New Trade Agreements will Take Center Stage in 2015. So Will Bad Arguments Made on their Behalf.
Next year, we are going to see lots of debate over trade policy. And, like clockwork, when trade policy rises to the top of policy debate, lots of bad arguments start getting thrown around on behalf of more trade agreements. Ed Gresser submits the latest round of bad ones in a paper released last week.
Gresser goes wrong out of the gate by implying very strongly that inequality is irrelevant to the living standards of low and moderate-income households. In his own words he argues:
“But “growing apart” [editor’s note: this means the rise in inequality] appears to be a phenomenon in which wealthy people rise fastest, not one in which they rise while the middle class and poor lose ground. Americans have actually grown more affluent at all income levels.”
This implicit claim is deeply wrong—the rise of inequality over the past generation has in fact been the primary drag on living standards growth for low- and moderate-income families. Gresser arrives at his irrelevance conclusion by essentially noting that cumulative income growth for low- and moderate-income households has exceeded zero over multiple decades. Well, congratulations to us, I guess. But very few countries outside of maybe North Korea have ever posted negative income growth over decades for the majority of their population.
It’s especially ironic to get this interpretation of rising inequality wrong when discussing its with expanded trade. The standard trade theory that links falling trade costs and rising inequality in rich countries like the United States is clear that this rise in inequality is accompanied by absolute (not just relative) income declines felt by the losing group. In the United States, the losing group is generally proxied by either production and nonsupervisory labor, or workers without a college degree—in either case the majority of the workforce. And while these trade-induced losses (which I estimated to be roughly $1,800 annually for a full-time worker without a college degree) do not explain all, or even the majority, of the rise in inequality over the past generation, they’re not trivial. Gresser claims to have cast doubt on these results (which are based on off-the-shelf standard trade models), but as I’ll show below, his analysis of them is completely irrelevant.
Recovery Is Nowhere Near Accomplished, and the Fed Shouldn’t Tighten Policy Until It Is
What follows are lightly edited remarks made by EPI Research and Policy Director Josh Bivens at a Dec. 9 event—Managing the Economy: The Federal Reserve, Wall Street, and Main Street—sponsored by EPI, Americans for Financial Reform, and the Roosevelt Institute Project on Financialization. Sen. Elizabeth Warren and Paul Krugman were the event’s featured speakers.
The event examined key policy questions facing the Federal Reserve in coming years. Bivens’s remarks focused on the need for monetary policy to allow a genuine recovery to happen, and argued that fears over coming inflation should not persuade the Fed to hike short-term interest rates before a full recovery is achieved.
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I’ll begin by trying to frame why we think the topics being addressed by today’s panels and speakers are so important.
They’re important first because the economy remains far from fully recovered from the Great Recession. In fact, even after last month’s excellent jobs report, we’re still only about halfway recovered in terms of employment conditions, evidenced in the figure below simply by the share of adults between the ages of 25 and 54 with a job. If I had to pick one desert-island measure of labor market slack, this one seems pretty good to me.
Congress Again Rewards Tax Dodgers with a Tax Cut
Congress has agreed to reduce the Internal Revenue Service’s fiscal year 2015 budget by about 3 percent (from almost $11.3 billion in fy2014 to $10.9 billion), with over half coming from the enforcement budget. The reduction is even larger after adjusting for inflation (almost 5 percent). This is just the latest IRS budget reduction; in inflation-adjusted terms the IRS budget has been cut by almost 18 percent since 2010.
Interestingly, earlier this week the IRS Oversight Board released the results from a survey of public attitudes on the IRS. Overall, the public appears to be satisfied with their personal interactions with the IRS—74 percent are either very or somewhat satisfied. Only 61 percent of respondents (still a majority) trust the IRS to fairly enforce the tax laws, and this number could plausibly be depressed as a result of the House GOP hearings on the possible IRS mishandling of some tax-exemption applications from conservative groups.
Two other results from the survey are notable (to me at least). First, 86 percent of respondents think it is unacceptable to cheat on their income taxes. Second, 56 percent agree that the IRS should receive extra funding to enforce the tax laws. Most Americans think it is wrong to cheat on taxes and are willing to pay a little more to catch the tax cheats, which brings me back to the IRS budget.
Most of the IRS budget is devoted to helping taxpayers with tax forms, catching honest mistakes by taxpayers, and catching tax cheats. Over the past few years, IRS’s enforcement actions have brought in about an additional $50 billion per year (this is above the $1.6 trillion collected in income taxes); this figure works out to about $10.60 in additional collections per enforcement budget dollar spent for the IRS (the average over several years).
