The Labor Market

1. The Labor Market “the unemployment rate is only the beginning of the problem”

2. The labor market The labor market is an enormously important market, and many of you in the beginning had concerns about some of the measures of performance in that market. High on that list was the unemployment rate, and we’ll certainly look at that as well as employment and earnings data. We’ll start with some information on demographics – a real driver of the labor market and the overall economy. Demographics used to be as exciting as watching grass grow, but now we use terms like tectonic plates, tsunami, and seismic when describing it. This is also a topic some of you mentioned in the opening postings. We’ll start with some headlines that contain some of the stats we will be looking at here.

3. In the news: The labor market “Did we drop the ball on unemployment?” “More jobs predicted for machines, not people” “The collapse of manufacturing” “Out of a job and no longer looking” “The number of those working past 65 is at a record high” “Teenage jobless rate reaches record high” “In Spain, jobless find a refuge off the books” “The recession was sexist (so is the recovery)” “Skills shortages are getting worse as youth unemployment reaches record highs” “In wreckage of lost jobs, lost power” “median earnings for prime-age (25-64) working men have declined slightly from 1970 to 2010, falling by 4 percent after adjusting for inflation.”

4. Demographics Back in the 18th century Thomas Malthus warned us about demographic growth, but concern over it largely disappeared until the 1960s and 1970s during rising concern over the environment and the carrying capacity of the world. China’s one-child policy is an extreme example of population “management,” but so is US immigration policy. Here we will look at the drivers of demographic change that are set to dramatically change the world in which we live.

5. Demographic Drivers of change Births / deaths (fertility / mortality / life expectancy) Immigration Labor force participation

6. Fertility rate Do you know what that is? What happened over here? And here? Population Reference Bureau

7. Fertility rate Those boomers The pill arrives Abortion legalized Population Reference Bureau

8. What does the next 6 graphs tell us about changes in families between those boomers and your generation – and what does it tell us about the future population?

11. Life Expectancy: by Race & Gender

14. We can see a sharp drop in birth and fertility rates that will slow down the population growth in upcoming years, although differential growth rates will reduce the share of the population that is white. This is the problem facing the Republican Party after the last election: they appeal to an increasingly small part of the population. So watch out to see what happens with the immigration bill, and you can see in the two graphs why we are seeing so much debate on he topic. We are approaching immigration levels not seen since the turn of the last century during the industrial revolution, and then we shut off migration and imposed Prohibition to limit the bad behaviors those immigrants brought with them. And check out those boomers who keep getting older plus the increasing life expectancy. Some of the impact can be seen in the following graphs – and do not forget to look at RI.

15. Implications of Demographic Drivers Population growth Population composition Age Race & ethnicity

16. US Population Projection In thousands

17. US Census: Constant Net Immigration

18. Troubling!

19. Scary!

20. 2010 2010-2030 US Census: Constant Net Immigration

21. International Comparisons Is the US “different?”

22. Why is the US so different from the other rich countries – and what are some of the implications?

23. Population pyramids are good ways to look at the age composition of the population. What do these tell us about the US, China, Japan, Afghanistan, and South Korea?

33. Here are a couple of observations. • Afghanistanis different. This is a typical profile of a poor country with high birth rates, and it gives us countries that are essentially countries of children. About 46% of Afghanistan’s population is age 0-14. • China is different too. It is aging rapidly, but it will be doing it before it is rich. China looks like other rich countries, except it is poor (per capita GDP). Part of this is China’s one-child policy. • All of the rich countries are aging rapidly, although the US is aging slower. The aging problem is most severe in East Asia – look at Japan and South Korea.

34. Labor Market Now let’s look at the important measures of performance in the labor market. • Labor market measures • Measures of Quantity (Q = labor force, employment) • Measures of Price (P = earnings / wages) • Measure of disequilibrium (unemployment) • Limitations of measures • What’s missing inthe numbers • Track record • Trends • Cycles U* P =W Headlines P* Q* Q = E

35. Important labor market concepts: Based on monthly BLS survey • Civilian population (16+) = Labor Force + Not in Labor Force • Labor Force = Employed + Unemployed • Labor Force Participation Rate = Labor Force/Civilian Population 16+ • Unemployment Rate = Unemployed/Labor Force • Employment population ratio = Employed / Population

36. What do you see? You will now see a collection of graphs that “capture” some of the major features of the labor market. I suggest getting out that pad again and working through each graph and take note of any trends, cyclical properties, and what is different or distinctive about the Great Recession.

37. Labor force participation rates: What percentage of the population decides to join the labor market? Trends – the gender differences and the long term Cycles – the “mancession” and behavior over the business cycle Differences: race & ethnicity, age, gender Take out that pad and jot down what you see in these labor market graphs

38. What has been the long term trend, and what is behind the decline in the 2000s?

39. What about the gender differences? What is behind these and what is the implication?

40. The end of men? • “It’s a first order mystery for social scientists, why women have more clearly heard the message that the economy has changed and men have such a hard time hearing it or responding. … • census data showing that in most of the United States, young, single, childless women in their 20s working full time have a higher median income than equivalent young men.”“Who wears the pants in this economy?,” NYT, 2012

41. Employment: Where the jobs are Trends Cycles Structural change

42. Long-term employment growth Recessions shaded

43. The 2000s do not look so good here

44. Where are the jobs?

45. Where are the jobswithin services?

49. What does this tell you about the future of the labor market and those ECN tests?

50. Unemployment: Who wants to work and can’t “Politics” of unemployment rate Trends Cycles Limitations of measure and alternative unemployment rate measures Composition of unemployment (gender, age, education, race & ethnicity, location, industry, occupation, duration)