exists in the job market.

It is also worth noting that consumer inflation has been running just slightly below this level (2.4%, year-over-year, in March), meaning paychecks are running just slightly ahead of price growth.

Those of us who’ve argued that slack still remains in the US job market tend to focus on the employment rates–share of the population with jobs–of prime-age (PA: 25-54) persons. In my monthly reports, I’ve emphasized that this group has pretty consistently been clawing back their losses since the last recession. Though this rate was unchanged in April, holding at 79.2%, since the downturn, it has climbed significantly. The PA employment rate fell 5.5 percentage points in and after the recession, but as the figure below shows, they’ve clawed back 4.4 percentage points of that loss, or 80%. For men, the comparable percentage point loss was 7.6; they’ve made back 5.9 points, or 78%; prime-age women lost 4.1 points and have made back 3.5 points, or 85%.

This implies some potential extra labor supply to be pulled into the job market. There is, however, the caveat that some of these workers face significant barriers to joining even a pretty hot job market, including health/skill deficits, criminal records, and long periods of joblessness. Others dwell in areas where job availability is still too low. So, along with continued tightening of the job market, other interventions, including training, apprenticeships, and direct job creation, will be needed to help them overcome these barriers.

Turning briefly to sectors, manufacturing employment posted solid gains of 24,000 in April, mostly in the higher paying durable goods part of the industry.  According to BLS, “Over the past 12 months, manufacturing has added 245,000 jobs, with about three-fourths of the growth in durable goods industries.” Since these solid gains in an important industry partially relate to exports, they underscore the importance of avoiding unnecessary disruptions in our trading regime.

Other services, including office work and health care, continue to post moderate to solid gains, but retail jobs continue to struggle due to competition with online sellers. Retail stores added just 2,000 jobs last month and only 72,000 over the past year, a gain of just 0.4%. In comparable periods of previous expansions, retail jobs typically grew 1-2 percent.

Finally, the Federal Reserve is, of course, closely scrutinizing these data for guidance as to the pace of their rate hike, or “normalization,” campaign. As the figure below shows, unemployment has long been below their target/”natural” rate. The figure also plots their preferred inflation measure which has tilted up of late and is just about at their 2% target. However, this target is a symmetrical one and the fact that they’ve been below for almost every month in the graph, along with the stable wage growth results discussed above, argues for patience.

The job market remains solid, and while this report was more moderate than strong, this is to be expected as we close in on full employment. We’re testing, to some degree, the extent of slack left out there in the US job market. However, as long as price growth remains around 2% and wage growth is not accelerating, our best play by far, on behalf of working Americans, is to let this experiment continue.