Jim Tankersley at the Washington Post and Ben Casselman at the Wall Street Journal are in a “wonkfeud” about labor force participation. It started when Casselman estimated that there are currently around 3 million “missing workers” in the US (workers who are not in the labor force but who would be if job opportunities were strong). Tankersley did not dispute that figure, but pointed out that because it only counts workers who are missing due to the weak labor market in the Great Recession and its aftermath, it is a substantial undercount of the total number of missing workers because labor force participation was also weak in the decade leading up to the Great Recession.

To Tankersley’s point I will just add that while I don’t have an estimate of the number of missing workers from the 2000-2007 business cycle, it was indeed the weakest full business cycle in terms of job growth in at least three generations, and the labor market had not yet come close to regaining the health of the late 1990s before the Great Recession began at the end of 2007. It is an important reminder that estimates like the one below of how many jobs we need to get back to the labor market health of 2007 are conservative indeed, since while 2007 was the last year before the Great Recession hit, it was no labor market paradise by any stretch.

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John Schmitt and Janelle Jones have written an excellent paper on what it would take to improve job-quality in the U.S., backed with actual data, rather than hand-waving about training-this and skills-that. I would, however, slightly tweak one line in the press release for the paper: “The authors note that restoring the link between economic growth and job quality will be a heavy lift.”

I think a distinction is in order between things that are a heavy economic lift versus those that are a heavy political lift. Schmitt and Jones, for example, show that increasing the share of U.S. workers represented by a union by 25 percent would have a larger impact on boosting good jobs (and reducing bad jobs) than would boosting the share of U.S. workers with a 4-year college degree by 25 percent.

But boosting the share of workers with a 4-year college degree is indeed a heavy economic lift—it takes real resources (books, labs, classrooms and most expensively teachers) to provide the skills and education needed to qualify for a college degree. But boosting the share of workers with union representation really doesn’t cost much at all—there is really no serious research linking economy-wide productivity declines to increased unionization. Instead, boosting the share of union workers in the U.S. would redistribute money, but would not cost the U.S. economy anything in the aggregate. And given that so much of the decline in unionization seems to be policy-driven (PDF), the real lever to make this increase happen is essentially the costless act of changing the policy stance towards unionization (there is no CBO score, for example, for the Employee Free Choice Act because it doesn’t cost anything).

But of course we’re not going to see a more hospitable policy/legal environment for unionization anytime soon—it’s too heavy a political lift.

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Here’s what we’re reading and talking about this afternoon:

• Tears and Rage as Hope Fades in Bangladesh (New York Times)
• At chicken plants, chemicals blamed for health ailments are poised to proliferate (Washington Post)
• Austerity is hurting our health, say researchers (Reuters)
• Austerity undone (American Enterprise Institute)
• House Republicans Eyeing New Hostage Opportunity (New York Magazine)
• Heading the Wrong Way (New York Times)
• Budget Cuts, Minus the Inconvenience (New York Times)

Robert Samuelson and Anders Aslund have a go at defending the R&R results, and the authors themselves further respond. A couple of notes on all of this.

As pointed out elsewhere, the claim that the UMASS paper actually supports R&R’s alleged core finding of a significant relationship between high debt and slow growth is flat wrong.1 Yes, the midpoint average growth rate of high-debt countries (over 90 percent of GDP) is lower than the average growth of lower-debt countries, but the differences are not statistically significant. Really, people should give up on this one.

More importantly, the real argument all along has been two-way causality: data showing that there is lower growth at high debt levels does not show that high debt causes low growth. A finding of statistical association between high debt and slow growth would surprise precisely nobody, but there is a better case to be made that slow growth leads to high debt rather than vice-versa. Arin Dube demonstrated this very well in his note on Reinhart and Rogoff’s entire data-set, and for the U.S. John Irons and I did the same with Granger causality tests on the U.S. data in July 2010, nearly three years ago. Paul Krugman kindly referred to our results in his blog saying “John Irons and Josh Bivens have the best takedown yet of the Reinhart-Rogoff paper (pdf) claiming that debt over 90 percent of GDP leads to drastically slower growth.” So the causality problem has been well known for some time. By the way, we compiled the data we used ourselves because emails to Reinhart and Rogoff requesting their data went unreturned. Perhaps if they had shared their data at that time their actual weighting procedure would have become clear much sooner and even their spreadsheet error could have been corrected. Kudos to the UMASS authors for being more persistent than us and for the work they did.

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How many times have you heard business lobbyists and spokesmen say: “Regulations are killing jobs”? Or how about, “Excessive regulations are driving manufacturers overseas”?

Well think about what’s been happening in Bangladesh, where so many US clothing retailers and garment makers, from Wal-Mart to L.L.Bean, have gone to escape livable wages and regulation. That lack of regulations is killing workers, not in ones and twos, as happens here in the United States several times every day, but hundreds at a time. Factory fires as devastating as the Triangle Shirtwaist fire of a century ago have now been followed by a building collapse that has so far claimed 300 lives, the workers crushed, bleeding to death or suffocating.

