A couple of charts about the US labour market

I haven’t done a post on the US for a very long time. The data point that is in most people's mind is unemployment. Suddenly everyone “discovered” that the fall in unemployment is kind of artificial and is due to people dropping out of the labour force and cannot be attributed to the exorbitant number of new jobs created. 

One data-point that I haven’t seen mentioned anywhere is that of the numbers of persons in the civilian labour force.

source: FRED

The number of people in the civilian labour force stagnated of even decreased a little bit, since the Great Recession kicked in and has only lately started rising anemically. This is something unprecedented, at least in the years that the FRED data cover.

 

Since the unemployment rate is skewed by people dropping out of the labour force one has to resort to alternative indicators to get a whiff of the actual state of the US labour market (well as much of a whiff as you can get when you are sitting behind your screen in Athens tapping your keyboard). An indicator that in my humble opinion matches the above description is the employment / population ratio.

source: FRED, own calculations

After the floor was taken off its feet the said ratio has not budged despite the alleged fall in unemployment rate. It even stands below its long term average.

From where I’m sitting the situation in the US labour market does not seem that rosy and it certainly does not appear to be improving. What this speaks of is structural problems in the economic model of the US, something which is also obvious in the largest part of Europe. These issues cannot be addressed by monetary policy but by structural policies.

 

 

 

Maybe Greece is a bit of a special case...

The post's title of course does not refer to comments from various finance ministers, central bank officials etc. It refers to one certain feature that the Greek economy has displayed since the adjustment program was commenced in mid-2010.

The said feature is none other than exports’ contribution to growth as opposed to the other two EZ countries who are currently en train of a similar troika-led adjustment program, namely Ireland and Portugal (I exclude Cyprus for obvious reasons).

I have plotted a few charts showing annual changes of GDP components in constant prices, as a way to replicate GDP growth contributions in an admittedly rather facile way.

source: Eurostat, own calculations

  

source: Eurostat, own calculations

source: Eurostat, own calculations

The plain and rather painful takeaway from the charts is that except from Greece the other two countries have displayed some (or more than some in Ireland's case) positive exports’ contribution.

Greece only witnessed a positive exports contribution in 2010, after the great 2009 trade collapse, which was nothing other than the base effect kicking in. The exact opposite goes for Portugal and Ireland where exports were positive for all three years since 2009. 

A while back I had penned a post claiming thatthe evolution of the troika-led adjustments could be predicted via two rathersimple indicators, the % that household demand and exports account for relative to GDP.

Here are the indicators mentioned above for the aforementioned countries.

source: Eurostat

 

source: Eurostat

My rationale was again rather simple. The higher the share of households’ final consumption in GDP the higher the hit the country’s GDP could take, while the higher the share of exports the bigger the cushion they could provide.

Unfortunately for Greece, results thus far seem to confirm this simplistic rule to a t...

P.S. Of course this does not mean that export-led growth is bullet-proof. A look at the following chart can confirm this.

source: Eurostat

As you can see exports' growth plummeted in 2012 and the variance of growth for certain coutnries was significant.