If a $1 budget reduction yields a $10.60 reduction in enforcement collections, then the $191 million reduction in the IRS enforcement budget could prove to be a $2 billion tax cut for tax cheats. There appears to be a disconnect between what Congress enacts and what the American public wants.
Still No Skills Mismatch in the Economy: The Number of Unemployed Exceeds the Number of Available Jobs Across All Sectors
The figure below shows the number of unemployed workers and the number of job openings in October, by industry. This figure is useful for diagnosing what’s behind our sustained high unemployment. If today’s labor market woes were the result of skills shortages or mismatches, we would expect to see some sectors where there are more unemployed workers than job openings, and others where there are more job openings than unemployed workers. What we find, however, is that unemployed workers exceed jobs openings across the board.
Some sectors have been closing the gap faster than others. Health care and social assistance, which has been consistently adding jobs throughout the business cycle, has a ratio quickly approaching 1-to-1. On the other end of the spectrum, there are 6.2 unemployed construction workers for every job opening. Removing those two extremes, there are between 1.1 and 3.1 as many unemployed workers as job openings in every other industry. This demonstrates that the main problem in the labor market is a broad-based lack of demand for workers—not, as is often claimed, available workers lacking the skills needed for the sectors with job openings.
Unemployed and job openings, by industry (in millions)
| Industry | Unemployed | Job openings |
|---|---|---|
| Professional and business services | 1.1213 | 0.8374 |
| Health care and social assistance | 0.7088 | 0.6926 |
| Retail trade | 1.1393 | 0.4738 |
| Accommodation and food services | 0.9668 | 0.5724 |
| Government | 0.6862 | 0.4281 |
| Finance and insurance | 0.2670 | 0.2235 |
| Durable goods manufacturing | 0.4880 | 0.1769 |
| Other services | 0.3863 | 0.1449 |
| Wholesale trade | 0.1660 | 0.1503 |
| Transportation, warehousing, and utilities | 0.3743 | 0.1638 |
| Information | 0.1521 | 0.1005 |
| Construction | 0.7917 | 0.1273 |
| Nondurable goods manufacturing | 0.3168 | 0.1076 |
| Educational services | 0.2259 | 0.0779 |
| Real estate and rental and leasing | 0.1182 | 0.0540 |
| Arts, entertainment, and recreation | 0.2227 | 0.0726 |
| Mining and logging | 0.0546 | 0.0285 |
Note: Because the data are not seasonally adjusted, these are 12-month averages, September 2013–August 2014.
Source: EPI analysis of data from the Job Openings and Labor Turnover Survey and the Current Population Survey
Little Change in the Job Openings Data for October 2014
After a larger than usual uptick in September, the quits rate fell slightly in October, while the hires and layoffs rates continued to hold steady, according the October Job Openings and Labor Turnover Survey (JOLTS)
The figure below shows the hires rate, the quits rate, and the layoffs rate. Layoffs, which shot up during the recession, recovered quickly once the recession officially ended—they’ve been at prerecession levels for more than three years. This makes sense. The economy is in a recovery and businesses are no longer shedding workers at an elevated rate. The fact that this trend continued in October is a good sign.
But not only do layoffs need to come down before we see a full recovery in the labor market, hiring needs to pick up. While the hires rate has been generally improving, it’s still well below its prerecession level.
Meanwhile, the voluntary quits rate, which has been flat since February (1.8 percent), saw a modest spike up in September to 2.0 percent, then fell to 1.9 percent in October. The overall trend in the recovery has been positive. A larger number of people voluntarily quitting their job indicates a labor market in which hiring is prevalent and workers are able to leave jobs that are not right for them, and find new ones. While there was a drop in October, these series are somewhat volatile and one should not rely too much on a one-month trend.
There are still 5.6 percent fewer voluntary quits each month than there were in 2007, before the recession began. A return to pre-recession levels of in voluntary quits would indicate that fewer workers are locked into jobs they would leave if they could.
