Full employment is a long way off Professor Danny Blanchflower - PowerPoint PPT Presentation

Full employment is a long way off Professor Danny Blanchflower Stirling, Dartmouth and Bloomberg www.dartmouth.edu/~blnchflr & twitter @D_Blanchflower 1

My new book, an old book and a few relevant papers • Princeton University Press, Not Working; Where Have All The Good Jobs Gone?, May 2019. • With Andrew Oswald, ‘The rise of despair in modern America’, working paper • With David Bell, 'Underemployment in Europe and the United States ’, Industrial and Labor Relations Review, 2019. • With David Bell, ‘Well -being of the overemployed and the underemployed and the rise in depression in the UK ’ Journal of Economic Behavior and Organization, volume 161, May, pp. 180-196, 2019. • With David Bell, 'The lack of wage growth and the falling NAIRU', National Institute Economic Review, No. 245,August, pp. R1-R16, 2018 • With David Bell, 'Underemployment and the Lack of Wage Pressure in the UK', National Institute Economic Review, No. 243, February, pp. R53-R61, 2018 • With Andrew T. Levin 'Labor Ma​rket Slack and Monetary Policy' , working paper 2014. • With Andrew J. Oswald 'Does High Home-Ownership Impair the Labor Market?' Peterson Institute Working Paper 13-3, May 2013. • With Andrew Oswald, The Wage Curve, MIT Press, 1994

The long dragging conditions of semi-slump " For it is a possibility that the duration of the slump may be much more prolonged than most people are expecting and much will be changed both in our ideas and in our methods before we emerge. Not, of course the duration of the acute phase of the slump, but that of the long, dragging conditions of semi-slump, or at least sub- normal prosperity, which may be expected to succeed the acute phase ” . Keynes, J.M. (1931), ‘An economic analysis of unemployment’, in Unemployment as a World Problem, edited by Q. Wright and J.M. Keynes, University of Chicago Press.

Full-employment in a Free Society – William Beveridge, 1960 – “ full employment has been accomplished ” • “In 1944 as a guide to the amount of such temporary idleness as we might expect under full employment, I suggested a figure of 3%, of the total labour force idle at any time. • Maynard Keynes, when he saw this figure, wrote to me that that there was no harm in aiming at 3%, but that he would be surprised if we got so low in practice. • In fact during the 12 years 1948-1959 the average unemployment rate for Britain taking all industries together, has been not 3% but half of that, 1.55% in exact terms. • Full employment is here. This is probably the single largest cause of British prosperity today. ”

Fed Chair Jay Powell yesterday, December 11 th 2019 “ Wages, really. There is so many other measures that suggest that the labor market is, I like to say labor market is strong, I don't want to say that it's tight. Someone asked me a question about a hot labor market. That was in the Humphrey Hawkins hearings. The labor market is strong. I don't know that it's tight because you are not seeing wage increases, ultimately, if it's tight those should be reflected in higher wage increases . It does come down to that. We look at countless measures of labor market, labor utilization and there are so many. It's too many to count. But the one that is suggesting that, it's a healthy number, the 3.1 percent average hourly earnings number is a decent number, 3.7 percent for production supervisory workers is more healthy. Ultimately though, we would like to see, to call it hot, you would want to see heat, you would want to see higher wages. ”

10.5 11.5 0.5 1.5 2.5 3.5 4.5 5.5 6.5 7.5 8.5 9.5 10 11 0 1 2 3 4 5 6 7 8 9 Jan-65 Nov-65 Sep-66 Jul-67 May-68 Mar-69 Jan-70 Nov-70 Sep-71 Jul-72 May-73 Mar-74 Jan-75 Nov-75 Sep-76 Jul-77 May-78 Mar-79 Jan-80 Nov-80 Unemployment rate and PNSW Annual Weekly Wage Growth Sep-81 Jul-82 May-83 Mar-84 Jan-85 Nov-85 Sep-86 Jul-87 May-88 Mar-89 Jan-90 Nov-90 Sep-91 Jul-92 May-93 Mar-94 Jan-95 Weekly wage growth Unemployment rate Nov-95 Sep-96 Jul-97 May-98 Mar-99 Jan-00 Nov-00 Sep-01 Jul-02 May-03 Mar-04 Jan-05 Nov-05 Sep-06 Jul-07 May-08 Mar-09 Jan-10 Nov-10 Sep-11 Jul-12 May-13 Mar-14 Jan-15 Nov-15 Sep-16 Jul-17 May-18 Mar-19

-5 -4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 Jul-00 Nov-00 Mar-01 Jul-01 Nov-01 Mar-02 Jul-02 Nov-02 Mar-03 Jul-03 Nov-03 Mar-04 Jul-04 Nov-04 Mar-05 Jul-05 Nov-05 Mar-06 Jul-06 US and UK weekly nominal wage growth Nov-06 Mar-07 Jul-07 Nov-07 US production and non-supervisory Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 UK Jul-12 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16 Mar-17 Jul-17 Nov-17 Mar-18 Jul-18 Nov-18 Mar-19 Jul-19

460 470 480 490 500 510 520 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Sep 06 Dec 06 Mar 07 Jun 07 Sep 07 Dec 07 Mar 08 Jun 08 UK Real Weekly Earnings Total Pay at 2015 Constant Prices Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10 Mar 11 Jun 11 Sep 11 Dec 11 Mar 12 Jun 12 Sep 12 Dec 12 Mar 13 Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14 Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Jun 16 Sep 16 Dec 16 Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Mar 19 Jun 19

