tag:blogger.com,1999:blog-2499715909956774229.post1049613760990201986..comments2024-03-22T22:37:02.639-07:00Comments on Stephen Williamson: New Monetarist Economics: The State of the Labor Market in the U.S.Stephen Williamsonhttp://www.blogger.com/profile/01434465858419028592noreply@blogger.comBlogger19125tag:blogger.com,1999:blog-2499715909956774229.post-73121558414595429652015-08-22T06:04:29.255-07:002015-08-22T06:04:29.255-07:00Thanks for sticking with this & your replies.Thanks for sticking with this & your replies.MaxSpeakhttps://www.blogger.com/profile/08594964334301228571noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-12034881228032286212015-08-21T11:55:19.519-07:002015-08-21T11:55:19.519-07:00For sure.For sure.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-35548949084980028352015-08-21T10:47:59.122-07:002015-08-21T10:47:59.122-07:00Right. But that still leaves open the source of th...Right. But that still leaves open the source of the trend change after 2000.MaxSpeakhttps://www.blogger.com/profile/08594964334301228571noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-91896366048032570072015-08-20T04:59:22.095-07:002015-08-20T04:59:22.095-07:00Well, notice that epop had already declined somewh...Well, notice that epop had already declined somewhat from 2000-2003, then it goes up somewhat during the housing boom. So the incentive-problem-driven housing boom could be masking a long-run trend. You would have to do the empirical work to determine what is important, but as economists we know a lot about the determinants of labor supply - demographics, fertility, social programs, taxation, human capital accumulation, etc. You could speculate, and the Canadian evidence gives you something to go on. Keynesian economics doesn't tell us everything we need to know about the workings of the labor market, right?Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-22391016368385823322015-08-19T18:40:49.713-07:002015-08-19T18:40:49.713-07:00If it isn't short term factors, than what coul...If it isn't short term factors, than what could it be that coincidentally took hold after the shock to keep EPOP depressed?MaxSpeakhttps://www.blogger.com/profile/08594964334301228571noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-29952752518748646462015-08-19T13:06:14.857-07:002015-08-19T13:06:14.857-07:00"It just seems obvious that a reduced EPOP fo..."It just seems obvious that a reduced EPOP for people ordinarily expected to work (prime age in particular) signals inadequate labor demand, due to inadequate consumer (and government) consumption."<br /><br />This would only be obvious if you think that EPOP can only fall due to "inadequate demand." What I think you mean is that there are sticky wages and prices, and this can lead to inefficiencies in the labor market when there are aggregate shocks to the economy. So, suppose I accept that. Then, there was a large aggregate shock that occurred - the financial crisis - and we are still seeing its effects. But why would wages and prices not adjust to the shock within a seven-year time span? What I see in the labor market is that most features of the labor market have adjusted to the shock - the unemployment rate has fallen substantially, vacancies are high, and most flows look like they did before the crisis. But epop is still low. Thus, it seems to me that we shouldn't be looking for short-run factors - e.g. relative price inefficiencies - to explain what is going on with epop, and with labor force participation. Maybe I could even say this should be obvious.<br /><br />"You must know everybody and his uncle ascribe falling LFP in part to aging of the population."<br /><br />As I like to tell people, we don't do science by taking an opinion poll.<br />Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-89683415146331808422015-08-19T12:10:27.462-07:002015-08-19T12:10:27.462-07:00Well of course I don't know what's going o...Well of course I don't know what's going on, no sarcasm intended. It just seems obvious that a reduced EPOP for people ordinarily expected to work (prime age in particular) signals inadequate labor demand, due to inadequate consumer (and government) consumption. Maybe the answer is the jobless need to be willing to work for less. Even if that's true, the adjustment period at this point in the business cycle looks interminable, hence policy has been lacking.<br /><br />I wasn't aware of the Canadian counterpart, and it gives pause. You must know everybody and his uncle ascribe falling LFP in part to aging of the population.MaxSpeakhttps://www.blogger.com/profile/08594964334301228571noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-50997377056925941612015-08-16T11:15:55.649-07:002015-08-16T11:15:55.649-07:00"Of course the decline of the total EPOP refl..."Of course the decline of the total EPOP reflects aging of the population."<br /><br />But Canada has similar demographics, and didn't see a similar drop in EPOP. See this:<br /><br />http://newmonetarism.blogspot.com/2014/03/why-are-canadians-working-so-much-more.htmlStephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-85691078701046899912015-08-16T10:01:28.199-07:002015-08-16T10:01:28.199-07:00"Do you take it as a coincidence..."