Hires, quits, and layoff rates, December 2000–October 2014
| Month | Hires rate | Layoffs rate | Quits rate |
|---|---|---|---|
| Dec-2000 | 4.1% | 1.4% | 2.3% |
| Jan-2001 | 4.4% | 1.6% | 2.6% |
| Feb-2001 | 4.1% | 1.4% | 2.5% |
| Mar-2001 | 4.2% | 1.6% | 2.4% |
| Apr-2001 | 4.0% | 1.5% | 2.4% |
| May-2001 | 4.0% | 1.5% | 2.4% |
| Jun-2001 | 3.8% | 1.5% | 2.3% |
| Jul-2001 | 3.9% | 1.5% | 2.2% |
| Aug-2001 | 3.8% | 1.4% | 2.1% |
| Sep-2001 | 3.8% | 1.6% | 2.1% |
| Oct-2001 | 3.8% | 1.7% | 2.2% |
| Nov-2001 | 3.7% | 1.6% | 2.0% |
| Dec-2001 | 3.7% | 1.4% | 2.0% |
| Jan-2002 | 3.7% | 1.4% | 2.2% |
| Feb-2002 | 3.7% | 1.5% | 2.0% |
| Mar-2002 | 3.5% | 1.4% | 1.9% |
| Apr-2002 | 3.8% | 1.5% | 2.1% |
| May-2002 | 3.8% | 1.5% | 2.1% |
| Jun-2002 | 3.7% | 1.4% | 2.0% |
| Jul-2002 | 3.8% | 1.5% | 2.1% |
| Aug-2002 | 3.7% | 1.4% | 2.0% |
| Sep-2002 | 3.7% | 1.4% | 2.0% |
| Oct-2002 | 3.7% | 1.4% | 2.0% |
| Nov-2002 | 3.8% | 1.5% | 1.9% |
| Dec-2002 | 3.8% | 1.5% | 2.0% |
| Jan-2003 | 3.8% | 1.5% | 1.9% |
| Feb-2003 | 3.6% | 1.5% | 1.9% |
| Mar-2003 | 3.4% | 1.4% | 1.9% |
| Apr-2003 | 3.6% | 1.6% | 1.8% |
| May-2003 | 3.5% | 1.5% | 1.8% |
| Jun-2003 | 3.7% | 1.6% | 1.8% |
| Jul-2003 | 3.6% | 1.6% | 1.8% |
| Aug-2003 | 3.6% | 1.5% | 1.8% |
| Sep-2003 | 3.7% | 1.5% | 1.9% |
| Oct-2003 | 3.8% | 1.4% | 1.9% |
| Nov-2003 | 3.6% | 1.4% | 1.9% |
| Dec-2003 | 3.8% | 1.5% | 1.9% |
| Jan-2004 | 3.7% | 1.5% | 1.9% |
| Feb-2004 | 3.6% | 1.4% | 1.9% |
| Mar-2004 | 3.9% | 1.4% | 2.0% |
| Apr-2004 | 3.9% | 1.5% | 2.0% |
| May-2004 | 3.8% | 1.4% | 1.9% |
| Jun-2004 | 3.8% | 1.4% | 2.0% |
| Jul-2004 | 3.7% | 1.4% | 2.0% |
| Aug-2004 | 3.9% | 1.5% | 2.0% |
| Sep-2004 | 3.8% | 1.4% | 2.0% |
| Oct-2004 | 3.9% | 1.4% | 2.0% |
| Nov-2004 | 3.9% | 1.5% | 2.1% |
| Dec-2004 | 4.0% | 1.5% | 2.1% |
| Jan-2005 | 3.9% | 1.4% | 2.1% |
| Feb-2005 | 3.9% | 1.4% | 2.0% |
| Mar-2005 | 3.9% | 1.5% | 2.1% |
| Apr-2005 | 4.0% | 1.4% | 2.1% |
| May-2005 | 3.9% | 1.4% | 2.1% |
| Jun-2005 | 3.9% | 1.5% | 2.1% |
| Jul-2005 | 3.9% | 1.4% | 2.0% |
| Aug-2005 | 4.0% | 1.4% | 2.2% |
| Sep-2005 | 4.0% | 1.4% | 2.3% |
| Oct-2005 | 3.8% | 1.3% | 2.2% |
| Nov-2005 | 3.9% | 1.2% | 2.2% |
| Dec-2005 | 3.7% | 1.3% | 2.1% |
| Jan-2006 | 3.9% | 1.3% | 2.1% |
| Feb-2006 | 3.9% | 1.3% | 2.2% |
| Mar-2006 | 3.9% | 1.2% | 2.2% |
| Apr-2006 | 3.8% | 1.3% | 2.1% |
| May-2006 | 4.0% | 1.4% | 2.2% |
| Jun-2006 | 3.9% | 1.2% | 2.2% |
| Jul-2006 | 3.9% | 1.3% | 2.2% |
| Aug-2006 | 3.8% | 1.2% | 2.2% |
| Sep-2006 | 3.8% | 1.3% | 2.1% |
| Oct-2006 | 3.8% | 1.3% | 2.1% |
| Nov-2006 | 4.0% | 1.3% | 2.3% |
| Dec-2006 | 3.8% | 1.3% | 2.2% |