250 260 270 280 290 300 310 320 330 340 350 Jan-64 Nov-64 Sep-65 Jul-66 May-67 Mar-68 Jan-69 Nov-69 Sep-70 Jul-71 May-72 Mar-73 Jan-74 Nov-74 Sep-75 Real Weekly Earnings Private Sector Production and Non-Supervisory Workers, $1982-1984 Jul-76 May-77 Mar-78 Jan-79 Nov-79 Sep-80 Jul-81 May-82 Mar-83 Jan-84 Nov-84 Sep-85 Jul-86 May-87 Mar-88 Jan-89 Nov-89 Sep-90 Jul-91 May-92 Mar-93 Jan-94 Nov-94 Sep-95 Jul-96 May-97 Mar-98 Jan-99 Nov-99 Sep-00 Jul-01 May-02 Mar-03 Jan-04 Nov-04 Sep-05 Jul-06 May-07 Mar-08 Jan-09 Nov-09 Sep-10 Jul-11 May-12 Mar-13 Jan-14 Nov-14 Sep-15 Jul-16 May-17 Mar-18 Jan-19

54.0 54.5 55.0 55.5 56.0 56.5 57.0 57.5 58.0 58.5 59.0 59.5 60.0 60.5 61.0 61.5 62.0 62.5 63.0 63.5 64.0 64.5 65.0 Feb-71 Nov-71 Aug-72 May-73 Feb-74 Nov-74 Aug-75 May-76 Feb-77 Nov-77 Aug-78 May-79 UK Feb-80 Nov-80 Aug-81 May-82 Feb-83 Nov-83 USA Aug-84 May-85 Monthly Employment Rates US and UK, 1971-2019 Feb-86 Nov-86 Aug-87 May-88 Feb-89 Nov-89 Aug-90 May-91 Feb-92 Nov-92 Aug-93 May-94 Feb-95 Nov-95 Aug-96 May-97 Feb-98 Nov-98 Aug-99 May-00 Feb-01 Nov-01 Aug-02 May-03 Feb-04 Nov-04 Aug-05 May-06 Feb-07 Nov-07 Aug-08 May-09 Feb-10 Nov-10 Aug-11 May-12 Feb-13 Nov-13 Aug-14 May-15 Feb-16 Nov-16 Aug-17 May-18 Feb-19

Unemployment Rates % 2008 2018 Australia 4.2 5.3 Canada 6.1 5.8 France 7.1 9.1 Germany 7.5 3.4 Greece 7.8 19.3 Ireland 6.8 5.7 Italy 6.7 10.6 Japan 4.0 2.4 United Kingdom 5.6 4.0 United States 5.8 3.9

Labor Market Rates Employment rates 15-64 LFPR 2008 2018 2008 2018 Australia 73.2 73.8 76.5 78.0 Canada 73.5 73.8 78.4 78.4 France 64.9 65.4 69.9 72.3 Germany 70.1 75.9 75.9 78.7 Greece 61.4 54.9 66.7 68.2 Ireland 59.8 68.7 75.0 73.0 Italy 58.7 58.5 62.9 65.6 Japan 70.9 76.9 73.8 78.9 United Kingdom 71.5 74.7 76.8 78.3 United States 70.9 70.7 75.3 73.6

Underemployment rates U7 = PT wants FT/employment 2008 2013 2018 Belgium 0.8 3.3 3.5 Cyprus 2.1 6.4 5.4 Finland 2.7 3.0 3.8 France (metropolitan) 4.5 5.5 5.1 Germany 6.0 4.3 2.9 Greece 2.0 4.5 5.3 Italy 1.6 2.5 2.6 Netherlands 1.1 6.7 4.3 Norway 3.0 2.9 2.7 Portugal 1.8 5.2 3.5 Spain 3.6 6.8 5.6 Sweden 4.5 5.0 3.3 Switzerland 5.8 6.3 7.2 United Kingdom 4.2 6.2 4.4

Annual Average Wage Changes 2000-2016 (annual % changes) Nominal Real 2000-2007 2008-2016 2000-2007 2008-2016 Australia 4.2 2.9 1.3 0.6 Canada 3.5 2.6 1.7 1.2 France 3.0 1.7 1.1 1.0 Germany 1.6 2.3 0.2 1.1 Greece 5.7 -1.7 2.6 -2.2 Ireland 5.9 1.2 2.4 1.2 Italy 3.1 1.2 0.4 -0.1 Japan -0.8 -0.2 -0.1 0.0 United Kingdom 4.1 1.7 2.7 -0.3 United States 3.8 2.2 1.5 0.7

Table 3.2. Twenty Three Successive MPC Wage Forecasts, 2014 – 20 (%) 2014 2015 2016 2017 2018 2019 2020 2021 2014 Q1 2¾ 3¾ 3¾ 2014 Q2 2½ 3½ 3¾ 2014 Q3 1¼ 3¼ 4 2014 Q4 1¼ 3¼ 3¾ 3¾ 2015 Q1 3½ 4 4 2015 Q2 2½ 4 4 2015 Q3 3 3¾ 4½ 2015 Q4 2½ 3¾ 4 4¼ 2016 Q1 3 3¾ 4¼ 2016 Q2 3 3¾ 4 2016 Q3 2¾ 3 3½ 2016 Q4 2½ 2¾ 3¾ 3¾ 2017 Q1 3 3¾ 3¼ 2017 Q2 2 3½ 3¾ 2017 Q3 2 3 3¼ 2017 Q4 2¼ 3 3¼ 3¼ 2018 Q1 2½ 3 3¼ 3½ 2018 Q2 2¾ 3¼ 3½ 2018 Q3 2½ 3¼ 3½ 2018 Q4 3½ 3 3¼ 2019 Q1 3½ 3 3¼ 3¾ 2019 Q2 3 3½ 3¾ 2019 Q3 3 3¼ 4 3.6 (Jan- Aug ‘19) Outcome 1.6 2.4 2.4 2.3 2.8