Tuesday, November 16, 2010

October Employment/Population Ratios

I didn't cover it at the time, but I like to track the working age employment/population ratios, and the October numbers came out November 5th.  The above graph shows both the male and female ratios for the last two and a half economic cycles (since 1990).  As you can see, the 2010 statistics are pretty bleak - the fraction of the population working is not behaving like it's recovering at all, instead sinking or at best holding steady for a month or two.

Since there has been some domestic economic growth during 2010, you'd think the problem is that productivity is rising fast enough to create growth in output without growth in the employment ratio.  The productivity statistics don't exactly bear this story out though:

There was a big boost to productivity in 2009, when output/hour was growing at about 5%, but it seems to have fallen back close to zero in 2010 (suggesting businesses have made most of the productivity improvements they know how to make for now).


Anonymous said...

I suspect that productivity has stalled because productivity, practically defined in modern business, is the process of replacing human labor with machine labor (or cheaper labor or nothing). At some point, you run out of cost-cutting strategies and have to improve the top line in order for the bottom line to move. Companies have pretty much cut as much as they can without beginning to materially impact their bottom line negatively. It seems unlikely that you will see substantial improvements in productivity absent significant changes in the overall economic picture.

Stuart Staniford said...


I wouldn't agree with that. The tech industry is constantly coming up with bright ideas to cut costs and improve productivity - that process may slow down a bit in a recession or jobless recovery, but it's not going to stop. The best ideas will tend to get funded and succeed, and then will impact productivity growth in coming years. The pace of adoption varies, of course.

Alexander Ac said...

Hi Stuart,

you made it into climatological circles really with the R&Z 2010 critique - William Connolley blog positively mentions your post:


Alexander Ac said...

In the case you have not seen:

Bob Hirsch on climate change!



Frozen in the North said...


Labor productivity is an equation: How many input units for a given production output. In every recession productivity rises because employer reduce labor for the same output, "do more with less".

Whereas I agree that the long term labor productivity is driven by innovation, it has little or not impact in the short term.

In fact, one driver in the most recent recession has been the dramatic reduction on business investments, which would confirm that that productivity has been driven by cost cutting rather than replacing units of labor. (the problem with this kind of labor productivity improvement is that it speaks volume as to the lack of business confidence...)

Finally, you should note that there are thousands of articles and ideas as to what makes productivity rise (strictly speaking this is the best way to increase "society's wealth"). Bottom line, lots of theories and very little empirical results with regards to policy...