| Jan-2007 | 3.8% | 1.2% | 2.2% |
| Feb-2007 | 3.8% | 1.3% | 2.2% |
| Mar-2007 | 3.8% | 1.3% | 2.2% |
| Apr-2007 | 3.7% | 1.3% | 2.1% |
| May-2007 | 3.8% | 1.3% | 2.2% |
| Jun-2007 | 3.8% | 1.3% | 2.0% |
| Jul-2007 | 3.7% | 1.3% | 2.1% |
| Aug-2007 | 3.7% | 1.3% | 2.1% |
| Sep-2007 | 3.7% | 1.5% | 1.9% |
| Oct-2007 | 3.8% | 1.4% | 2.1% |
| Nov-2007 | 3.7% | 1.4% | 2.0% |
| Dec-2007 | 3.6% | 1.3% | 2.0% |
| Jan-2008 | 3.5% | 1.3% | 2.0% |
| Feb-2008 | 3.5% | 1.4% | 2.0% |
| Mar-2008 | 3.4% | 1.3% | 1.9% |
| Apr-2008 | 3.5% | 1.3% | 2.1% |
| May-2008 | 3.3% | 1.3% | 1.9% |
| Jun-2008 | 3.5% | 1.5% | 1.9% |
| Jul-2008 | 3.3% | 1.4% | 1.8% |
| Aug-2008 | 3.3% | 1.6% | 1.7% |
| Sep-2008 | 3.1% | 1.4% | 1.8% |
| Oct-2008 | 3.3% | 1.6% | 1.8% |
| Nov-2008 | 2.9% | 1.6% | 1.5% |
| Dec-2008 | 3.2% | 1.8% | 1.6% |
| Jan-2009 | 3.1% | 1.9% | 1.5% |
| Feb-2009 | 3.0% | 1.9% | 1.5% |
| Mar-2009 | 2.8% | 1.8% | 1.4% |
| Apr-2009 | 2.9% | 2.0% | 1.3% |
| May-2009 | 2.8% | 1.6% | 1.3% |
| Jun-2009 | 2.8% | 1.6% | 1.3% |
| Jul-2009 | 2.9% | 1.7% | 1.3% |
| Aug-2009 | 2.9% | 1.6% | 1.3% |
| Sep-2009 | 3.0% | 1.6% | 1.3% |
| Oct-2009 | 2.9% | 1.5% | 1.3% |
| Nov-2009 | 3.1% | 1.4% | 1.4% |
| Dec-2009 | 2.9% | 1.5% | 1.3% |
| Jan-2010 | 3.0% | 1.4% | 1.3% |
| Feb-2010 | 2.9% | 1.4% | 1.3% |
| Mar-2010 | 3.2% | 1.4% | 1.4% |
| Apr-2010 | 3.1% | 1.3% | 1.5% |
| May-2010 | 3.4% | 1.3% | 1.4% |
| Jun-2010 | 3.1% | 1.5% | 1.5% |
| Jul-2010 | 3.2% | 1.6% | 1.4% |
| Aug-2010 | 3.0% | 1.4% | 1.4% |
| Sep-2010 | 3.1% | 1.4% | 1.4% |
| Oct-2010 | 3.1% | 1.3% | 1.4% |
| Nov-2010 | 3.2% | 1.4% | 1.4% |
| Dec-2010 | 3.2% | 1.4% | 1.5% |
| Jan-2011 | 3.0% | 1.3% | 1.4% |
| Feb-2011 | 3.1% | 1.3% | 1.4% |
| Mar-2011 | 3.2% | 1.3% | 1.5% |
| Apr-2011 | 3.2% | 1.3% | 1.5% |
| May-2011 | 3.1% | 1.3% | 1.5% |
| Jun-2011 | 3.3% | 1.4% | 1.5% |
| Jul-2011 | 3.1% | 1.3% | 1.5% |
| Aug-2011 | 3.2% | 1.3% | 1.5% |
| Sep-2011 | 3.3% | 1.3% | 1.5% |
| Oct-2011 | 3.2% | 1.3% | 1.5% |
| Nov-2011 | 3.2% | 1.3% | 1.5% |
| Dec-2011 | 3.2% | 1.3% | 1.5% |
| Jan-2012 | 3.2% | 1.2% | 1.5% |
| Feb-2012 | 3.3% | 1.3% | 1.6% |
| Mar-2012 | 3.3% | 1.2% | 1.6% |
| Apr-2012 | 3.2% | 1.4% | 1.6% |
| May-2012 | 3.3% | 1.4% | 1.6% |
| Jun-2012 | 3.2% | 1.3% | 1.6% |
| Jul-2012 | 3.2% | 1.2% | 1.6% |
| Aug-2012 | 3.3% | 1.4% | 1.6% |
| Sep-2012 | 3.1% | 1.3% | 1.4% |
| Oct-2012 | 3.2% | 1.3% | 1.5% |
| Nov-2012 | 3.3% | 1.3% | 1.6% |
| Dec-2012 | 3.2% | 1.2% | 1.6% |
| Jan-2013 | 3.2% | 1.2% | 1.7% |
| Feb-2013 | 3.4% | 1.2% | 1.7% |
| Mar-2013 | 3.2% | 1.3% | 1.6% |
| Apr-2013 | 3.3% | 1.3% | 1.6% |
| May-2013 | 3.3% | 1.3% | 1.6% |
