Fragility of the 1990s Economic Gains

1
Fragility of the 1990s Economic Gains

• William M. Rodgers III
• Rutgers University and National Poverty Center
• And
• Richard B. Freeman
• Harvard University and NBER
• March 2005

2
Introduction

• Characterization of the Jobs Recovery
• Why has the Recovery been so Weak?
• What have been Its Consequences?
• What does the Future Hold?

3
Characterization of Jobs Recovery Cumulative
Employment Growth During The Six Most Recent
Recoveries
Source Nonfarm Payroll Establishment data. U.S.
Department of Labor, Bureau of Labor Statistics
(www.bls.gov). Each series is benchmarked to the
start of its recovery as defined by the NBER
Business Cycle Dating Committee. Figures are
through the March 2005, the 41st month of the
current recovery..
4
Why has the Jobs Recovery been so Weak?
Fiscal Stimulus as a Percentage of
GDP (Standardized-Budget Deficit/Surplus as of
GDP)

• Its not productivity growth
• Less bang for the fiscal stimulus buck
• US performance in the international economy
• The impact of health care costs

Notes CBO Forecast for 2005 are from Table 1
Measures of the Federal Budget Surplus or
Deficit, 2000 to 2005, The Cyclically Adjusted
and Standardized Budget Measures Updated
Estimates, September 2004, Section 2 of 3.
5
Change in Male Employment-Population Ratios
During the 1990s Boom, Recession and Recovery
Episode
Out of School Youth
Adults
New Entrants
Source Table 3 of Rodgers and Freeman (2005).
Expansion 3/91 to 3/01 Recession 3/01 to
11/01 and Recovery 11/01 to 3/05.
6
Change in Female Employment-Population Ratios
During the 1990s Boom, Recession and Recovery
Episode
Out of School Youth
New Entrants
Adults
Source Table 3 of Rodgers and Freeman (2005).
Expansion 3/91 to 3/01 Recession 3/01 to
11/01 and Recovery 11/01 to 3/05.
7
Change in Male Hourly Wages During the 1990s
Boom, Recession and Recovery Episode
New Entrants
Out of School Youth
Adults
Source Table 3 of Rodgers and Freeman (2005).
Expansion 3/91 to 3/01 Recession 3/01 to
11/01 and Recovery 11/01 to 3/05.
8
Change in Female Hourly Wages During the 1990s
Boom, Recession and Recovery Episode
Out of School Youth
New Entrants
Adults
Source Table 3 of Rodgers and Freeman (2005).
Expansion 3/91 to 3/01 Recession 3/01 to
11/01 and Recovery 11/01 to 3/05.
9
Conclusions to Date

• The 1990s gains appear to be fragile, especially
  employment.
• Recession and weak recovery have led to an
  erosion in the gains that African Americans and
  women, particularly the less skilled made during
  the 1990s.

10
What Does the Future Hold?
Forecast of Employment-Population Ratios of
Nonenrolled 1624-Year-Olds

• Will tight labor markets of the 1990s return?
• It depends
• Fiscal and Monetary Policy
• Globalization (FDI and Trade Deficit)
• Health Care Costs
• Industry Structural Change
• Demographics
• What must we do to help vulnerable groups?

11
References

• Blacks Need More than an Economic Boom, in Real
  World Macro, 21st Edition, Edited by Daniel
  Fireside, Dollars and Sense (Forthcoming, 2005).
  (www.heldrich.rutgers.edu)
• What do the Future Labor Market Prospects of
  Non-college Educated Adults, Youth and Minorities
  look like? in Extended Opportunities, Edited by
  Ronald Mincy, Columbia University and NPCL,
  (Forthcoming, Fall 2005). (www.heldrich.rutgers.ed
  u)
•  
• Jobless Recovery Whatever Happened to the Great
  American Jobs Machine? Centre Piece Magazine,
  London, 9 3, Autumn 2004, 22-27 New York
  Federal Reserve, Economic Policy Review,
  (Forthcoming, May 2005) (with Richard Freeman).
• The Disparate Labor Market Impacts of Monetary
  Policy, Journal of Policy Analysis and
  Management, 23 4, 2004, 813-830 Labor History,
  46 1, 2005 (with Seth Carpenter).
•   
• The 1990s Economic Boom, another Period of
  Missed Opportunities, Harvard Journal of African
  American Public Policy, 10 Summer, 2004.