Statista takes a look at yesterday's JOLTS data

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The Massachusetts Employment Situation: U-Rate 3.5%; Jobs 4,400; 64,400 YoY

OVERVIEW

•    According to the Executive Office of Labor and Workforce Development, the state’s total unemployment rate dropped one-tenth of a percentage point to 3.5 percent in October.
  
•    According to the federal Bureau of Labor Statistics, the state also added 4,400 jobs in October.
  
•    The state’s unemployment rate was two-tenths of a percentage point lower than the national average of 3.7 percent.
  
•    The state’s Labor Force Participation Rate (LFP) continued to improve since October 2017. It now stands at 68.0 percent, an increase of 2.6 percentage points. October estimates show 3.69 million residents were employed in Massachusetts.
  
•    The largest private sector percentage job gains over the past year took place in the Construction (+5.4); Professional, Scientific and Business Services (+5.1); Information (+2.0); and Education and Health Services (+1.9).
  
•    Meanwhile, Financial Activities; Leisure and Hospitality each lost 400 jobs while Government lost 300 jobs. 

ANALYSIS

The Massachusetts economy steamrolls ahead. By adding 4,400 jobs, the state’s economy showed no signs of slowing down.

 "The Massachusetts unemployment rate continues to remain low at 3.5 percent and has now held below 4 percent for 30 consecutive months. With the Commonwealth's consistently low rate of unemployment, the economy continues to add jobs at a healthy clip and our labor force continues to grow to meet employment needs," Labor and Workforce Development Secretary Rosalin Acosta said. 

The job market is so attractive that the October labor force increased by 10,800. Employers are competing for talent. 

Consolidation in the state’s financial sector has been gradual. The state’s financial sector has not appreciably grown as the economy recovered from the Great Recession. 

In February 2007, 10 months before the recession began, the sector employed 232,000 workers; today it employs 222,000 workers on a seasonally adjusted basis. 

However, wages in the sector have increased in real terms. The average hourly wage for financial workers in January 2007 was $36.45 compared to today’s average hourly wage of $42.55. The ascent in wages picked up slightly in July 2007 as jobs in the sector began to recover. 

As defined by the BLS, the financial sector classification includes finance, insurance, real estate, rental and leasing subsectors. 

New NBER Working Paper: U.S. Employment and Opioids: Is There a Connection?

From a new NBER Working Paper "U.S. Employment and Opioids: Is There a Connection?" by Janet Currie, Jonas Y. Jin and Molly Schnell.

Abstract:

This paper uses quarterly county-level data to examine the relationship between opioid prescription rates and employment-to-population ratios from 2006-2014.  We first estimate models of the effect of opioid prescription rates on employment-to-population ratios, instrumenting opioid prescriptions for younger ages using opioid prescriptions to the elderly.  We also estimate models of the effect of employment-to-population ratios on opioid prescription rates using a shift-share instrument.  We find that the estimated effect of opioids on employment-to-population ratios is positive but small for women, but there is no relationship for men.  These findings suggest that although they are addictive and dangerous, opioids may allow some women to work who would otherwise leave the labor force.  When we examine the effect of employment-to-population ratios on opioid prescriptions, our results are more ambiguous.  Overall, our findings suggest that there is no simple causal relationship between economic conditions and the abuse of opioids.  Therefore, while improving economic conditions in depressed areas is desirable for many reasons, it is unlikely to curb the opioid epidemic.

The working paper is available here, (gated).

Demographics and Automation (as in Robots!)

From a new NBER Working Paper by Daron Acemoglu and Pascual Restrepo.

Abstract:

We argue theoretically and document empirically that aging leads to greater (industrial) automation, and in particular, to more intensive use and development of robots.  Using US data, we document that robots substitute for middle-aged workers (those between the ages of 36 and 55).  We then show that demographic change--corresponding to an increasing ratio of older to middle-aged workers--is associated with greater adoption of robots and other automation technologies across countries and with more robotics-related activities across US commuting zones.  We also provide evidence of more rapid development of automation technologies in countries undergoing greater demographic change.  Our directed technological change model further predicts that the induced adoption of automation technology should be more pronounced in industries that rely more on middle-aged workers and those that present greater opportunities for automation.  Both of these predictions receive support from country-industry variation in the adoption of robots.  Our model also implies that the productivity implications of aging are ambiguous when technology responds to demographic change, but we should expect productivity to increase and labor share to decline relatively in industries that are most amenable to automation, and this is indeed the pattern we find in the data. 

Gated NBER Working Paper #24421 available here. 

New NBER Working Paper: NAFTA and the Wages of Married Women

A new working paper by Shushanik Hakobyan and John McLaren.