| Jun-2013 | 3.2% | 1.2% | 1.6% |
| Jul-2013 | 3.3% | 1.2% | 1.7% |
| Aug-2013 | 3.4% | 1.2% | 1.7% |
| Sep-2013 | 3.4% | 1.3% | 1.7% |
| Oct-2013 | 3.3% | 1.1% | 1.8% |
| Nov-2013 | 3.3% | 1.1% | 1.8% |
| Dec-2013 | 3.3% | 1.2% | 1.8% |
| Jan-2014 | 3.3% | 1.2% | 1.7% |
| Feb-2014 | 3.4% | 1.2% | 1.8% |
| Mar-2014 | 3.4% | 1.2% | 1.8% |
| Apr-2014 | 3.5% | 1.2% | 1.8% |
| May-2014 | 3.4% | 1.2% | 1.8% |
| Jun-2014 | 3.5% | 1.2% | 1.8% |
| Jul-2014 | 3.6% | 1.2% | 1.8% |
| Aug-2014 | 3.4% | 1.2% | 1.8% |
| Sep-2014 | 3.6% | 1.2% | 2.0% |
| Oct-2014 | 3.6% | 1.2% | 1.9% |
Note: Shaded areas denote recessions. The hires rate is the number of hires during the entire month as a percent of total employment. The layoff rate is the number of layoffs and discharges during the entire month as a percent of total employment. The quits rate is the number of quits during the entire month as a percent of total employment.
Source: EPI analysis of Bureau of Labor Statistics Job Openings and Labor Turnover Survey
JOLTS Report Mostly on Trend: Jobs-Seekers-To-Job-Openings Ratio Falls Below 2.0 for the First Time Since the Great Recession
This morning’s Job Openings and Labor Turnover Summary (JOLTS) shows that the total number of job openings in October was 4.8 million, up 149,000 since September. Meanwhile, according to the Census’s Current Population Survey, there were nearly 9.0 million job seekers, which means there were 1.9 times as many job seekers as job openings in October. This is the first time since the Great Recession that the jobs-seekers-to-job-openings ratio fell below 2.0. While we are moving in the right direction, keep in mind that in a labor market with strong job opportunities, there would be roughly as many job openings as job seekers, while in October, job seekers still so outnumbered job openings that nearly half of the unemployed were not going to find a job no matter what they did.
The slight decline in the jobs-seekers-to-job-openings ratio in October comes on the heels of a steady decrease since its high of 6.8-to-1 in July 2009, as you can see in the figure below. The ratio has fallen by 0.9 over the last year.
At the same time, the 9.0 million unemployed workers understates how many job openings will be needed when a robust jobs recovery finally begins, due to the existence of 5.8 million potential workers (in October) who are currently not in the labor market, but who would be if job opportunities were strong. Many of these “missing workers” will go back to looking for a job when the economy really picks up, so job openings will be needed for them, too.
