Three Pictures from the Job Market

April 8th, 2014 at 10:34 am

Over at the NYT Economix blog: the flow point I made earlier here at OTE, getting back to ground zero on private sector jobs is not much to crow about, and sure, there’s a bit of wage growth, but nothing to get all wound up about, inflation-wise.

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12 comments in reply to "Three Pictures from the Job Market"

  1. Robert Buttons says:

    Reversing the Shrinking Labor Force – By terminating extended unemployment, we have already seen a reversal in the downward trend of participation rates.

    Increasing Job Growth – Two problems here: 1. Regulatory uncertainty. ie. Why do Obamacare rules change on a weekly basis? 2. ZIRP is allowing for increasing profits via financialization. A normal interest rate policy would promote Capex.

    Raising Wages- Cutting the payroll tax is an option. But if the fed pursued DEFLATIONARY measures, real wages would automatically rise.

    • Tom in MN says:

      We are coming out of a recession caused by too much consumer debt and you propose deflation? See

      • Robert Buttons says:

        1. “First, when people expect that prices will be lower in the future, they spend less today. ”
        Myth. People line up for iphones today when they know they will be cheaper in 6mo. Further, if it were true, as you say, we have too much debt and we need less spending and more savings.
        2.”Second, deflation raises the inflation-adjusted interest rate.”
        Myth. In a deflationary environment, nominal interest rates will fall, just like they tend to soar when high future inflation is expected.

        The deflation phobia (poplithorismosphobia) is based on a single data point, namely Friedman’s review of the Great Depression.

  2. Tom in MN says:

    So this post:

    says a WSJ plot showing 7M missing jobs is nonsense, which I would tend to believe about the WSJ, but you have the same type of plot and conclusion. Can you explain what the issue is here?

  3. Larry Signor says:

    Glad to see someone not buying the “everything is wonderful” meme. We may have disposed of the debris, but we haven’t begun to rebuild the burnt out house.

    Just a note to Robert Buttons: 1. Deflation would also increase the real cost of fixed rate debt and decrease the collateral wealth securing much of it. Sounds like contractionary policy to me, like letting the air out of a basketball…
    2. about the decline in EPOP and starving the unemployed, correlation is not causation.
    3.Why would institutions receiving 0.25% interest want to alter their investment strategy if they were earning 3-4% returns? Why would they decide to roll-over into Cap-ex rather than earn 12-16 times the present return from safe havens? There is no justification for terminating ZIRP right now. That would merely be enhancing corporate welfare.

    • Robert Buttons says:

      1. I’m glad you agree our economy is based on debt collateralized by bubble assets. Now we can set out a plan to fix it.
      2. It’s economics, not physics. correlation is all we’ve got.
      3. Corporations are using the cheap money to fund dividends, buybacks and M&A to falsely elevate their metrics. If capital was more dear, they would deploy it to actually create real goods and services. Interest rates are at record lows and corporate profits are at record highs. I know it’s just correlation……

      • Larry Signor says:

        One must remember we are in a demand constrained situation. This changes many “normal” business metrics. Asset valuation is very time and event influenced. This makes it difficult for responsible policy makers to declare the existence of many bubbles until they explode. Jared warned us off these times in 2006, a fabulous piece that is worth a re-read:

        And, you are right…correlation is something important.

        • Robert Buttons says:

          We are not in any type of low demand period. Personal consumption expenditure is at a record, Equities valuations (equities demands) are near record. Bond yields are near record lows (increased demand).

  4. Perplexed says:

    From a very recent OTE post:
    -“The root of the problem, and why I connected it with the waiter, is the passivity in the language. “The budget is on an unsustainable path.” “The entitlements are going to bankrupt us.” “The national debt will swallow everything.”

    But economists are exempt from these “linguistic” restrictions right? They are free to discuss “labor markets” when the term itself is any oxymoron? As Roger Farmer recently suggested: “Labor markets don’t don’t clear, let’s stop pretending that they do.” (

    We will never get to the “root” of this problem if we don’t stop pretending we’re dealing with markets rather than cartels. The question at this point is whether that is a bug or feature from the standpoint of economic “science.” The 100 year old Clayton Act continues to protect these cartels as intended and prevent those supplying “labor” from pooling their risk and achieving the bargaining power they would otherwise have under equal protection of anti-trust laws. A recent study by Northwestern’s Robert Gordon demonstrates just how effective these cartels have gotten at defining the “marketplace” to include only cartel members and how including data from the groups rejected by the cartels is so obscuring the results that they need to be removed from the data now to see the Phillips Curve. ( Maybe its time for equal protection and real markets instead of economists trying to solve problems of their own making. The only thing we stand to lose is the ability of employers to overpower and coerce at-will employees.

    • Larry Signor says:

      Now, I am perplexed. Most forward looking economists (read Keynesians) are advocating for a more equal labor/management/capital structure and enhanced oversight of publicly held corporations, especially the financial sector. Whom, may I ask will lead this discussion, if not economic scientists? Um, the Phillips Curve? Really??

      • Perplexed says:

        -“Most forward looking economists (read Keynesians) are advocating for a more equal labor/management/capital structure and enhanced oversight of publicly held corporations…”

        If this were true, why would they support exempting “labor” from protections against anti trust? You don’t empower labor by taking away their protections, you empower employers. You also undermine the ability of those supplying labor to pool their risk of being unemployed – a good analogy would be if automobile drivers were forced to drive without access to car insurance, each driver would be required to bear the entire risk instead of pooling the risk through insurance. And this is “advocating for a more equal labor/management/capital structure”? I’m not seeing how anyone would believe this to be true, even economists.

  5. smith says:

    Doesn’t the graph showing 4% nominal wage growth with 2.5% inflation pre 2007 mean we’d like to see those numbers again. Won’t a 2% inflation target kill the idea of ever getting close to that wage growth and associated full employment level?

    “Why it’s taking so much longer to regain lost jobs — why today’s recoveries tend to start out “jobless” — is another important question, beyond my present scope”
    1. Debt overhang of consumers, includes mortgages, consumer credit, student loans. If a recession is marked by business failures, businesses go bankrupt, people lose jobs, recession. Eventually expansion creates virtuous cycle, new jobs for the unemployed who spend. Doesn’t happen with debt overhang, aggravated by important changes to personal bankruptcy law in 2005, usurious interest rates from national banks since 1978, and student loans (see again 2005 law and tuition explosion).
    2. Ever since the 1990’s, the mantra of business was respond to weak sales by cutting costs, downsize, outsource, relocate, automate. Weakened labor is pummeled further in a recession because the bargaining position is weak even before the recession. In fact, business benefits from weaker labor costs offsetting the lower sales. Business sees the benefit of a jobless recovery (see also closely related 4. Inequality)
    3. Service economy can easily do with less employees without losing sales. Just as Keynes said bury money in mines and pay workers to dig it up, that’s what many workers do already, make work in an office writing memos, making reports, studying markets. Unlike the days of the factory or mine, production can be sustained with less workers.
    4. Inequality is also a key, if more income goes to the 1%, through jobs they don’t lose, but especially through dividends and capital gains they enjoy, then GDP is sustained with no job recovery needed.

    Not to be snarky, but this does not take a genius to figure out.

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