Th..."Do you take it as a coincidence..."<br /><br />Those flow rates seem to move together, but they're not identical. Of course, in a steady state, inflows have to equal outflows for each state: NILF, employed, unemployed. Your observation might have some significance, but I can't think what it is off the top of my head.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-14915628524170466242015-08-16T09:52:39.368-07:002015-08-16T09:52:39.368-07:00You can see in the other chart that most of the fl...You can see in the other chart that most of the flow into employment from other states comes from NILF typically, but that flow fell during the recession. For example, suppose someone who is a student, or caring for children and chooses to enter the labor force. In good times they could go straight from NILF to employment, but in bad times they experience a period of unemployment before finding work, or maybe search for work and then leave the labor force again.Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-44354176156171734372015-08-16T09:46:44.294-07:002015-08-16T09:46:44.294-07:00Thanks. I think we think about this in different w...Thanks. I think we think about this in different ways. In the labor market, employment requires that a would-be worker and a firm come to an agreement about an employment contract - a stream of future compensation in exchange for agreed-upon hours of work. The firm would like to have a worker with all of the available skills in the world - a worker who can unplug the toilet, fend off internet hackers, manage many other workers, change the light bulbs, invent new stuff, etc.- Also, the firm would like this worker to put in unlimited hours, and do it for nothing. The would-be worker would like to work zero hours for an enormous salary. Obviously, the would-be workers and firms have to meet somewhere in the middle.<br /><br />What will determine successful matches? On the firm's side, the firm has particular skill requirements that are determined by the available technology. On the would-be worker's side, the worker has particular skills, determined by his or her choices and resources, and he or she has alternatives, determined by social assistance (social security, disability, welfare, UI) and by decisions about fertility and child care, the value of leisure, etc.<br /><br />So, in general, I think you're more interested in the labor force participation rate than epop. Labor force participation would be determined by all of the things that I mentioned above. If a would-be worker has skills that have a low value in the market, for example, maybe that person chooses NILF.<br /><br />But there is something else - frictions that might throw sand in the gears, so that would-be workers and firms have trouble coming to an agreement. Some people think that labor market participants get the prices wrong, and it's often argued that this is important. We also might think that a low labor force participation rate reflects underfunding of public education, which leads to underskilled segments of the population which are chronically underemployed.<br /><br />So we can certainly think of inefficiencies that could lead to a low labor force participation rate. What do you think is going on?Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-84673962312216397072015-08-16T08:59:12.043-07:002015-08-16T08:59:12.043-07:00This comment has been removed by the author.MaxSpeakhttps://www.blogger.com/profile/08594964334301228571noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-84832120855510020732015-08-16T08:46:11.429-07:002015-08-16T08:46:11.429-07:00This comment has been removed by the author.MaxSpeakhttps://www.blogger.com/profile/08594964334301228571noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-16750594088965884882015-08-16T08:41:57.745-07:002015-08-16T08:41:57.745-07:00More people available for work at prevailing wages...More people available for work at prevailing wages not reflected in LFP numerator. A.K.A. the involuntarily unemployed.MaxSpeakhttps://www.blogger.com/profile/08594964334301228571noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-7482823562862062922015-08-16T08:35:32.754-07:002015-08-16T08:35:32.754-07:00"... indicates more slack in the labor market..."... indicates more slack in the labor market..."<br /><br />In this case, what do you mean by "slack?"Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-80368193106410494362015-08-16T08:33:18.875-07:002015-08-16T08:33:18.875-07:00A couple questions:
Why would NILF to unemployed ...A couple questions:<br /><br />Why would NILF to unemployed flow start increasing right from the start of the recession?<br /><br />Do you take it as a coincidence that the flow rate of unemployed to employed and the flow rate of NILF to unemployed are about the same? (about .9 or have I misunderstood the units?) Is there some equilibrium condition that would be drivig this?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-40467142265010447042015-08-16T07:18:50.575-07:002015-08-16T07:18:50.575-07:00I would have thought the depth of the prime-age EP...I would have thought the depth of the prime-age EPOP relastive to 2000 that you didn't show indicates more slack in the labor market than your summation suggests. Of course the decline of the total EPOP reflects aging of the population.MaxSpeakhttps://www.blogger.com/profile/08594964334301228571noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-51602959023245417602015-08-16T06:00:41.893-07:002015-08-16T06:00:41.893-07:00Yes, I wrote about this too:
http://newmonetarism...Yes, I wrote about this too:<br /><br />http://newmonetarism.blogspot.com/2012/06/beveridge-curve-and-long-term.html<br /><br />But I was looking at the Beveridge curve in the 6th chart, and the shift doesn't seem to be going away as the percentage of long-term unemployed declines. So, I'm not so sure. Looking at the insured population doesn't just take out the long-term unemployed - it also takes out the people who transit from NILF to unemployed. In the flow data you can see that the latter is actually the majority of newly unemployed.<br /><br />Stephen Williamsonhttps://www.blogger.com/profile/01434465858419028592noreply@blogger.comtag:blogger.com,1999:blog-2499715909956774229.post-35159595378382480592015-08-15T20:20:30.808-07:002015-08-15T20:20:30.808-07:00Re: the Beveridge curve, see
http://www.bostonfe...Re: the Beveridge curve, see <br /><br />http://www.bostonfed.org/economic/ppb/2012/ppb123.htm<br /><br />The shift is due to long-term unemployed. This explains the stability of the insured rate curve.Alexnoreply@blogger.com