The job-seekers ratio, December 2000–October 2014
| Month | Unemployed job seekers per job opening |
|---|---|
| Dec-2000 | 1.1 |
| Jan-2001 | 1.1 |
| Feb-2001 | 1.3 |
| Mar-2001 | 1.3 |
| Apr-2001 | 1.3 |
| May-2001 | 1.4 |
| Jun-2001 | 1.5 |
| Jul-2001 | 1.5 |
| Aug-2001 | 1.7 |
| Sep-2001 | 1.8 |
| Oct-2001 | 2.1 |
| Nov-2001 | 2.3 |
| Dec-2001 | 2.3 |
| Jan-2002 | 2.3 |
| Feb-2002 | 2.4 |
| Mar-2002 | 2.3 |
| Apr-2002 | 2.6 |
| May-2002 | 2.4 |
| Jun-2002 | 2.5 |
| Jul-2002 | 2.5 |
| Aug-2002 | 2.4 |
| Sep-2002 | 2.5 |
| Oct-2002 | 2.4 |
| Nov-2002 | 2.4 |
| Dec-2002 | 2.8 |
| Jan-2003 | 2.3 |
| Feb-2003 | 2.5 |
| Mar-2003 | 2.8 |
| Apr-2003 | 2.8 |
| May-2003 | 2.8 |
| Jun-2003 | 2.8 |
| Jul-2003 | 2.8 |
| Aug-2003 | 2.7 |
| Sep-2003 | 2.9 |
| Oct-2003 | 2.7 |
| Nov-2003 | 2.6 |
| Dec-2003 | 2.5 |
| Jan-2004 | 2.5 |
| Feb-2004 | 2.4 |
| Mar-2004 | 2.5 |
| Apr-2004 | 2.4 |
| May-2004 | 2.2 |
| Jun-2004 | 2.4 |
| Jul-2004 | 2.1 |
| Aug-2004 | 2.2 |
| Sep-2004 | 2.1 |
| Oct-2004 | 2.1 |
| Nov-2004 | 2.3 |
| Dec-2004 | 2.1 |
| Jan-2005 | 2.2 |
| Feb-2005 | 2.1 |
| Mar-2005 | 2.0 |
| Apr-2005 | 1.9 |
| May-2005 | 2.0 |
| Jun-2005 | 1.9 |
| Jul-2005 | 1.8 |
| Aug-2005 | 1.8 |
| Sep-2005 | 1.8 |
| Oct-2005 | 1.8 |
| Nov-2005 | 1.7 |
| Dec-2005 | 1.7 |
| Jan-2006 | 1.7 |
| Feb-2006 | 1.7 |
| Mar-2006 | 1.6 |
| Apr-2006 | 1.6 |
| May-2006 | 1.6 |
| Jun-2006 | 1.6 |
| Jul-2006 | 1.8 |
| Aug-2006 | 1.6 |
| Sep-2006 | 1.5 |
| Oct-2006 | 1.5 |
| Nov-2006 | 1.5 |
| Dec-2006 | 1.5 |
| Jan-2007 | 1.6 |
| Feb-2007 | 1.5 |
| Mar-2007 | 1.4 |
| Apr-2007 | 1.5 |
| May-2007 | 1.5 |
| Jun-2007 | 1.5 |
| Jul-2007 | 1.6 |
| Aug-2007 | 1.6 |
| Sep-2007 | 1.6 |
| Oct-2007 | 1.7 |
| Nov-2007 | 1.7 |
| Dec-2007 | 1.8 |
| Jan-2008 | 1.8 |
| Feb-2008 | 1.9 |
| Mar-2008 | 1.9 |
| Apr-2008 | 2.0 |
| May-2008 | 2.1 |
| Jun-2008 | 2.3 |
| Jul-2008 | 2.4 |
| Aug-2008 | 2.6 |
| Sep-2008 | 3.0 |
| Oct-2008 | 3.1 |
| Nov-2008 | 3.4 |
| Dec-2008 | 3.7 |
| Jan-2009 | 4.4 |
| Feb-2009 | 4.6 |
| Mar-2009 | 5.4 |
| Apr-2009 | 6.1 |
| May-2009 | 6.0 |
| Jun-2009 | 6.2 |
| Jul-2009 | 6.8 |
| Aug-2009 | 6.5 |
| Sep-2009 | 6.2 |
| Oct-2009 | 6.5 |
| Nov-2009 | 6.3 |
| Dec-2009 | 6.1 |
| Jan-2010 | 5.5 |
| Feb-2010 | 6.0 |
| Mar-2010 | 5.8 |
| Apr-2010 | 5.0 |
| May-2010 | 5.1 |
| Jun-2010 | 5.3 |
| Jul-2010 | 5.0 |
| Aug-2010 | 5.0 |
| Sep-2010 | 5.2 |
| Oct-2010 | 4.8 |
| Nov-2010 | 4.9 |
| Dec-2010 | 5.0 |
| Jan-2011 | 4.8 |
| Feb-2011 | 4.6 |
| Mar-2011 | 4.4 |
| Apr-2011 | 4.5 |
| May-2011 | 4.5 |
| Jun-2011 | 4.3 |
| Jul-2011 | 4.0 |
| Aug-2011 | 4.3 |
| Sep-2011 | 3.9 |
| Oct-2011 | 4.0 |
| Nov-2011 | 4.2 |
| Dec-2011 | 3.7 |
| Jan-2012 | 3.5 |
| Feb-2012 | 3.7 |
| Mar-2012 | 3.3 |
| Apr-2012 | 3.5 |
| May-2012 | 3.4 |
| Jun-2012 | 3.3 |
| Jul-2012 | 3.5 |
| Aug-2012 | 3.4 |
| Sep-2012 | 3.4 |
| Oct-2012 | 3.2 |
| Nov-2012 | 3.2 |
| Dec-2012 | 3.4 |
| Jan-2013 | 3.3 |
| Feb-2013 | 3.0 |
| Mar-2013 | 3.0 |
| Apr-2013 | 3.1 |
| May-2013 | 3.0 |
| Jun-2013 | 3.0 |
| Jul-2013 | 3.0 |
| Aug-2013 | 2.9 |
| Sep-2013 | 2.8 |
| Oct-2013 | 2.8 |
| Nov-2013 | 2.6 |
| Dec-2013 | 2.6 |
| Jan-2014 | 2.6 |
| Feb-2014 | 2.5 |
| Mar-2014 | 2.5 |
| Apr-2014 | 2.2 |
| May-2014 | 2.1 |
| Jun-2014 | 2.0 |
| Jul-2014 | 2.1 |
| Aug-2014 | 2.0 |
| Sep-2014 | 2.0 |
