Re-examining Wage share in the US (1959-2024)

 Re-examining Wage share in the US (1959-2024)

Figure show the compensation of employees as a share of personal income.

Updating the post by Matias Vernengo - January 03, 2013 , one can see the "negative trend starts in the late 1970s early 1980s, with the Volcker hike in interest rates and the Reagan revolution, meaning reductions in marginal taxes for the wealthy". Since that period here has been a steady downward trend. The COVID-19 recession provided a dramatic drop and a subsequent rebound but not at pre-recession levels.

Comments on Position Limits in Commodity Markets

Comments on Position Limits in Commodity Markets

quoted in Federal Registry

...and that allowing owners of more than 10 percent of another entity not to

aggregate could ‘‘potentially spark additional ‘herd-like’ behavior, thus

causing another commodities futures boom-bust cycle.’’

-  International Association of Machinists and Aerospace Workers on June 29, 2012 (‘‘CL– IAMAW’’).

Summary

COMMODITY FUTURES TRADING COMMISSION 17 CFR Part 151 ruN: 3038-AD82 AGGREGATION UNDER PART 151, POSITION LIMITS FOR FUTURES AND SWAPS.

The proposed rule would amend the rules establishing speculative position limits for physical commodity futures and option contracts traded on a designated contract market and economically equivalent swaps, which were published in the Federal Register on November 18, 2011.

 The proposed rules would permit any market participant with an ownership interest of 10% up to 50% in a separately organized entity (an "owned entity") to make a notice filing of exemption from aggregation by demonstrating independence in decision making. The owned entity could be a financial or a nonfinancial entity that has passive ownership interests.

By loosening the ownership of interest up to 50%, the proposed rule can potentially spark additional “herd-like” behavior, thus causing another commodities futures boom-bust cycle. We believe that without strong regulations including position limits established by the Dodd Frank Act, excessive speculation in the futures markets will continue.  Therefore, we recommend that Commodities Futures Trading Commission (CFTC) adhere to its existing formula of setting position limits such that no single investor can constitute more than 10 percent of a market, as measured by open interest, up to 25,000 contracts of open interest, and 2.5 percent thereafter.  However, if CFTC’s existing position limit formula is considered not to be feasible, then we suggest CFTC give Pollin and Heintz (2011) and CME group (2011) position limits proposals serious consideration.[1]

Our views are based on the analysis of the empirical literature on position limits, excessive speculation, price volatility and the financialization of commodities.[2] The literature reviewed shows that institutional investors in its attempts find “safe havens” and increase their profits entered into the commodity markets en masse.  As a result, prices became inflated beyond the fundamentals of supply and demand (boom) and subsequent drop in prices when many institutional investors exited the commodities market (bust).

With the increasing presence of institutional investors in the commodities market, it appears that index traders (institutional investors) primarily hold long positions (buyers).   Several economists show that from a sheer size perspective the number of index traders tend to be small, however, “their average long positions is very large…sometimes more than 10 times the size of an average long positions held by either commercial or non-commercial traders. A direct consequence is that index traders can have strong financial power to influence prices. As a result, speculative bubbles may form and price changes can no longer be interpreted as reflecting fundamental supply and demand signals” (Mayer 2009).

A policy response to guard against excessive speculation is for the CFTC “to exercise its authority to ensure that the policy tools provided by Dodd-Frank are implemented in ways that protect the interests of ordinary people and small businesses throughout the United States (Pollin and Heintz 2011:5). Specifically, Section 737 of the Dodd Frank Act mandates that CFTC  institute position limits in order to “diminish, eliminate, or prevent excessive speculation.”  Thus, from the existing studies, reports and articles cited, it is clear that position limits are needed in the commodities market.[3]

As mentioned previously, we believe that the existing rules are reasonable and sound.  The proposed rule as written deviates from the intended purpose as instructed in the Dodd Frank Act. Although not a panacea to end all excessive speculation, position limits can be another tool in the tool box.

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[1] Pollin and Heintz (2011) and CME Group (2011)

[2] See our analyses in Appendix A.

[3] See Appendix B.

Examining Work Stoppages in a Modified Goodwin Business Cycle Model

Themes and Issues in Labor and Labor Unions

 

Examining Work Stoppages in a Modified Goodwin Business Cycle Model Tazewell Hurst, International Association of Machinists

Summary

•       Until recently, there was a general consensus that the number of work stoppages (strikes and lockouts) is cyclical. Aside from a few incidents, “noise”, it was shown empirically that the number of strikes tend to increase during economic expansion but decline during a contraction. 

