Tracking Labor Share & Unemployment
In May of 2015, I wrote about the relationship between Labor Share and Unemployment. The post basically said that lower labor share translated into a higher limit upon unemployment.
Here is the original graph from that post…
In the post, I wrote…
“The graph implies that as labor share falls, labor is less inclined to supply their labor… and the natural rate of unemployment rises.
“Since 1947, the unemployment rate falls to a level consistent with implied supply & demand limits set by labor share of national income. The US is now hitting the implied supply limit.
- Will the unemployment rate only fall as long as labor share keeps trending up?
- Will the plot line end up respecting the implied supply limit of labor?”
So what has happened since this graph was posted? Has the plot line broken through the limit that I estimated? or Has the plot line respected the limit?
Here is the updated graph… (quarterly data)
The plot line has respected the estimated limit. (Currently labor share at 100 and 4th quarter 2015 unemployment at 5%.)
Over the past 20 years we have out sourced millions of livable wage wealth creating manufacturing jobs out side the country. Trade balances have swelled and only a very low % have benefitted from this. Ross Perot told us this would happen when the Clintons passed NAFTA. We were sold out as nothing happened for 20 years to correct it. Then the Clintons repealed the Glass-Steagall allowing the big banks to merge with the hedge fund guys allowing them to gamble with your FDIC savings money. More recently we get a Supreme court that is making very liberal decisions such as late term abortions and selling of body parts at Planned Parent Hood. Repealing Citizen United allowing elections to be bought. Other potential losses of citizen rights and freedoms in govt. power and abuses. We need a government, supreme court, congress, senate and president that is more accountable and responsible to the American people. Sound good but will it ever happen? Probably not so what is the alternative what do we do as middle class citizens to take our country back?
If I was younger and had the energy and the means , I think I’d try to find myself a better country to live in. Aside from that , I don’t know. I cling to the hope that Bernie gets elected , that he inspires the bottom-up revolution that he’s talked about so often , and that this revolution is so widespread , inclusive , and sustained that it results in wholesale changes for the better , throughout the system. This happened to a significant degree under FDR , and after WWII things really were better than they’d been before. For a millisecond or two , anyway. If we could pull off something like that again , I’d be pleased.
I’ve often thought that one of the better “rules to live by” is the old Boy Scout commandment to always leave the campsite in better shape than you found it. My greatest fear is that in my final moments on this Earth , I’m going to take a look around , and then think to myself : ” Man , this campsite is fucking trashed ” , and feel deeply , deeply ashamed.
Not good. Not good at all.
This IMF paper points out that labor share declines in the aftermath of financial liberalization.
See chart 5. Bug or feature?