| Oct-2014 | 1.9 |
Note: Shaded areas denote recessions.
Source: EPI analysis of Bureau of Labor Statistics Job Openings and Labor Turnover Survey and Current Population Survey
Furthermore, a job opening when the labor market is weak often does not mean the same thing as a job opening when the labor market is strong. There is a wide range of “recruitment intensity” with which a company can deal with a job opening. For example, if a company is trying hard to fill an opening, it may increase the compensation package and/or scale back the required qualifications. Conversely, if it is not trying very hard, it may hike up the required qualifications and/or offer a meager compensation package. Perhaps unsurprisingly, research shows that recruitment intensity is cyclical—it tends to be stronger when the labor market is strong, and weaker when the labor market is weak. This means that when a job opening goes unfilled when the labor market is weak, as it is today, companies may very well be holding out for an overly-qualified candidate at a cheap price.
A Victory for U.S. and Migrant Workers
For 5 years, the Obama administration has been trying to make reasonable improvements to one of the United States’ main guestworker program for lower skilled workers. The H-2B visa is used by businesses that want low-cost gardeners, hotel maids, cooks and dishwashers, forestry workers, workers to pick and pack crab meat, and various other kinds of laborers. The businesses that hire H-2B workers don’t want U.S. workers who expect a decent wage and they don’t want U.S. workers who might get sick of poor working conditions and quit to find a better job. They want migrant laborers from abroad, who may think being paid a poverty-level wage is a great windfall and who can’t quit—no matter how abusive the working conditions are—because they will be deported if they try to switch jobs. Many H-2B workers secure their temporary jobs in the United States by paying labor recruiters thousands of dollars to connect them to U.S. employers. The employers that ultimately hire them benefit from this arrangement because H-2Bs workers are so indebted to recruiters that their lives will be in danger if they return home before their contract is finished. Businesses call this a “reliable” workforce.
The Bush administration issued rules for the H-2B visa that gave businesses what they wanted: below-market wages so they could discourage U.S. workers from applying and underpay the migrants who did apply. EPI’s analysis has shown that the Bush rules led to wages that fell more than 25 percent below the true prevailing wage. Migrant advocates sued to have the Bush rules thrown out, and a federal court agreed. So the Obama administration set out to rewrite the rules to protect both U.S. workers who might want some of these jobs and the mostly Mexican migrants who come to work with H-2B visas. The Department of Labor issued rules to require more honest recruiting of U.S. workers before a business can look abroad, rules to protect the migrants against exploitation by recruiters and businesses, and—most importantly—a rule to set a true prevailing wage that businesses using the H-2B visa have to offer and pay to U.S. and migrant workers alike.