•       Most believe this pro cyclical relationship was a “stylized’ economic fact, at least up to the end of what is considered the “golden age” of capitalism (1948 – 1980).  Further, research indicate that trends in strike activity and union membership were more instrumental for impacting labor's share during the peak period of the capital–labor accord (golden age) and less instrumental in later period post 1981(neoliberal period).

Strategic Competition, Dynamics and the Role of the State: A New Perspective, by Jamee K. Moudud - A Book Review byTazewell V Hurst III

Springer version 

Hurst, T. Strategic Competition, Dynamics and the Role of the State: A New Perspective, by Jamee K. Moudud. Eastern Econ J 39, 260–263 (2013). https://doi.org/10.1057/eej.2011.30

Moudud's Book Review  (uncorrected proof)

Strategic  Competition,  Dynamics  and  the  Role  of the  State:   A New Perspective. By Jamee  K.  Moudud. Edward  Elgar,  Cheltenham, UK,  2010.  167pp.,  $99.00. ISBN: 978-1-845-42923-2.

Strategic  Competition,  Dynamics and the Role of the State  attempts  to  provide  a “more   robust   foundation for  heterodox   economic   theory   and   policy.”  Jamee Moudud believes his book  makes two contributions. “First, it has provided a new interpretation of the microeconomics  of  OERG   (Oxford  Economists’  Research Group) . Second, the nature of fiscal policy to raise the warranted growth rate has been elaborated” [p. 136].

The Recession is over for all workers in the manufacturing sector but at different points in time

The Sahm Rule identifies signals related to the start of a recession when the three-month moving average of unemployment rate rises at a minimum 0.50 percentage points or more relative to its low during the previous 12 months.  

Applying to the manufacturing and its subsectors it shows the recession is over but it occurred at different points in time.

Sahm Rule Manufacturing

Sahm Food Manufacturing

The September Jobs Report Misses Employment Forecasts, Unemployment down to 5.2%.

The United States (U.S.) economy added 235,000 jobs in August of 2021, the lowest in seven months and well below forecasts of 750,000 as a surge in COVID-19 infections may have discouraged companies from hiring and workers from actively looking for a job.

Most jobs were created in professional and business services (+74,000), transportation and warehousing (+53,000), private education (+40,000), manufacturing with most of them coming in motor vehicles despite ongoing struggles to source parts, and other services (+37,000). Employment in retail trade declined over the month (-29,000) mostly because of food and beverage stores (-23,000) and building material and garden supply stores (-13,000). Employment in leisure and hospitality was unchanged.

Source: Analysis U.S. Department of Labor and Wells Fargo Securities

 

Overall, nonfarm employment has risen by 17 million since April 2020 but is down by -5.3 million, or 3.5%, from its pre-pandemic level in February 2020.

The standard, headline unemployment rate (U-3) dropped to 5.2 percent in August 2021, the lowest level since March 2020 and in line with market expectations, as the labor market continued its steady recovery following business re-openings in the US and despite reports of labor supply shortages and concerns over the lingering threat of the COVID-19 resurgence. The number of unemployed people fell by 318,000to 8.38 million, while employment levels increased by 509,000 to 153.15 million.  The broad or real unemployment rate (U-6) is at 8.90%, compared to 9.60% last month and 14.30% last year. This is lower than the long term average of 10.44%.

Headline and Real Unemployment Rates

Although the jobless rate remained well above the pre-crisis level of about 3.5 percent, experts believe that the rate should decline further due to strong economic activity and demand for labor

As indicated, the Delta surge is holding down job growth in the leisure & hospitality sector. After increasing by more than 300K for four straight months, employment growth was stagnant in August.

Unemployment Intensity is the product of the duration and the rate of unemployment.  The unemployment intensity is constructed by multiplying the unemployment rate for an index representing the average duration of unemployment, with the idea that unemployment becomes more intense when its duration increases.  As shown below unemployment intensity has increased since the end of the COVID-19 recession but appears to have leveled out and possibly shifting downward.

