Data frequency, and aggravation type

Watch that high point, the 5% in 1955.

Monthly Frequency (FRED default)

 

Annual Frequency, FRED Aggregation Type "Average"

 

Annual Frequency, FRED Aggregation Type "End of Period"

Finegan again

Finegan describes data I can use to look for the 1955 increase in labor force.

Given my focus on 1955-57, I found the most interesting bit of Finegan's article to be on page 31 where he writes:

... the 2.5-percent rise in the labor force between 1969 and 1970 was equaled only by the increase between 1968 and 1969; only four other year-to-year increases (1947-48, 1954-55, 1955-56, and 1966-67) were larger than 2.0 percent.

Take another look at the FRED data:

Graph #1: Labor Force Growth thru 1980

The 1956 increase is NOT larger than 2.0 percent. And the 1955 increase is way bigger than 2%. If that one was 2% I wouldn't have noticed it. It would have been like 1959-60 on the graph: No big deal.

Dunno. Maybe there was some revision in the data, after Finegan wrote his article. I have to track that down. I still want to find the explanation of the super-high 1955 increase in the labor force.

I don't want to go to FRED for this. I don't want current data. I want to see the data Finegan was looking at in 1971-72. He identifies the data source at the bottom of Table 1:

Yeah, I'm not finding the "1971 Manpower Report of the President" on the internet. The Economic Report of the President comes to mind. I'll go with Table C-22 of the 1971 ERP.

Finegan's numbers for the total civilian labor force: 80,733 for 1969 and 82,715 for 1970. "Numbers in thousands". I find exactly the same numbers in the "Total" column (to the right of the "Armed Forces" column) in Table C-22. I'll go with that -- for "persons 16 years of age and over".

// 

It's not so bad, typing the data in, if the data stops in 1970. Less than 25 numbers to type. Come to think of it, that's how I started, paying a quarter apiece at the library to photocopy pages from the Historical Statistics, Bicentennial Edition, and entering data thru 1970.

Entering data? Into what?? Nah, I didn't have to enter the data back then. I did my graphs by hand.

//

Here is the "civilian labor force level" data for 1948-1970, a comparison of current data from FRED and 50-year-old data from the 1971 Economic Report of the President:

The ERP data generates the wide blue line. The FRED data gives us the yellow line, not perfectly centered atop the blue, but not far off. The numbers have changed little in 50 years. Hmm.

Okay, so next I need the "percent change" values to see annual labor force growth rates.

I did the figuring, and peeked before making the new graph. Finegan talks of increases "larger than 2.0 percent" for 1955 and 1956 growth. As soon as I figured the growth rates, I looked:

	ERP Data	FRED Data
1955	2.17% increase	2.03% increase
1956	2.35% increase	2.42% increase

Larger than two percent all around, as Finegan says. And no 5% increase in 1955. WTF!

I'm looking at annual data, not monthly. I notice that the monthly data varies: there is a big increase in June for example, at the end of the school year. It's not like debt, where every number is bigger than the one before until you have a crisis.

The annual values -- at least in the ERP -- are "averages of monthly figures". I got the 5% increase for "percent change from year ago" of monthly data. In my case, the default was monthly data. For Finegan, the default was annual, it appears. Maybe this accounts for the difference.

So I still don't know what accounts for the 1955 increase of the labor force. I still kinda think it must have been Korean war veterans returning to a peacetime economy. But I didn't find anything on that, and anyway the Korean war ended in July 1953. What were those people doing for a year and a half ? Apparently not joining the labor force in droves.

Time to look at monthly data.

//

I checked every Economic Report of the President from 1953 to 1968, looking for Noninstitutioinal Population and the Labor Force or something like. All of them list data for "persons 14 years of age and over". The 1968 edition was the first where I also found data on "persons 16 years of age and over".

I guess I can just use the "age 14" data, as it covers the mid-1950s. But I didn't know the "age 16" stuff wasn't available. And FRED's labor force data is age 16 and up. So I spent the morning looking at old ERP files. Good thing my head don't spin easy.

