They aren't quite the best, but are still very high up. Granted, some of this is age dependency issues. Fewer children and more elderly people means high levels of labor supply in the prime age demographics. But it is also just that low NGDP growth manifests as weak wage growth instead of lower employment numbers in Japan (similar story for a lot of the Eurozone, to be fair).
A stable NGDP growth is essential to keep u falling or low. The level of trend path of NGDP is important in determining the quality (level of employment) of the labor market.
Great article. To bear in mind after J Powell press conference where he insisted in labour market tightness. Happy to be a suscriber. Wonder how the US can go back to full capacity (those 9.160 usd…) without scaring inflation hawks in government & markets.
May 7, 2022·edited May 7, 2022Liked by Joseph Politano
How does the story of bad monetary and fiscal policy being responsible for the large fall of Epop in the US square with the fact that aggregate demand policy was far more conservative in Europe? Despite much deeper austerity and a much later pivot to QE in Europe, Epop didn't fall by nearly as much as in the US, which we wouldn't expect if weak labor demand was the main issue
I would say that most European countries protect existing employment far more than the US, so the drop in demand manifested as lower wage growth, weaker output growth, and higher youth unemployment rather than drops in prime-age employment rates.
Sorry for the late comment, but I was surprised to see that the employment-population ratio for France was much higher than the US (according to the OECD data in your chart above). I know that French unemployment has historically been higher, at least according to the ILO: https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?locations=FR-US. And I checked labor force participation, which for France also looked quite low (https://data.worldbank.org/indicator/SL.TLF.CACT.ZS?locations=FR-US). So it does seem to me like a bit of a mystery that OECD's reports of the French prime age employment-population ratio seem so high...
Of course, these ILO metrics don't filter down to prime age population. But I feel like the gap between the ILO estimates (https://data.worldbank.org/indicator/SL.EMP.TOTL.SP.ZS?locations=FR-US-DE-JP), and the prime age metrics reported by OECD (per your graph) is quite large to just be explained by filtering down to that subpopulation.
I might be wrong here, but curious if you might have any other thoughts on the data on France?
I would have to dig a bit deeper to be sure, but I think the gap has to do with older populations and earlier retirements in France. For example, the employment rate (pre-pandemic) for 55-64 year olds in France was nearly 10% lower than in the US (https://fred.stlouisfed.org/graph/fredgraph.png?g=TsDd).
OK yup, that makes a lot of sense. I did try to do a mini-reconciliation between the ILO/World Bank numbers and OECD and things do check out. Like you say, it looks like retirement certainly plays a role (looking at 2015 in specific as a reference year, looks like the 65+ age group in France has ~6% employment rate whereas US is closer to 17%).
It is hard to explain Japan being the #1 employer given it has been the worst performing economy (in terms of real growth) for the past 30 years!
They aren't quite the best, but are still very high up. Granted, some of this is age dependency issues. Fewer children and more elderly people means high levels of labor supply in the prime age demographics. But it is also just that low NGDP growth manifests as weak wage growth instead of lower employment numbers in Japan (similar story for a lot of the Eurozone, to be fair).
A stable NGDP growth is essential to keep u falling or low. The level of trend path of NGDP is important in determining the quality (level of employment) of the labor market.
https://marcusnunes.substack.com/p/the-contrast-between-slow-and-fast?s=w
Great article. To bear in mind after J Powell press conference where he insisted in labour market tightness. Happy to be a suscriber. Wonder how the US can go back to full capacity (those 9.160 usd…) without scaring inflation hawks in government & markets.
Thank you, I am glad you're enjoying the substack!
How does the story of bad monetary and fiscal policy being responsible for the large fall of Epop in the US square with the fact that aggregate demand policy was far more conservative in Europe? Despite much deeper austerity and a much later pivot to QE in Europe, Epop didn't fall by nearly as much as in the US, which we wouldn't expect if weak labor demand was the main issue
I would say that most European countries protect existing employment far more than the US, so the drop in demand manifested as lower wage growth, weaker output growth, and higher youth unemployment rather than drops in prime-age employment rates.
Sorry for the late comment, but I was surprised to see that the employment-population ratio for France was much higher than the US (according to the OECD data in your chart above). I know that French unemployment has historically been higher, at least according to the ILO: https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?locations=FR-US. And I checked labor force participation, which for France also looked quite low (https://data.worldbank.org/indicator/SL.TLF.CACT.ZS?locations=FR-US). So it does seem to me like a bit of a mystery that OECD's reports of the French prime age employment-population ratio seem so high...
Of course, these ILO metrics don't filter down to prime age population. But I feel like the gap between the ILO estimates (https://data.worldbank.org/indicator/SL.EMP.TOTL.SP.ZS?locations=FR-US-DE-JP), and the prime age metrics reported by OECD (per your graph) is quite large to just be explained by filtering down to that subpopulation.
I might be wrong here, but curious if you might have any other thoughts on the data on France?
I would have to dig a bit deeper to be sure, but I think the gap has to do with older populations and earlier retirements in France. For example, the employment rate (pre-pandemic) for 55-64 year olds in France was nearly 10% lower than in the US (https://fred.stlouisfed.org/graph/fredgraph.png?g=TsDd).
OK yup, that makes a lot of sense. I did try to do a mini-reconciliation between the ILO/World Bank numbers and OECD and things do check out. Like you say, it looks like retirement certainly plays a role (looking at 2015 in specific as a reference year, looks like the 65+ age group in France has ~6% employment rate whereas US is closer to 17%).
With some more digging, it seems to be because France has mandatory retirement for workers at age 70 (https://www.oecd.org/els/emp/Older%20Workers%20FRANCE_Assessment%20and%20main%20recommendations.pdf), whereas in the US only a few regulated professions (like pilots and law enforcement officers) have mandatory retirement.
So perhaps France prime age looks better because they have no choice but to pick up the slack given the lack of labor supply at the 65+ end...