Since the most recent Financial Crisis, government entities have struggled to understand why the unemployment numbers have been so slow to recover. The Federal Reserve will tell you it is because of contractionary fiscal policy. Policy makers don't have a clue and most Americans blame the top 1%, but my personal belief has been that, as a country, we are experiencing a period of adjustment. The structure of our economy is changing. This article from the Huffington Post about November job growth gives some insight as to how.
Author Josh Boak looks at 5 trends in our current economy affecting job creation and employment. He does not explicitly agree with the opinions I shared above, but much of what he says seems to agree. The 5 trends are: Holiday Shopping, Death of Factories Greatly Exaggerated, Grayer Workers, Stagnant Pay at the Bottom, and Long-Term Unemployed. A quick overview is as follows: Holiday Shopping always causes a bump in the employment numbers, but this year it's not in retail. Shipping and distribution firms added nearly 20% more jobs than brick-and-mortar retailers did. Online shopping is changing the mix. Death of Factories is Greatly Exaggerated points out that factories are hiring and have once again cracked 2009 employment levels. The average factory worker is averaging over 4 hours of overtime per week. Grayer Workers (65 and older) experience unemployment of only 4.7% whereas unemployment for adults in general is at 7%. Since November 2012, the number of senior citizens seeking or holding jobs has increased by half a million. Stagnant Pay at the Bottom is occurring mostly in the hospitality industry. Restaurants and Hotels have accounted for 16% of new job creation in the last year, but have only had to raise wages by 15 cents an hour to do so. Leisure sectors have actually experienced a pay decrease of 3 cents per hour. Finally, Long-term Unemployed (half a year or more) are having a harder time finding a job than those that have been out of job for a shorter period. Firms seem hesitant to hire those without recent work experience.
Although job creation is occurring, it's a little different from what what many expect. Some industries decline as others thrive. The demographics in the work force are changing. Those hurting the most are having the hardest time finding a job. Any adjustment comes with growing pains and this one is no different.
2 comments:
Ryan Horlacher: 100/100
Another macro post: what's with you folks this semester? I'm a macroeconomist, and glad to write about this ... but it's a ManEc class!
From the first paragraph, I haven't heard anyone in the Fed blame contractionary fiscal policy. Having said that, it's not the dumbest idea out there. Traditional Keynesian theory argues that the only part of fiscal policy that makes a difference is the actual buying of goods and services. The rest is just receiving and sending checks, and is a wash. If you look at the expansion in government outlays under Obama, it is all in the check-writing. The actual amount spend on goods and services is down. So it's a defendable position that the president currently associated with expansionary fiscal policy is actually doing the opposite.
In the second paragraph, I think the second, third, and fifth points are important (and related to each other). More on this later.
The first point is that the mix of holiday employment is changing. I think this is unimportant: the data we get are seasonally adjusted to remove just this sort of pattern.
The fourth point is that wages are low in the leisure sector. They always have been, so no news there.
Now, back to those other three points: factories are back, seniors are working more, and the long-term unemployed are not. Believe it or not, for the vast majority of the population, the job market has been back to normal for almost 4 years now. How is that possible? Well, more than in other recessions, the economy has cut some people loose as unemployable. On an individual basis, that may or may not be true. But the averages in the data are consistent with firms choosing people who will do the work, and giving them extra ... and not bothering at all with the people who can't do the work. The disenfranchisement of these people is a fact, but we don't have a solid theory for why it's happened in such an exaggerated way this time around.
In the Federal Reserve class with Berri, we had representatives from the San Francisco Fed come and present to us. They estimated that had Fiscal Policy been neutral instead of counter productive, GDP would have grown by an additional one percent this year.
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