Or... Historical Statistics: Data thru 1970, and in particular Table D 11-25, which lists the labor force as age 16 and up, might be just the ticket. There is a note, however.

The introduction of data from the decennial censuses into the estimation procedure in 1953 and 1962 and the inclusion of Alaska and Hawaii beginning in 1960 have resulted in 3 periods of noncomparability; see text.

The "text" for Table D 11-25 says in part:

In 1953, population data from the 1950 census were introduced into the estimating procedure, affecting the comparability of the labor force figures with earlier years. Population levels were raised by 600,000; labor force, total employment, and agricultural employment levels were raised by 350,000, primarily in the figures for all persons and for males. Similarly, population data from the 1960 census were introduced in 1962, reducing the population totals by 50,000 and the labor force and employment totals by 200,000.

The inclusion of Alaska and Hawaii in 1960 resulted in an increase of about 600,000 in population and 300,000 in the labor force, four-fifths of which was in nonagricultural employment.

These adjustments are close in time to 1955 but seem to miss it. They are big numbers, big enough maybe to create a 5% increase in the labor force, but ...
anyway I have to look.

If data for 1953 is not comparable with data for 1952 and before, and data from 1960 is not comparable with data from 1959 and before, then we can safely look at data for the 1953-1959 period. That might be just what I need.

T. Aldrich Finegan on 1955-57

During the baby-boom upswing of the Labor Force Participation Rate, after the 1970 recession, the Monthly Labor Review published an article and noted that its

Alternative projections of labor force growth suggest difficulties in returning to a 4.5-percent unemployment rate

T. Aldrich Finegan: "Labor force growth and the return to full employment" at JSTOR. Monthly Labor Review, February 1972

Looking back in time, Finegan writes (page 35):

Only one postwar recovery -- namely, 1954-55 -- was followed by a prolonged period of full employment when the country was not at war. And that period (1955-57) was very unusual in several respects. As table 3 reveals, real GNP rose only 1.5 percent a year -- less than half the average rate for the postwar period (3.7 percent). At the same time, growth in employment (1.2 percent per year) was abnormally high relative to the growth of real output but abnormally low for a full employment period. Evidently, only a rare combination of exceptionally small growth in output per worker and in the size of the labor force kept unemployment from rising during these two years.

He sees

• slow economic growth
• relatively high employment growth
• low labor productivity growth

That's half a confirmation of my answer to the question about the cause of the 1955-57 inflation, except Finegan draws no conclusions about inflation. His focus is the 1970s, the baby boom entering the workforce, and unemployment.

Matter of fact, a lot of the argument in the late 1950s and early '60s was about whether the 1955-57 inflation was cost-push or always-and-everywhere inflation. Because it was a hot topic, it was easy for people to see what they wanted to see in the data. Finegan, writing in 1971-72 and focused on unemployment rather than inflation, was able to evaluate the data with a cool head. I think so, anyway. I have more confidence in his evaluation of the '50s than I do even in Samuelson and Solow's. Hindsight, and all that.

 

Finegan sees full employment in 1955-57, but also unusually slow economic growth. That combination screams "low productivity!" 

We have already seen the low productivity and its consequences. But if Finegan's details are right, we should be able to see that low in a graph of real GDP relative to the number of workers in the economy. Come to think of it, yes, that is one way to measure productivity:

Graph #1: Real GDP per Worker, with HP showing low productivity
between the post-recession bounces of 1955 and 1959

I showed the data in Excel and put a Hodrick-Prescott on it to see the 1956-57 low. Then I set the background to "no fill", copied the plot window, and pasted it over the FRED graph, matching Excel's GDPC1/PAYEMS line with the line in the FRED graph to get the fit right. Where there's a will there's a way.

Unrelated: I thought Finegan's method of identifying "recoveries" and "expansions" was interesting and might be useful:

The historical periods were selected in the following way. In the case of previous recoveries, the criterion was that each period should begin with the quarter immediately preceding that in which real GNP resumed growing and should end with the quarter in which the unemployment rate stopped falling. Two exceptions to this rule were made ...