Abstract:

Using US Census data for 1990-2000, we estimate effects of NAFTA on US wages, focusing on differences by gender.  We find that NAFTA tariff reductions are associated with substantially reduced wage growth for married blue-collar women, much larger than the effect for other demographic groups.  We investigate several possible explanations for this finding.  It is not explained by differential sensitivity of female-dominated occupations to trade shocks, or by household bargaining that makes married women workers less able to change their industry of employment than other workers. We find some support for an explanation based on an equilibrium theory of selective non-participation in the labor market, whereby some of the higher-wage married women workers in their industry drop out of the labor market in response to their industry's loss of tariff.  However, this does not fully explain the findings so we are left with a puzzle.

Gated edition of the paper is here. 

Research Note on the December 2017 Massachusetts Employment Situation

December 2017 Report: U-Rate: 3.5%; Jobs: 63,000 YoY 

OVERVIEW

•  According to the Executive Office of Labor and Workforce Development, the state’s total unemployment rate dropped to 3.5 percent in December from 3.6 percent in November.
• The state lost 500 jobs in the month.
• The state's labor force participation decreased one-tenth of a percentage point to 65.3 percent over the month. Compared to December 2016, the LFP rate over the year has increased by 0.7 percentage point.
• Construction gained 1,600 (+1.0%) jobs over the month and Manufacturing added 800 (+0.3%) jobs; Leisure and Hospitality gained 500 jobs (+0.1%); Financial Activities added 400 (+0.2%) jobs. 
• Professional, Scientific and Business Services lost 1,000 (-0.2%) while Education and Health Services lost 1,000 (-0.1%)  
• Other Services lost 200 (-0.1%) jobs over the month; Trade, Transportation and Utilities lost 500 (-0.1%) and Information lost 700 (-0.8%) and Government lost 100 jobs. 
• The November jobs number was revised from the originally reported 6,700 to 7,800 jobs. 

ANALYSIS

The December unemployment rate was six-tenths of a percentage point lower than the national rate of 4.1 percent reported by the Bureau of Labor Statistics. The largest private sector percentage job gains over the year were in Construction, Manufacturing, Financial Activities and Leisure and Hospitality. 

“While much of these [year over year] job gains continue to be in sectors like Professional, Business, and Scientific Services, Manufacturing posted a preliminary 2,800 over the year job gain, the first over the year over job gain in that sector in 18 years," Labor and Workforce Development Secretary Rosalin Acosta said in yesterday's statement. 

Over the last decade, Manufacturing has lost 43,100 jobs. (See table.) However, if we were to rank wages in the sectors with employment growth sectors such as Management and Professional Services, we find that manufacturing wages would rank 3rd (with $1,625 per week) and significantly higher than the private sector average of $1,273.   

The state’s high-tech manufacturing may account for the high wages in an overall shrinking sector — highlighting how output increases with fewer workers.  Weekly wages in the management subsector are nearly double when compared to all private industries. 

"How to save humanity from the Malthusian destiny" resulting from AI

From the new NBER working paper by Anton Korinek, Joseph E. Stiglitz  titled, "Artificial Intelligence and Its Implications for Income Distribution and Unemployment."

Abstract:

Inequality is one of the main challenges posed by the proliferation of artificial intelligence (AI) and other forms of worker-replacing technological progress.  This paper provides a taxonomy of the associated economic issues:  First, we discuss the general conditions under which new technologies such as AI may lead to a Pareto improvement.  Secondly, we delineate the two main channels through which inequality is affected - the surplus arising to innovators and redistributions arising from factor price changes. Third, we provide several simple economic models to describe how policy can counter these effects, even in the case of a "singularity" where machines come to dominate human labor. Under plausible conditions, non-distortionary taxation can be levied to compensate those who otherwise might lose.  Fourth, we describe the two main channels through which technological progress may lead to technological unemployment via efficiency wage effects and as a transitional phenomenon. Lastly, we speculate on how technologies to create super-human levels of intelligence may affect inequality and on how to save humanity from the Malthusian destiny that may ensue.

Read the whole working paper here. (Gated)

US EMPSIT November 2017: 4.1 percent U-Rate; Payrolls +228,000

OVERVIEW

• The unemployment rate remained at 4.1 percent in November while payrolls expanded by 228,000, according to the Bureau of Labor Statistics.
• The Labor Force Participation (LFP) remained at 62.7 percent for November. The employment-population ratio was little changed at 60.1 percent. 
• The manufacturing sector added 31,000 jobs. The BLS reports “that since a recent low in November 2016, manufacturing has increased by 189,000 jobs.”
• Professional and business services added 46,000 jobs in November and health care added 30,000. 
• Employment in the other major sectors— mining, wholesale trade, retail trade, transportation and warehousing, information, leisure and hospitality, financial activities and government —changed little. 
• In November, average hourly earnings for all employees increased by 5 cents to $26.55; over the past year, hourly earnings have risen by 64 cents or 2.5 percent. 
• The September employment report was revised up from +18,000 to +38,000 and the change in October was revised down from +261,000 to +244,00 Over the past three months, job gains have averaged 170,000 a month.  The six-month average monthly growth is 177,600. From January, the economy added on average 174,000 monthly jobs.

