Employment in the durable goods sector for motor vehicles and parts increased in July to 818,000, the highest employment level in that sector since October 2008. Over the last quarter, employment in the US auto industry has increased by 10.8% at an annual rate.
Jeffrey Sparshott of the WSJ blog reports,
Residential and specialty trade contractors — home builders — added 6,300 jobs in July.
Autos and new home construction used to be the big cyclical sectors of the economy. If I take 10 percent of 818,000, I get 82,000. If I multiply 6300 by 12, I get 75,000. So at an annual rate these erstwhile behemoths are adding 157,000 jobs, which amounts to rounding error in a work force of 140 million.
One of the ways in which my macro view differs most from that of the textbooks is that I believe that it is very hard to identify repeatable patterns in an economy that undergoes such important evolution. Developments that probably change the way the economy reacts to fiscal and monetary policy include:
–deregulation of deposit interest ceilings in the 1980s , which reduced the credit-rationing impact of higher interest rates
–change in the labor force participation behavior of men and women
–big drop in the proportion of work force employed as manufacturing production workers
–big increase in the use of credit cards, Internet banking and ATM machines; we can go months without using our checkbook).
–big shift toward education and health care, or what Nick and I called The New Commanding Heights
Here’s a good quote on macro from – guess who:
“To say that net output to-day is greater, but the price-level lower, than ten years ago or one year ago, is a proposition of a similar character to the statement that Queen Victoria was a better queen but not a happier woman than Queen Elizabeth—a proposition not without meaning and not without interest, but unsuitable as material for the differential calculus. Our precision will be a mock precision if we try to use such partly vague and non-quantitative concepts as the basis of a quantitative analysis.”
John Maynard Keynes, General Theory.
Rounding Error significance or not, these stats should always, nowadays, ought not be interpreted alone.
Proportionate (or disproportionate) changes in wage payments need be noted.
Hours worked per worker? Changes in agg. hours worked?
We have begun to use participation as an adjusting factor, but it may actually have more significance to the social structure than is yet accorded (France, Italy, Hungary, etc.)
What happens to social structures (as well as economies) when ever fewer people are the source for productive and distributive activities and more do nothing?
Is there some limit to non-participation; a tipping point? NBER Paper?
Tyler Cowen:
The share of American adults with jobs is stuck at just 58.7 percent. – See more at: http://marginalrevolution.com/#sthash.hA5ZxIgz.dpuf
To the list of changes that may affect the economy’s response to cyclical policies, I would add:
– Decline in gross reallocative flows of jobs and workers (see Hyatt & Spletzer); unless high flows in the past just meant that the economy is a Rube Goldberg machine, something strange has been happening.
– Aging of the firm distribution due to a decline in firm entry rates, in addition to a decline in activity from establishment entry.
– Changing geography of economic activity (e.g., Enrico Moretti’s book, changes in the location of intense startup activity, etc.).
The separation between growth and cycle studies in academic macro has its uses, but it abstracts from the fact that “growth” is not the only long-term force in the US economy. Massive changes in the nature of the firm distribution and reallocation rates, in addition to the points you mention, suggest that those who wish to treat current problems as entirely cyclical should bear a heavy burden of proof.
One twelfth of jobs being creating is a fairly sizable rounding error. I would be somewhat surprised if there were many larger.