The Economy and Unemployment

Transcription

1 The Economy and Unemployment Chris Foote Research Department Federal Reserve Bank of Boston June 26, 2017 Foote (Boston Fed) Economy and Unemployment June 26, / 32

2 Disclaimer: I do not speak for: Eric Rosengren, President of Boston Fed Janet Yellen, Chair of Federal Reserve Foote (Boston Fed) Economy and Unemployment June 26, / 32

3 Outline 1 The Fed s Dual Mandate 2 Employment, Unemployment and Participation 3 Aggregate Supply Foote (Boston Fed) Economy and Unemployment June 26, / 32

4 The Fed s Dual Mandate Fed s Marching Orders: The Dual Mandate 1 Stable prices Macroeconomic theory says Fed gets to pick long-term inflation rate Fed has chosen a 2% inflation target 2 Maximum sustainable employment Theory says: Steer unemployment toward natural rate Fed has to estimate natural rate of unemployment Foote (Boston Fed) Economy and Unemployment June 26, / 32

5 The Fed s Dual Mandate Dual Mandate: Inflation and Unemployment Percent Unemployment Rate Core CPI (12 mo chg.) Core Chain Price PCE (12 mo chg.) Jan 2001 Jan 2003 Jan 2005 Jan 2007 Jan 2009 Jan 2011 Jan 2013 Jan 2015 Jan 2017 Percent Foote (Boston Fed) Economy and Unemployment June 26, / 32

6 The Fed s Dual Mandate Dual Mandate: Inflation and Unemployment Percent Unemployment Rate Chain Price PCE (12 mo chg.) Jan 2001 Jan 2003 Jan 2005 Jan 2007 Jan 2009 Jan 2011 Jan 2013 Jan 2015 Jan 2017 Percent Foote (Boston Fed) Economy and Unemployment June 26, / 32

7 Federal Funds Rate The Fed s Dual Mandate Percent Jan 1985 Jan 1990 Jan 1995 Jan 2000 Jan 2005 Jan 2010 Jan 2015 Recessions Fed Funds Rate Foote (Boston Fed) Economy and Unemployment June 26, / 32

8 The Fed s Dual Mandate From FOMC Summary of Economic Projections Foote (Boston Fed) Economy and Unemployment June 26, / 32

9 The Fed s Dual Mandate From FOMC Summary of Economic Projections June 2017 Foote (Boston Fed) Economy and Unemployment June 26, / 32

10 The Fed s Dual Mandate From FOMC Summary of Economic Projections June 2017 Foote (Boston Fed) Economy and Unemployment June 26, / 32

11 Employment, Unemployment and Participation Distribution of labor market states: Aug 2011 Foote (Boston Fed) Economy and Unemployment June 26, / 32

12 Employment, Unemployment and Participation Atlanta Fed Jobs Calculator No Change in UR (4.3%) or LFPR (62.7%) Foote (Boston Fed) Economy and Unemployment June 26, / 32

13 Employment, Unemployment and Participation Trends in Labor Force Participation Percent of Population Total Men Women Jan 1960 Jan 1980 Jan 2000 Jan 2020 Foote (Boston Fed) Economy and Unemployment June 26, / 32

14 Employment, Unemployment and Participation Total Participation Rate Since 1980 Percent of Population Jan 1980 Jan 1990 Jan 2000 Jan 2010 Jan 2020 Foote (Boston Fed) Economy and Unemployment June 26, / 32

15 Employment, Unemployment and Participation BLS Participation Projections Foote (Boston Fed) Economy and Unemployment June 26, / 32

16 Employment, Unemployment and Participation Distribution of labor market states (again) Foote (Boston Fed) Economy and Unemployment June 26, / 32

17 Employment, Unemployment and Participation Total Participation Rate Since 1980 (again) Dot implies a decline of 0.25 ppt. per year through May 2019 for illustrative purposes Percent of Population Jan 1980 Jan 1990 Jan 2000 Jan 2010 Jan 2020 Foote (Boston Fed) Economy and Unemployment June 26, / 32

18 Employment, Unemployment and Participation Foote (Boston Fed) Economy and Unemployment June 26, / 32

19 Employment, Unemployment and Participation Atlanta Fed Jobs Calculator No Change in UR (4.3%); Lower LFPR (62.2%) Foote (Boston Fed) Economy and Unemployment June 26, / 32

20 Employment, Unemployment and Participation Foote (Boston Fed) Economy and Unemployment June 26, / 32

21 Employment, Unemployment and Participation Ratio of Nonfarm Payrolls to Total CPS Employment Ratio: Payolls / CPS :M1 1960:M1 1980:M1 2000:M1 2020:M1 Foote (Boston Fed) Economy and Unemployment June 26, / 32

22 Employment, Unemployment and Participation Current Work on CES/CPS Reconciliation Researchers writing in the 2013 Journal of Labor Economics matched March CPS records to UI records in 16 states. Paper focused on in-scope workers (private, nonfarm, wage & salary, etc.) Findings: About one out of every six CPS workers (17.6 percent) does not have a UI record. About six percent of in-scope UI workers are not in the CPS. Problems reconciling multiple job holders are even worse. Implication: Surveys have problems measuring... Off-the-books employment and independent contractors (in CPS, not in UI) Marginal jobs (in UI, not in CPS) Multiple jobholders Foote (Boston Fed) Economy and Unemployment June 26, / 32

23 Employment, Unemployment and Participation Measurement of Alternative Work Arrangements Source: NY Times, March 1, 2017 The trend is hard to measure, since subcontracting can take many forms. But it is big. A study last year by Lawrence F. Katz of Harvard and Alan B. Krueger of Princeton, a former chief economic adviser to President Barack Obama, concluded that independent contractors, on-call workers and workers provided by contracting companies or temp agencies accounted altogether for 94 percent of employment growth over the last 10 years. Nonstandard employment arrangements like these account for nearly one in six jobs today. That is 24 million jobs, nine million more than 10 years ago. Foote (Boston Fed) Economy and Unemployment June 26, / 32

24 Employment, Unemployment and Participation From Katz and Krueger (2016) Foote (Boston Fed) Economy and Unemployment June 26, / 32

25 Aggregate Supply CBO Potential and Actual Real GDP Billions of Chained $2005 (Log Scale) q1 1980q1 1990q1 2000q1 2010q1 2020q1 Foote (Boston Fed) Economy and Unemployment June 26, / 32

26 Aggregate Supply Potential Growth of GDP Source: John Fernald, SF Fed (2014) Foote (Boston Fed) Economy and Unemployment June 26, / 32

27 Aggregate Supply From FOMC Summary of Economic Projections June 2017 Foote (Boston Fed) Economy and Unemployment June 26, / 32

28 Aggregate Supply Decomposition of Aggregate Output Output per capita = Output /Population Output per capita = Output /Workers Workers /Population = Labor Productivity Labor Force Participation Foote (Boston Fed) Economy and Unemployment June 26, / 32

29 Aggregate Supply Productivity Growth Source: John Fernald, SF Fed (2014) Foote (Boston Fed) Economy and Unemployment June 26, / 32