Category Archives: jobs

5/5/20: A V-Shaped Recovery? Ireland post-Covid

My article for The Currency on the post-Covid19 recovery and labour markets lessons from the pst recessions:

Key takeaways:
"Trends in employment recovery post-major recessions are worrying and point to long-term damage to the life-cycle income of those currently entering the workforce, those experiencing cyclical (as opposed to pandemic-related) unemployment risks, as well as those who are entering the peak of their earnings growth. This means a range of three generations of younger workers are being adversely and permanently impacted.

"All of the millennials, the older sub-cohorts of the GenZ, and the lower-to-middle classes of the GenX are all in trouble. Older millennials and the entire GenX are also likely to face permanently lower pensions savings, especially since both cohorts have now been hit with two systemic crises, the 2008-2014 Great Recession and the 2020 Covid-19 pandemic.

"These generations are the core of modern Ireland’s population pyramid, and their fates represent the likely direction of our society’s and economy’s evolution in decades to come."

3/6/19: Three Periods in labor Force Participation Rate Evolution and Secular Stagnations

The state of the global labor markets is reflected not only in the record lows in official unemployment statistics, but also in the low labor force participation rates:

In fact, chart above shows three distinct periods of evolution of the labor force participation rates in the advanced economies, three regimes: the 1970s into 1989 period that is marked by high participation rates, the period of 1990-2004 that is marked by the steadily declining participation rates, and the period since 2005 that is associated with low and steady participation rates.

This is hardly consistent with the story of the labor markets spectacular recovery that is presented by the official unemployment rates. In fact, the evidence in the above chart points to the continued importance of the twin secular stagnations hypothesis that I have been documenting on this blog.

The Impact of a Court-Ordered Disruption of California’s Gig Economy

After growing at an average rate of 27,100 employed people per month from January 2015 to September 2017, California's total employment stalled out at a level just over 18.5 million in the 12 months from September 2017 to August 2018 before finally resuming an upward trajectory.

Google Search Results

That observation started us digging into the state's employment data, where we were looking to identify distressed industries within the state, specifically looking for economic sectors that might have been losing jobs as others were gaining them, which would account for the period of stagnation.

After looking the data over, the leading candidates were the state's Mining and Logging sector(which includes Oil Extraction), the Construction sector, and California's catch-all "Other Services" economic sector. But the job numbers we saw in these industries didn't explain the full magnitude of the deviation in trend of the state's total employment level that occurred during this time.

That's when it occurred to us that we were comparing apples and oranges, where the total employment data comes from the Bureau of Labor Statistics' monthly survey of U.S. households, while the industrial employment figures represent the number of jobs counted in the BLS' monthly survey of U.S. business establishments.

As it happens, we have some experience with that topic, where top Google search result for the difference between household and establishment survey currently returns an article that we wrote several years ago.

It occurred to us that we could use the difference between the kinds of employment data collected between the two surveys to determine if the apparent stagnation in California's total employment level from September 2017 through August 2018 could be partially accounted for by changes in non-establishment employment, which could potentially explain the gap.

So we took both sets of seasonally-adjusted data and graphed them on the same chart, projecting the linear trend for each that was established in the period before the period of stagnation in the total employment data took hold in September 2017. We found something remarkable.

California Total Employment and Total Non-Farm Payroll Employment, Seasonally Adjusted, January 2015 - October 2018

Both total employment and nonfarm establishment jobs in California grew steadily in the period from January 2015 through September 2017. While the total employment level began to stagnate at that point, the number of filled jobs at establishments continued to grow until January 2018, after which it began to flatten. After March 2018, both series of data deviate significantly from their established linear trends, where the trajectory of total employment data shows a bigger negative deviation than the total nonfarm payroll data.

What this data tells us is that there was a notable shift, beginning in September 2017 and more notably after March 2018, where Californians employed outside of business establishments in the state shifted to become payroll employees. The following chart shows the difference between the two data series (note that this math can only produce at best a rough estimate of the change given the differences in the types of employment data involved - the two sets of data do not fit precisely together like puzzle pieces).

Difference Between California Total Employment and Total Non-Farm Payroll Employment, Seasonally Adjusted, January 2015 - October 2018

The chart also marks the timing of a powerful explanation for the deviation from previous trend that we observe after March 2018. In April 2018, the California Supreme Court ruled in Dynamex Operations West, Inc. vs Superior Court that many Californian employers would have to reclassify many workers who they had previously employed as independent contractors under Californian state law as regular employees, putting them on their establishment's payrolls.

The court's arbitrary ruling was expected to cause "massive disruption to California's gig-economy employers", where the significant deviation from previous trend for both total employment and total nonfarm payroll jobs after March 2018 suggests occurred.

That doesn't explain the shift that appears to have occurred from September 2017 to March 2018, but that period also roughly coincides with the peaking and subsequent decline of California's housing market that has largely been driven by the Federal Reserve's recent series of rate hikes. This sector of California's economy coincidentally employs about one out of every five independent contractors in the state, where the decline of the market may have prompted many of these Californians to stop being their own boss and start working on someone else's payroll.

Although all the employment data we've presented in this post is still subject to future revision, it does suggest that California's gig-economy did experience a court-ordered disruption during 2018. That same preliminary data also suggests that the period of adjustment may now be over, but we won't know for sure that's the case for quite some time.