Employment levels in May 2014 finally surpassed those at the start of the Great Recession in December 2007. Although this news seems positive, the health of the labor market depends not only on the number of jobs created but also the types of jobs created. The labor market’s slow recovery from the Great Recession has prompted a variety of explanations. One is the growing trend of “job polarization.” Economist David Autor and coauthors showed that, over the past 30 years, demand for high-skill (high-wage) workers and low-skill (low-wage) workers increased, while opportunities for middle-skill (middle-wage) workers declined. 1 The shift toward this U-shaped employment distribution is known as job polarization. Autor shows that job polarization predated the Great Recession and was reinforced rather than reversed during the Great Recession. Has the picture changed five years later? Recent data suggest that U.S. job polarization persists after the Great Recession.
U.S. Job Polarization Persists
S&P Case-Shiller Home Prices increased in July, with the 10-City composite and 20-city composite indices both ticking up 0.6% (not seasonally adjusted).
Year over year, the 20-City Composite is up 6.7%. This is a slower annual rate of growth than the 8.1% in June and the 13.6% rate in October 2013.
The national house price level is now roughly equal to where it stood in November 2004.
Of the 20 cities tracked in the index, Los Angeles has had the greatest increase in home prices since 2000, while Detroit has been the only city where prices have declined over the past 14 years.
From a year ago, house prices have increased the most in Las Vegas, where they rose 12.8%. Cleveland has had the slowest rate of annual increase, rising only 0.9%.
Dallas and Denver are the only cities whose prices have increased beyond their pre-recession peak. Las Vegas remains the furthest below its peak.
The U.S.Federal Housing Finance Agency saw its national house prices increasing 0.1% in July (not seasonally adjusted), and increasing 4.4% from a year ago.
The FHFA HPI is calculated using home sales price information from mortgages either sold to or guaranteed by Fannie Mae and Freddie Mac.
The U.S. index is 6.4% below its April 2007 peak and is roughly the same as its July 2005 index level.
Of the 9 different geographic census divisions that FHFA tracks, house prices have increased the most year over year in the Pacific and increased the least in the Middle Atlantic.
In both the Case-Shiller index and the FHFA index house prices continue to increase, but the pace is slowing.
U.S. consumer confidence decreased to a reading of 86.0 (1985=100) in September, as published this morning by The Conference Board. This compares to a revised reading of 93.4 in August.
The Present Situation Index component decreased to 89.4 from 93.9, while the Expectations Index component decreased to 83.7 from 93.1.
Says Lynn Franco, Director of Economic Indicators at The Conference Board: “Consumer confidence retreated in September after four consecutive months of improvement. A less positive assessment of the current job market, most likely due to the recent softening in growth, was the sole reason for the decline in consumers’ assessment of present-day conditions. Looking ahead, consumers were less confident about the short-term outlook for the economy and labor market, and somewhat mixed regarding their future earnings potential. All told, consumers expect economic growth to ease in the months ahead.”
The U.S. consumer sentiment index, reported by the University of Michigan, increased to 84.6 in September from 82.5 in August.
The recent trend:
An obscure federal contract for a company charged with routing millions of phone calls and text messages in the United States has prompted an unusual lobbying battle in which intelligence officials are arguing that the nation’s surveillance secrets could be at risk.
The contractor that wins the bid would essentially act as the air traffic controller for the nation’s phone system, which is run by private companies but is essentially overseen by the government.
And with a European-based company now favored for the job, some current and former intelligence officials — who normally stay out of the business of awarding federal contracts — say they are concerned that the government’s ability to trace reams of phone data used in terrorism and law enforcement investigations could be hindered.
Spy Agencies Urge Caution on Phone Deal
Because housing is durable, the housing supply is slow to adapt to declines in demand. This paper uses long-term vacancy—defined as nonseasonal housing units that have been vacant for an unusually long period of time—to quantify the extent of excess supply in the housing market. I find that long-term vacancy is less than 2 percent of all nonseasonal housing units and accounts for only one quarter of the aggregate increase in nonseasonal vacancy from 2001 to 2011. Thus, at the national level, excess supply is considerably less extensive than indicated by traditional measures of vacancy. However, the stock of long-term vacant housing is concentrated in a small number of neighborhoods that do have appreciably high long-term vacancy rates. Some of these neighborhoods have characteristics suggesting that excess supply is related to overbuilding during the housing boom, while others have characteristics that are symptomatic of persistently weak housing demand.
Long-Term Vacant Housing in the United States
U.S. disposable personal income rose 0.3% in August to a seasonally adjusted annual rate of $13.11 trillion. This increase follows a 0.2% increase in July, and leaves disposable personal income up 4.3% from a year ago.
Personal outlays for the month totaled $12.41 trillion, a 0.5% increase, leaving personal outlays up 3.8% from the year prior.
Personal savings, which is disposable personal income less personal outlays, decreased to $705.3 billion from $730.5 billion.
The personal savings rate decreased to 5.38% from 5.59%.
The recent growth in manufacturing imports to the US is largely a consequence of China’s emergence on the global stage coupled with its deep comparative advantage in labour-intensive goods. The jobs in apparel, furniture, shoes, and other wage-sensitive products that the United States has lost to China are unlikely to return. Even as China’s labour costs rise, the factories that produce these goods are more likely to relocate to Bangladesh, Vietnam, or other countries rising in China’s wake than to reappear on US shores.
Further, China’s impact on US manufacturing is far from complete. During the 2000s, the country rapidly expanded into the assembly of laptops and cell-phones, with production occurring increasingly under Chinese brands, such as Lenovo and Huawei. Despite this rather bleak panorama, there are sources of hope for manufacturing in the United States. Perhaps the most encouraging sign is that the response of many companies to increased trade pressure has been to increase investment in innovation (Bloom et al. 2011). The ensuing advance in technology may ultimately help create new markets for US producers. However, if the trend toward the automation of routine jobs in manufacturing continues (Autor and Dorn 2013), the application of these new technologies is likely to do much more to boost growth in value added than to expand employment on the factory floor.
The rise of China and the future of US manufacturing