Tuesday, August 8, 2017

Parallel lines of thought

Douglas Campbell shows a graph I've not seen before -- total nonfarm employment "now something like 23% below the long-run trend" -- and says

Of course, there are caveats here. Population growth did naturally slow a bit, and the absorption of women into the labor force was a one-time event that was mostly played out by the 2000s; 9/11 exogenously reduced immigration, and thus job growth, and the Boomers have been retiring, etc... [But] why should exogenous negative shocks to labor supply cause wage growth to slow?

They shouldn't. As if in answer to Campbell's question, J.W. Mason writes

If employment is falling due to demographics, that should be associated with rising productivity and wages, as firms compete for scarce labor.

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