In the case of the three "other expansions," the criterion was a generally sustained growth of employment not accompanied by a pronounced change in the unemployment rate...

Remember when some people were saying the post-2008 decline of Labor Force Participation had nothing to do with economic conditions being so bad? It was baby boomers retiring, they insisted.

T. Aldrich Finegan in Labor force growth and the return to full employment (at JSTOR) from Monthly Labor Review, February 1972, page 30. (Page 2 of 11 JSTOR pages):

 "... it is well established that, other things equal, the labor force tends to be larger when (and where) labor market conditions are more favorable ..."

Alternatively, see Requirements for a Return to Full Employment, 1971-73  (PDF, typed, preliminary draft, text not selectable) 

//

I thought I was done with this one. Nope. At JSTOR I just found The Great Labor Force Projection Debate: Implications for 1980 by Marc Rosenblum, from the Fall 1973 issue of The American Economist. Rosenblum writes:

... new projections being issued by the Labor Department for 1980 fail to reflect a major lesson learned from the great debate over 1970 forecasts: projection accuracy depends in part on the extent to which actual economic conditions during the target year match the projection's full-employment assumptions. Changes in labor force size are, to that extent, induced by changes in demand at given wage rates...

Only seven years ago Jacob Mincer wrote that the procyclical behavior of the labor supply had finally been accepted, after "three decades of research and occasionally animated controversy."

... The two main critics of the Labor Department's forecasts, Alfred Tella and Thomas Dernburg et al., both held (correctly, as it turns out) that Government figures would understate the 1970 labor force. Along with their reasoning both offered projections based on their own regression models, avoiding the supposed shortcomings of inflexibility to economic conditions they both found (independently) in the BLS forecasts...

And that's just on the first page.

//

In these articles from the early 1970s, references to "full employment" policy are glaringly obvious. You don't see that in recent thinking. So different!

Cleaning up the Desktop

Instead of just moving files off my desktop, I decided to look at a few of them. That slowed things down. But I did get a blog post out of it.

Peak Interest Costs

 

Looking at that one, of course I wanted to see also the continuation of the 1960-1972 trend:

Just Looking

 

M1 money: 

Big increase in 2020

Some terms were redefined.  Savings was excluded from M1 before the change, and is now included.

This next one goes back to mine of 13 April, Answering an old question:

A price increase in 1950, let's say related to the Korean war. Then some remarkable price stability.
Then a price increase that begins in the second half of the massive 1955 increase in the Labor Force,
as adding all that unskilled labor led to falling productivity and rising business costs.

 

Looking at that graph, and now being more familiar with this data

• price per unit
• labor cost per unit
  
• nonlabor cost per unit and
• profit per unit,
  

I jumped to look at labor cost per unit as a percent of price per unit:

Unit Labor Cost as a percent of Unit Price of NCB output, 1950-1962

The drop in labor cost that was inspired by the 1954 recession ends in Q1 1955. The four dots there indicate the four quarters of 1955. The labor costs of nonfinancial corporate business ran low in 1955, and only started picking up in 1956: The increase of Q3 1955 is more like noise than an increase. (Compare it to the first increase after the low point of Q4 1950, or the first increase after the low of Q2 1959.) And from Q1 1956 to the 1958 recession is less than a one percentage point increase.

I think it is reasonable to say that in 1955-56, prices started going up before labor costs. Therefore, I have to say it was not wage-push inflation that drove prices up.

 

Price per unit is typically highest of the four data values, with labor the highest cost, then non-labor cost, and profits the lowest number of the four. But if you look at them on a graph, you just see four somewhat wiggly lines running across the page. So I indexed the four data sets to make them all the same value where they start, in 1947-01-01. Now we can see how they move, relative to each other:

Relative Movement of Unit Labor Cost (blue), Unit Non-Labor Cost (red),
Unit Price (green) and Unit Profits (purple)

With everything indexed and starting out equal in early 1947, profit (purple) is clearly the most variable of the numbers. The labor cost number runs almost unfailingly lower than everything else. That is due to the indexing; but the graph does show less variability in labor than in non-labor cost, and certainly less than in profits. And it is easy to see that non-labor cost increased faster than labor cost.