Growing Trans-Pacific Trade Deficits Set the Stage for Growing Trade-Related Job Displacement
U.S. trade and investment agreements have almost always resulted in growing trade deficits and job losses. Under the 1993 North American Free Trade Agreement, growing trade deficits with Mexico cost 682,900 U.S. jobs as of 2010, and U.S.-Mexico trade deficits and job displacement have increased since then. President Obama promised that the U.S.-Korea Free Trade Agreement would increase U.S. goods exports by $10 to $11 billion, supporting 70,000 American jobs from increased exports alone. However, in the first two years after that deal went into effect, U.S. exports actually declined, and growing trade deficits with Korea cost nearly 60,000 U.S. jobs.
This is important to keep in mind as negotiations for the Trans-Pacific Partnership (TPP) resume in Washington this week. The United States has a large and growing trade deficit with the 11 other countries in the proposed TPP. This deficit has increased from $110.3 billion in 1997 to an estimated $261.7 billion in 2014, as shown in the figure below. With trade deficits already on the rise, it makes no sense to sign a deal that would exacerbate them further.
Meanwhile several members of the proposed TPP deal are well known currency manipulators, including Malaysia, Singapore, and Japan—the world’s second largest currency manipulator (behind China). Eliminating currency manipulation could reduce U.S. trade deficits, increase GDP, and create 2.3 million to 5.8 million U.S. jobs. The United States would be foolish to sign a trade and investment deal with these countries that does not include strong prohibitions on currency manipulation. Yet U.S. Trade Representative Froman has testified that currency manipulation has not been discussed in the TPP negotiations.
Trade and investment agreements negotiated in recent decades have been bad deals for working Americans. Fast track legislation would deprive Congress of the opportunity to amend proposed trade deals, leading to growing job displacement and downward pressure on American wages. It is time for Congress to take notice and assert its rightful role in providing advice and consent in the governance of U.S. trade and investment with other nations.
Nominal Wages Continue to Indicate How Far the Economy is from Full Recovery
One month of adding upwards of 300,000 jobs is not enough to say the economy is strong. In fact, adding jobs at November’s rate of growth wouldn’t lead us back to pre-recession labor market health until October 2016. And, then, there’s the story of nominal wage growth. Last month, nominal—i.e., not adjusted for inflation—wages grew only 2.1 percent, about on pace with what we’ve seen the last five years. This sluggish wage growth is a key sign that there’s still too much slack remaining in the labor market.
Let me put 2.1 percent nominal wage growth into perspective. The Federal Reserve’s mandate is to balance the benefits of low unemployment versus the benefits of keeping inflation stable. One sign of growing inflationary pressure is when nominal (not real) wages are rising significantly faster than the Fed’s target rate of inflation (currently 2 percent, which is not set in stone but which is widely acknowledged to be what the Fed is aiming for) plus productivity growth (between 1.5 to 2 percent). Putting those together, we get a target between 3.5 and 4 percent. Now consider our recent nominal wage growth of 2.1 percent. The fact is that nominal wages have been growing far slower than any reasonable wage target for the last five years.
To provide some context and help explain the role nominal wage growth plays in policymaking, we created a new EPI feature, the Nominal Wage Tracker. This page hosts the most up-to-date information on nominal wages, tracks how the cumulative effect of wages continues to lag behind target levels, and relates both of these to labor’s share of corporate-sector income. One of the statistics our tracker measures is the size of the accumulated gap between target and actual nominal wage growth, which now stands at $3.16 an hour.
Even At 321,000 Jobs a Month, It Will Be Nearly Two Years Before the Economy Looks Like 2007
Dramatically falling employment in the Great Recession and its aftermath has left us with a jobs shortfall of 5.8 million—that’s the amount of jobs needed to keep up with growth in the potential labor force. Each year, the population keeps growing, and along with it, the number of people who could be working. To get back to the same labor market we had in 2007, we need to not only make up the jobs we lost, but gain enough jobs to account for this growth.
The chart below projects out the potential labor force into the future. We ran a variety of scenarios to determine how many jobs we would need to create each month to catch up to that line. The reality is that at November’s pace of job growth—which was an above average month—it will take until October 2016 to hit the employment level needed to return the economy to the labor market health that prevailed in 2007.
Yes, the jobs growth last month is good news, and I’m optimistic that we will continue to see job growth that strong or stronger in the upcoming months. But, it’s also higher than we’ve seen lately and could get revised downward next month. If we were to take the average monthly job growth over the last six months, we wouldn’t return to pre-recession labor market health until July 2017.
On the other hand, if we want to return to the labor market health that prevailed in 2007 much sooner, say, by creating 450,000 jobs per month, we would get there in March 2016. So, yes, 321,000 is a nice surprise, however, between the jobs gap and the sluggish wage growth, it is clear that we are fall from a full recovery.