U.S. labor force participation, growth and productivity in the last four recoveries By Mun S. Ho* Based on work with Dale Jorgenson* and Jon Samuels** *Harvard University, and ** BEA World KLEMS Conference 2018 Harvard University June 4, 2018 The views expressed in this paper are solely those of the authors and are not necessarily those of the Bureau of Economic Analysis, U.S. Department of Commerce.
Motivation The U.S. recovery from the Great Recession has been slow compared to previous recoveries: 1.9% p.a. for 2009-2014, compared to 4.5%, 3.2%, and 2.8% during 1982-87, 1991-96, 2001-06 (5-year spans). Features of Great Recession recovery: Very weak recovery of employment-population (EP) ratio. EP(educated) improved faster than EP(noneduc) -> short term rise in labor quality Slow growth of Total Factor Productivity. Weak recovery of investment. Our objectives Give an industry-level Sources of Growth comparison of recoveries Classify by education-intensity Give an accounting of EP effects Discuss role of above in growth projections
Sources of Growth 1947-2015 TFP accounted for ~20% of growth. Capital Input predominate among Sources of Growth Educated labor grew in importance.
Objective: Sources of Growth during last 4 Recoveries (5years after trough) Next slides color these bars: K,L, TFP Sources of Growth Which industries contributed to this growth Accounting for employment/pop
Sources of Aggregate Value-Added Growth during recoveries
Which industries contributed the most to these recoveries?
Education, Emp-Pop, and Industry Classification Educ Intensive Industries Industry BA+ Share Securities 68.5 Computer systems 68.2 Funds, trusts 67.5 Legal services 62.1 Educational svc Misc. professional 61.5 Information svcs 56.4 Publishing 55.9 Mgmt of companies 52.6 Performing arts 47.3 Computer mfg 46.4 Motion picture 45.3 Insurance 43.9 Chemicals 42.6 Ambulatory health 41.9 Telecommunications 38.8 Oil and gas 38.1 Banks 37.8 Real estate Other transp equip 37.3 Air transp 35.5 Hospitals 33.3 Federal govt 32.3 Petroleum prod 30.9 Education important driver of aggregate labor input and emp/pop trends We develop new industry classification based on “skill” intensity. Skill intensity: Share of Workers with a BA degree or above, 2007 Link education and industry performance during the recovery.
Industry Sources of Growth during recoveries
Industry Decomposition of the Sources of Aggregate VA Growth
Employment-population ratio, differences by Education and labor quality during Recoveries
Labor Force Participation Rate versus Employment-Population (age 25-54) Emp/pop accounts for unemployment changes during the recovery Simpler link to labor input: Hours = hr/wk * E/P * Pop
Emp-pop and education Emp-pop depends critically on education We construct emp/pop by sex, age, and education
Decomposition of Labor Input during Recoveries EP continued falling in 2001-06 recovery EP recovered slowly after Great Recession; small contribution in 5yr Continued EP recovery is key to growth projections
Over the longer horizon, the TFP contribution differs significantly bet. Educ-int and non-Educ
Conclusions The last 4 recoveries was steadily weaker; 2009-2014 recovery was slowest (1.9%). Growth accounting provides the contributions of K, L and TFP to the weakening recoveries. In the Great Recession recovery: Capital growth and TFP growth tiny relative to previous recov. Emp-pop recovered slowly, but not drag on this recovery. Less severe changes to Emp-pop of highly educated contributed to temporary rise in labor quality. Over longer horizon big diff in TFP by Education-intensity Next steps: projection model that incorporates these differences in emp-pop trends by sex-age-educ.