Chart of the day, hours-worked edition

By Felix Salmon
October 2, 2009
Jake is on fire with employment charts this morning in the wake of the atrocious payrolls report. This one in particular is new to me, and extremely sobering:

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Jake is on fire with employment charts this morning in the wake of the atrocious payrolls report. This one in particular is new to me, and extremely sobering:

hours per civ.png

Even at the worst points of the worst recessions of the 1970s and 1980s, never has the number of hours worked per US person been lower than it is now. And this isn’t happy productive people taking time off because they don’t need to work as hard any more: this is unhappy unemployed people who desperately want and need to earn money but can’t.

What we’re seeing in this graph is, I think, the violent implosion of a large swathe of the working classes. Many of those jobs — the ones which, in the boom, were in or connected to the housing or auto industries in particular — will never come back; if they’re replaced at all it will be with lower-wage, lower-skill service-industry jobs. That bodes very ill for the US economy as a whole, and reinforces my notion that the best-case scenario right now, economically speaking, is essentially a square-root-shaped recession where we rebound from the lows but then fail to grow over the medium or long term.

That said, previous plunges in this graph have been followed by relatively sharp rebounds, so maybe we’ll see the same thing happen again. I just can’t work out what the driver of all that new employment will be.

10 comments

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well thru process of elimination — http://blogs.ft.com/maverecon/2009/10/a- stronger-us-economy-requires-a-weaker-do llar/ — it’s either got to be gov’t (if it can be financed; or war!), biz (i’m holding out hope for synthetic biology ;) and/or exports (g’luck w/ USD’s ’30 percent [drop] in effective (trade-weighted) real terms…’)

Posted by glory | Report as abusive

The problem facing displaced workers in this recession is not future low paying jobs. The problem is, as you mention, whether ANY jobs will be available for them.

“Many of those jobs — the ones which, in the boom, were in or connected to the housing or auto industries in particular — will never come back; if they’re replaced at all it will be with lower-wage, lower-skill service-industry jobs.”

The job losses in construction and auto industry are union jobs. You are just seeing removal of union “economic rent seeking” and replacement, not with low paying jobs, but with jobs fairly priced for the worker’s skill level, training, experience and industry need. You are also seeing the effects of automation on industrial productivity replacing union pay scales and workforce retention rules. Additionally, you are seeing the effect of the job market catching up to previous auto bailouts, e.g. Chrysler late 1970′s, etc., and government housing subsidies, e.g. GNMA guarantees, mortgage interest deduction, etc. and undoing the distorting subsidy effect on wages and employment in the affected sectors. It is like a dam created by government policies breaking and the total effects felt in a short time as oppose to a normal river’s run-off occurring gradually, season by season. The US is experiencing a massive restructuring of protected and subsidized industries.

If there are comparative advantage skills in the available US work force, jobs from other parts of the world will be outsourced to the US. Plus, when there is an excess mobile labor force in a country, the workers emigrate to other countries where their skills are needed. Immigrants came here to build the railroads in the mid 1800s, and then about half the immigrants who came here to build the RRs returned to their homelands after its completion. Utilities and other companies will often bring in skilled and specialized labor from foreign countries to meet temporary unfilled job skills in the US. US workers may have to go outside the US for jobs. Worker mobility among different countries is a norm in many parts of the world, except the US.

“if they’re replaced at all it will be with lower-wage, lower-skill service-industry jobs.”

There is no way to know if new jobs will be high paying or low paying. It depends on US industry need (demand) and the skill set of available employees (supply). Once we are past the worst of the job losses of the recession, the problem will not be creating high paying jobs. The problem will be whether the skill set, training and experience of the available workforce match the new high paying jobs’ requirements.

If skills do not match job requirements, the US might have going forward a much higher natural unemployment rate than it has had since WWII. The concern then will not be the creation of low paying jobs; it will be high unemployment without any substantial job creation.

The US lost over 7 million jobs in this recession so far and needs to create about 1.4 million per year just for new entrants to the workforce, such as school graduates, mothers and divorcees returning to work, retirees returning to work, etc. So far, in this recession, there is negative net job creation, which is why unemployment and discourage workers numbers are so high and going higher. Historically, in the best of times (not the average job creation rate), the US creates about 2 to 2.4 million jobs per year. At that rate, it will take a decade to return employment to pre-recession levels. If new job creation, is lower, it will obviously take much longer.

One thing that will occur will be an attempt by the unemployed to remove artificial job barriers to their hire such as licensing, unnecessary education requirements and union membership for better paying jobs, such as teaching, the medical field and similar job categories where future job openings are expected.

Felix, you’re viewing this chart all wrong. Instead of seeing it as evidence of a decline in the US economy, some people will hail these numbers, because the less hours worked by people in the US, the higher the productivity. CEOs everywhere will crow about how they increased productivity during this recession, and business writers will chalk it up to American competitiveness.

Just one more example of “There are lies, there are damn lies, and there are statistics”.

Posted by KenG | Report as abusive

Works Progress Administration

Milton,

It may be different where you live, but most places in the US, residential contstruction is almost completely non union. In fact, it is not particularly highly paid.

Posted by Robb Lutton | Report as abusive

Agree with KenG, and would also add that employment number have been, and will continue to be for all of capitalistic time, a BACKWARD-looking indicator of economic health. Just as much as the stock markets are forward-looking to the future of the economy, employment numbers, albeit hours worked or unemployment percentages, are looking back at what happened in the economy. One is proactive, the other is reactive.

Posted by jeremy | Report as abusive

There are three long term factors. The first is a decline in the relative and absolute quality of the workforce over the last forty years. This is the result of the cultural changes in the sixties and seventies. The second is the huge and growing burden of entitlement spending and regulation on the productive sectors of the economy. The last is positive changes in the economies of nations like China, India and Brazil.

Posted by Charles R. Williams | Report as abusive

Jeremy, re: stock market data vs. unemployment figures, one of those sets of numbers is FACT and the other set is FANTASY. You figure out which is which.

Posted by Epiminondas | Report as abusive

A drop from 21.5 to 19.5. Big deal. Nice melodramatic graph, though. It must have taken him some time to tweak that one.

Posted by WM | Report as abusive

If a Chinese autoworker earns $2.40/hour why not here? Bye-bye American Paradise.

Posted by Jim | Report as abusive