Note also that purple profits drop to low points when the red and blue costs reach highs. Based on this observation, we might think that at start-of-data, where profits are at a definite low point, labor and non-labor costs were already at high points that we cannot see due to the indexing -- and because no earlier data is available.

Well this is way more fun than just moving files off my desktop!

The whole paragraph from Smith

According to the glossary of the U.S. Bureau of Economic Analysis, "Value Added" is

The gross output of an industry or a sector less its intermediate inputs; the contribution of an industry or sector to gross domestic product (GDP).

So I'm thinking that Gross Value Added is the gross output of an industry or sector, including the intermediate inputs. And total GVA would be greater than GDP.

The rest of the glossary entry:

Value added by industry can also be measured as the sum of compensation of employees, taxes on production and imports less subsidies, and gross operating surplus.

//

Value added for business and government adds up to 100% of GDP:

The rest of us are just consumers who add no value to the world. (Now you know.) So much for the wisdom of Adam Smith:

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it.

and Maynard Keynes:

Consumption — to repeat the obvious — is the sole end and object of all economic activity.

//

The whole paragraph from Smith:

Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it. But in the [modern]mercantile system the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce.

Secular Cycles: Population

Secular Cycles, by Peter Turchin and Sergey A. Nefedov

From Chapter One (page 19):

Most broadly the cycle can be divided into two opposite trends. In the literature these are sometimes called the positive "A Phase" and the negative "B phase," but we prefer the more descriptive terms integrative and disintegrative trends.

The population tends to increase during the integrative phase and decline or stagnate during the disintegrative one.

 

 

ABC News:

22 December 2020

US population growth smallest in at least 120 years

The U.S. population grew by the smallest rate in at least 120 years from 2019 to 2020, according to figures released Tuesday by the U.S. Census Bureau — a trend that demographers say provides a glimpse of the coronavirus pandemic’s toll.

Population growth in the U.S. already was stagnant over the past several years due to immigration restrictions and a dip in fertility, but coronavirus-related deaths exacerbated that lethargic-growth trend, said William Frey, a senior fellow at The Brooking Institution’s Metropolitan Policy Program.

“I think it’s a first glimpse of where we may be heading as far as low population growth," Frey said. “It’s telling you that this is having an impact on population."

The U.S. population grew by 0.35% from July 2019 to July 2020, an increase of 1.1 million people in a nation whose estimated population in July was more than 329 million residents, according to Census Bureau estimates.

...

From The Economics of Population Growth by Jonathan Rochford:

At the most basic level, population growth increases the total size of the economy including the demand for labour. There are more people purchasing goods and services so the economy grows to meet that demand. Politicians are positively disposed to population growth as it allows them to boast about economic growth and job growth...

However, this is a very shallow line of thinking ...

 Amen, brother.

From The Role of Population in Economic Growth by E. Wesley F. Peterson:

In his important book on inequality, Thomas Piketty (2014) observes that economic growth “ . . . always includes a purely demographic component and a purely economic component, and only the latter allows for an improvement in the standard of living” (p. 72). Economic growth is measured by changes in a country’s Gross Domestic Product (GDP) which can be decomposed into its population and economic elements by writing it as population times per capita GDP.

Right. That's a version of "growth accounting".

There is no greater hypocrisy than to proclaim one's desire to improve the economy when one's solution is to boost GDP by boosting the population, which of course does nothing to improve GDP per Capita.

Meanwhile, slow population growth itself is an indicator that society is entering, or has already entered its "B" phase, the disintegrative phase of the "secular cycle", the "The End Is Near" phase.

Toynbee of course says that our civilization does not have to follow in the footsteps of the 20-odd other civilizations he identifies, none of which survived. Dunno yet what Turchin and Nefedov say on that topic.