Several stories I’ve read report that only one business (a bank) heeded the warnings of police that the eight-story factory building was so unsafe that it had to be evacuated. The other businesses shrugged off the warnings and ordered more than 2,000 people to work in mortal danger.

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I noted a while back that the uptick in residential construction was a genuine bright spot in the economy, and one that would all else equal make one expect better GDP growth in 2013 than 2012. But just how much should we realistically expect from residential investment in driving growth?

Not much. Residential investment is only about 2.7 percent of the overall economy (as of the first quarter of 2013), so even extraordinarily fast growth in this sector would not be enough to drag the rest of the economy with it. As a demonstration, look at 2012—the most rapid growth of residential investment in the past two decades—in the figure below (which shows a rolling 4-quarter average of growth rates of residential investment since 1989).

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Here’s what we read (and watched) today:

• Austerity’s Spreadsheet Error (Part 2) (The Colbert Report)
  
• The University of Massachusetts Econ Department: How We Know Reinhart and Rogoff Were Wrong (CEPR)
• Baucus retires, a grateful nation cheers (Washington Post)
• Self-Defeating Austerity? (National Institute of Economic and Social Research)
• TCS, Infosys and Wipro abusing H-1B visa system (The Economic Times)
• 2013 Preventable Deaths: The Tragedy of 

  Workplace Fatalities (National Council for Occupational Safety and Health)

In conjunction with its April 23 quarterly earnings report, Apple issued a separate announcement that it is doubling its “capital return program” and will return $100 billion to shareholders by the end of 2015. This decision reflects the enormous size of the company’s existing cash reserve and, according to Apple’s chief financial officer, the fact that “We [Apple] continue to generate cash in excess of our needs….”

Missing from yesterday’s announcement, as well as from the last few months of discussion over what Apple should do with its cash reserve, was how those resources could also be deployed to make necessary improvements in the compensation and treatment of the workers making Apple’s products abroad, or selling its products in the United States. This neglect is unfortunate. These workers contribute directly to Apple’s enviable financial position, even though they frequently live and work under harsh conditions for meager pay. As I detailed in a previous analysis, Apple could also use its cash reserve to:

• Fulfill its promise to retroactively pay the factory workers making its products for previously uncompensated work time
• Boost the pay of the factory workers making its products to offset the reductions in excessive overtime Apple has (appropriately) helped spur
• Ensure that all the workers making its products are paid a livable wage, a step Apple is theoretically obliged to take as a member of the Fair Labor Association
• Reduce health and safety threats at the factories making its products
• Provide compensation for the labor rights violations the workers making its products have endured
• Narrow the gap between the pay of the workers at Apple stores and comparable college graduates

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Last year around this time, I wrote a blog looking at the behavior of the unemployment rate over and after the Great Recession. I found that relative to its past historical relationship with output growth, the overall unemployment rate rose too rapidly during recession and then fell too rapidly between 2011 and 2012. I then approvingly quoted Ben Bernanke, who noted: “further significant improvements in unemployment will likely require faster economic growth than we experienced during the past year.”

In last year’s blog post, I noted that going forward the historical relationship between output growth and unemployment suggested that two straight years of 2.7 percent growth would be needed to reduce unemployment by even 0.4 percentage points. The growth rate for 2012 came in well under this at 2.2 percent. And what happened to unemployment in 2012? It fell by 0.8 percentage points.

So, another year has passed where the overall unemployment rate significantly over-performed relative to most other economic aggregates. The figure below shows the two-year change in unemployment, both actual and what is predicted from a simple regression of the two-year change on the two-year difference in growth rates of actual gross domestic product versus potential gross domestic product as measured by the CBO.1 What this captures is that the economy must grow faster than underlying trend growth (or growth in potential GDP) in order for unemployment to decline. The figure confirms that the actual unemployment rate rose more rapidly than predicted during the Great Recession, but then fell more rapidly than predicted in 2011 and 2012. By the end of 2012, the actual unemployment was a nearly 1.5 percentage points below what it would have been had the simple Okun’s relationship between output growth and unemployment continued to hold.

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Here’s what our experts were reading today:

• Did a Spreadsheet Error Cost You Your Job? (Yahoo! Finance)
  
• Reinhart/Rogoff-gate isn’t the first time austerians have used bad data (Washington Post)
• Huzzah! The U.S. economy is 3 percent bigger than we thought. Thanks, George Lucas! (Washington Post)
• A Dose of Reality: Deficit-Cutting Right Now Is Extraordinarily Imprudent: Creating a Crisis Now To Forestall a Future Crisis That Is Unlikely To Come (Brad DeLong)
• Labor Force Participation and Monetary Policy in the Wake of the Great Recession (Federal Reserve Bank of Boston)