Unemployment Intensity Index 

Employment Summary August 2021 Jobs Report for the United States

Employment Summary August 2021

Jobs Report for the United States

United States – Department of Labor August Jobs Report

According to the United States Department of Labor August Jobs Report, the unemployment rate decreased by 0.5 percentage points from the previous month to 5.4 percent which was below the forecast of 5.7 percent July unemployment rate.  The rise can be attributed to more people returning to work which is a sign that the labor market is beginning to recover from the  short but deep recession.

The National Bureau of Economic Research (NBER)  Business Dating Committee determined that the COVID-19 recession lasted just two months (from February 2020 to April 2020), which would makes it the shortest US recession on record.  Despite the fact that the COVID recession is deemed over,  it is important to note that the unemployment rate is still well above the pre-pandemic level of 3.9 percent.

The restoration of 978,000 (the highest number jobs in the prior ten months) jobs is significant and beat the employment forecast of 950,000 for the month of July. The three month moving average for July is approximately 832, 000 jobs restored.   Nonfarm payroll employment in July was up by 16.7 million since April 2020 but it is still down by 5.7 million compared to its pre-pandemic level in February 2020

The Economic Policy Institute (EPI) states that, the unemployment rate fell for the right reasons in July as more people found work rather than left the labor force.   They predict that the current pace of job restoration/growth (as a result of lifting of more COVID-19 restrictions) will lower the unemployment rate to pre-pandemic levels (4 percent or lower) by July 2022 with a full recovery by the end of 2022 – a recovery five times as fast as the recovery following the Great Recession.  Other analysts believe that a full recovery can occur as early as February 2022.

Similar to the July Jobs Report, notable job gains occurred in leisure and hospitality with an increase of +380,000 and food services and drinking places (+253,000). The Employment Situation , July2021 report also points to job gains in local government (+221,000).  Employment also continued to increase in accommodation (+74,000) and in arts, entertainment, and recreation (+53,000). Despite recent growth, employment in leisure and hospitality is down by 1.7 million, or 10.3 percent, from its level in February 2020.   

Industries impacting the industrial unions show a slight net employment increase from the previous month in in transportation and warehousing (+50,000 for all employees)). Specifically, employment gains where in transit and ground passenger transportation (+19,000), warehousing and storage (+11,000).  The good news in this industry is that employment has grown by 534,000 since April 2020, a 92.9 percent recovery from of the jobs lost during the February-April 2020 recession (-575,000).

Employment in manufacturing increased by 27,000 in July, largely in durable goods manufacturing (+20,000). Within durable goods, job gains occurred in machinery (+7,000) and miscellaneous durable goods manufacturing (+6,000). Overall, manufacturing employment is well short (-433,000) of its February 2020 level.

Manufacturing Employment

Month to Month change in Manufacturing Employment

Job gains in durable goods such as fabricated metal products (+4,500 for all employees and +3,800 for production and nonsupervisory workers), and primary metals (+2,500 for all employees and +3,700 for production and nonsupervisory workers)  Nonmetallic metals saw increases by 1,800 employees and 300 production and nonsupervisory workers.  Other durable goods manufacturing sectors pertinent to industrial unions  include transportation equipment (-1.500 all employees and +2,000 production and nonsupervisory workers), computer and electronic products (-500 all employees and 2,400 production and nonsupervisory workers), electrical equipment and appliances (+200 all employees, and production and nonsupervisory workers, respectively),  transportation equipment (-1,500 all employees and +2,000 production and nonsupervisory workers).

 Durable Goods Employment

Month to Month Change in Durable Goods

Nondurable goods producers gained +7,000 jobs for all employees and for production and nonsupervisory employees, respectively 

Nondurable Manufacturing

Month to Month Change in Nondurable Employment

Within the nondurables sectors employment gains/losses were mixed.  For instance, employment in food manufacturing increased by 4,000 for all employees and by 3,600 production and nonsupervisory workers.  Overall employees in chemical manufacturing saw growth of all workers by +2,600 while the number of production and nonsupervisory workers saw a decrease by -1,800 jobs The number of jobs increased in rubber and plastics (+300, and +1,600 production and nonsupervisory employees) and, Petroleum and coal products employees continue to see a month over month decrease by -.400 employees and-1,600 for production and nonsupervisory workers).

Most economists and analysts believe that the August 2021 Employment Situation report is a good indicator that the economy is heading in the right direction.  According to Dean Barker of CEPR, the “Delta variant had not had a major impact on the labor market, at least through the middle of July. If its spread can be contained we will likely continue to see strong job growth, coupled with declines in unemployment”.