ANALYSIS

In November, the American factory kicked into high gear. Since last year the manufacturing sector has added 189,000 jobs. Subsector growth took place in machinery (+8,000), fabricated metal products (+7,000), computer and electronic products (+4,000), and plastics and rubber products (+4,000).  The payroll employment report exceeded the  Wall Street consensus of 200,000 jobs.  According to an ADP report earlier this week, private sector employment increased by 190,000 jobs in November. The unemployment rolls decreased over the past 12 months by 799,000 workers. The number of part-time for economic reasons remained at 4.8 million. Nonetheless, there is talk of a labor shortage in the manufacturing sector where employers are investing in resources to train new workers and by increasing automation.  The tight labor market suggests that wages should be  increasing faster that today’s reported annual rate of 2.5%. But percentage growth in lower paid jobs since 2007 in the leisure and hospitality sectors (0.2) have outstripped high-value-adding professional and business services (0.1) and the overall job (0.1) growth (See table below). Another view is more generational than structural. According to USAToday, “Some economists say the government's measure of average earnings growth may be skewed downward by the retirements of higher-paid Baby Boomers and the entry into the labor force of lower paid Millennials.” For now, holding a job is more important than higher wages. Overall, the job market is on solid ground giving the Federal Reserve an opportunity to raise rates.

PDF version of this post.

The rise of the machines. What does it mean?

A new working paper from the National Bureau of Economic Research by Erik Brynjolfsson, Daniel Rock, Chad Syverson. Abstract:  

We live in an age of paradox.  Systems using artificial intelligence match or surpass human-level performance in more and more domains, leveraging rapid advances in other technologies and driving soaring stock prices.  Yet measured productivity growth has declined by half over the past decade, and real income has stagnated since the late 1990s for a majority of Americans.  We describe four potential explanations for this clash of expectations and statistics:  false hopes, mismeasurement, redistribution, and implementation lags.  While a case can be made for each, we argue that lags have likely been the biggest contributor to the paradox.  The most impressive capabilities of AI, particularly those based on machine learning, have not yet diffused widely.  More importantly, like other general purpose technologies, their full effects won't be realized until waves of complementary innovations are developed and implemented.  The required adjustment costs, organizational changes, and new skills can be modeled as a kind of intangible capital. A portion of the value of this intangible capital is already reflected in the market value of firms. However, going forward, national statistics could fail to measure the full benefits of the new technologies and some may even have the wrong sign.

New NBER Working Paper: Diagnosing the Italian Disease

A new working paper by Bruno Pellegrino and Luigi Zingales. From the abstract: 

We try to explain why Italy's labor productivity stopped growing in the mid-1990s.  We find no evidence that this slowdown is due to trade dynamics, Italy's inefficient governmental apparatus, or excessively protective labor regulations.  By contrast, the data suggest that Italy's slowdown was more likely caused by the failure of its firms to take full advantage of the ICT revolution.  While many institutional features can account for this failure, a prominent one is the lack of meritocracy in the selection and rewarding of managers.  Familyism and cronyism are the ultimate causes of the Italian disease. 

Read more at NBER Working Papers.  

About those low wage jobs and robots: People versus machines: The Impact of minimum wages on at-risk jobs

A growing automated workforce of robots does not bode well for low-income workers, particularly older ones. Minimum wages don't help. Here's a new working paper by Grace Lordan, and David Neumark 

Abstract:

We study the effect of minimum wage increases on employment in automatable jobs - jobs in which employers may find it easier to substitute machines for people - focusing on low-skilled workers from whom such substitution may be spurred by minimum wage increases.  Based on CPS data from 1980-2015, we find that increasing the minimum wage decreases significantly the share of automatable employment held by low-skilled workers, and increases the likelihood that low-skilled workers in automatable jobs become unemployed. The average effects mask significant heterogeneity by industry and demographic group, including substantive adverse effects for older, low-skilled workers in manufacturing.  The findings imply that groups often ignored in the minimum wage literature are in fact quite vulnerable to employment changes and job loss because of automation following a minimum wage increase.

More at NBER.

