Friday, January 8, 2021

Nah, that can't be

At FRED, a search for labor force turns up almost 27,000 datasets. 30 pages of results. Halfway down the first page I was distracted by a shiny object: Average Annual Hours Worked by Persons Engaged for United States:

Graph #1

First thing that caught my eye: the big drop at the start.

I blinked and looked again: After being interrupted by the 1953-54 recession, a sharp drop in average hours worked, from 1955 to 1958.

Maybe you know where my mind goes next: Samuelson and Solow (1960): What James Forder said: "The question they were addressing was that of the explanation of the inflation of the 1950s – particularly the period 1955-57".

Any relation between the drop in hours worked and inflation? possibly cost-push inflation? possibly wage-push? Wage demands could have been rising to compensate for the fall of hours worked. Could be. What else does the graph show? 

A longer big decline, from 1966 to 1982, almost the whole of the "great inflation".

Well that's weird. Wage demands spurring inflation despite four recessions? That's hard to fathom. But it is odd that both big drops in "hours worked" occur at times when inflation was a problem.

Hm, there is one more interesting drop on the graph, from 2000 to 2009. Here's inflation during that time:

Graph #2: Three Measures of Inflation, 2000-2009

An argument could perhaps be made.

It wouldn't mean that wage costs are always what drives inflation. It might mean only that wage demands are a coincident indicator or a contributing consequence.

When we see persistent declines in hours worked, it seems we also find increasing inflation.

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