New Working Paper: The Employment Effects of Minimum Wages: Some Questions We Need to Answer

Here's a new paper from labor economist David Neumark: 

The literature on the employment effects of minimum wages is about a
century old, and includes hundreds of studies. Yet the debate among
researchers about the employment effects of minimum wages remains
intense and unsettled. This essay discussed the key questions that
have arisen in the past research that, if we can answer them, may
prove most useful in making sense of the conflicting evidence. I
also focus on additional questions we should consider to better
inform the policy debate, in particular in the context of the very
high minimum wages coming on line in the United States, about which
past research is quite uninformative.
Certain to add to the debate on how we think about minimum wages in the U.S.

The relationship between educational attainment and enrollment in disability insurance programs

From James M. Poterba, Steven F. Venti, David A. Wise, "The Long Reach of Education: Health, Wealth and DI Participation:"

Between 1972 and 2012, the fraction of the population with low levels of education has declined dramatically and the fraction with higher levels of education has increased. This change in the composition of educational attainment in the population places downward pressure on disability rates. Our estimates suggest that over the past two decades, the upward pressure on DI rates arising from increasing educational disparities in health, wealth and employment has been roughly offset by the downward pressure arising from the declining fraction of the population with low levels of education. 

March 2017 Jobs Report: Rate drops to 4.5 but economy only adds 98,000 jobs

OVERVIEW

• The unemployment rate declined to 4.5 percent in March while payrolls expanded by 98,000, according to the Bureau of Labor Statistics.
• The Labor Force Participation (LFP) rate remained at 63.0 percent. 
• The number of persons working part-time for economic reasons was little changed at 5.6 million. 
• The number of those individuals “marginally attached to the labor force,” also remained unchanged.
• Retail jobs lost 30,000 positions in March.  General merchandise stores declined by 35,000. 
• Following gains of 219,000 in February and 216,000 in January, March employment only edged up by 98,000. 
• Mining added 11,000 bouncing back from an October 2016 low. 
• Professional and Business Services led the gains by adding 56,000 jobs. BLS reports the growth in this sector has kept pace with the average monthly gain over the past 12 months.
• The previous two months’ figures were revised downward. January’s report was revised downward from 238,000 to 216,000 and February’s report was revised downward from 235,000 to 219,000 jobs. 

ANALYSIS

The unexpectedly weak jobs report— along with the downward revisions to January and February numbers —suggest there may be something more at work than last month’s weather. Wall Street expected a gain of 175,000 jobs.

Moreover, today’s report stands in stark contrast with the ADP report released this week estimated the addition of 263,000 jobs in March.

Professional and Business Services continued to notch gains on the strength of “services to buildings and dwellings (+17,000) and architectural and engineering services (+7,000). The Health Care sector continues to post jobs gains with 20,000 per month for 2017. Construction employment changed little, however today’s report noted that jobs have “been trending up since late last summer, largely among specialty trade contractors and in residential building.”

The average workweek was unchanged at 34.3 hours. Average hourly earnings for all private sector employees increased by 5 cents to $26.14, following a 7-cent increase in February.

Over the past year, these earnings have increased by 2.7 percent.  The retail sector continues to struggle, with major firms announcing job cuts and store closings. Approximately 15.8 million workers have jobs in the retail sector, overall.  

Of that number, 3.1 million are in general merchandise stores representing 19.6 percent of the retail workforce. The slowly growing but influential and tech-driven “non-store” retail sector comprises 3.5 percent of the retail workforce.  In March 2016 nonstore retailers employed 521,800 workers compared to 555,700 workers today, a gain of 33,900 workers.

PDF version of Research Note

Is the gig economy's flexibility an asset to labor markets?

Sure to add to the debate about the sharing/gig economy.  "The Value of Flexible Work: Evidence from Uber Drivers" by M. Keith Chen, Judith A. Chevalier, Peter E. Rossi, Emily Oehlsen

Participation in flexible contract work has increased dramatically over the last decade, often in settings where new technologies lower the transaction costs of providing labor flexibly. One prominent example of this is the ride-sharing company Uber, which allows drivers to provide (or not provide) rides anytime they are willing to accept prevailing prices for this service. An Uber-style arrangement offers workers flexibility in both setting a customized work schedule and also adjusting it throughout the day. Using high-frequency data of hourly earnings for Uber drivers, we document the ways in which drivers utilize this real-time flexibility and we estimate the driver surplus generated by this flexibility. We estimate how drivers' reservation wages vary in high frequency from hour to hour, which allows us to study the surplus and supply implications of both flexible and traditional work arrangements. Our results indicate that, while the Uber relationship may have other drawbacks, Uber drivers benefit significantly from real-time flexibility, earning more than twice the surplus they would in less flexible arrangements. If required to supply labor inflexibly at prevailing wages, they would also reduce the hours they supply by more than two-thirds. The implications of our findings for the future of flexible work are discussed. 

It comes down to the willingness to supply more labor.

Gated version of the paper is here.