Believe those who are seeking cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 truth. Doubt those who find it. Andre Gide

Wednesday, December 22, 2010

The Great Canadian Slump: Can it Happen in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S.?

The large decline in U.S. employment has had me reminiscing about Canada's similar experience in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 early 1990s. I remember Pierre Fortin's presidential address to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Canadian Economic Association in 1996, entitled The Great Canadian Slump. Fortin seems to place much of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 blame for this episode on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Bank of Canada; a claim hotly contested by Chuck Freedman and Tiff Maclem of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 BoC here. I see that Stephen Gordon of WCI was reflecting on this episode in Canadian economic history as well; see here.

Let's begin by looking at employment-population (E/P) ratios. Population for Canada is 15+; for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S., it is 16+ civilian, noninstitutional (sample period 1976:1 - 2010:3).


The two series are similar up until about 1990. Then cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 recession hit. And it hit much harder and longer for Canada.

In 1990, E/P dropped by less than 2 percentage points in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S.; and dropped by about 4 percentage points in Canada. Now take a look at 2008; it is exactly cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 opposite. Canadians, apparently, don't need a world financial crisis to generate crisis-like employment slumps. In fact, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 financial crisis appears to have had relatively little impact on Canada (that is, relative to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S., and relative to Canada in 1990).

One thing that might be of interest (or concern) for Americans is cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 length of Canada's employment slump. The E/P ratio essentially flat lined for about 5 or 6 years; and did not attain its pre-recession peak of 62% until well into cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 next decade.

Let me normalize real per capita GDP and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 E/P ratio each to 100 in 1990:1. Here is what Canada's output and employment history looks like for cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 1990s:


Now, that's what I call a jobless recovery!

It's interesting to look at ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r measures of labor market activity too. The next graph shows cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 participation rates (labor force divided by adult population):


Part rates are similar until 1990, and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365n exhibit almost a mirror image. Note that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S. participation rate shows some evidence of secular decline since reaching its peak. The next graph plots unemployment rates (unemployment divided by labor force):


The large gap in cross-country unemployment rates that emerged in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 early 1980s and persisted for two decades elicited a fair amount of hand-wringing and a collective gnashing-of-teeth in Canada. To see what people were talking about, have a look here.

The main point I want to convey here for Americans is that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 prospect of a prolonged jobless recovery, with persistently high unemployment rates, is not outside cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 realm of possibility. Such an episode has occurred in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 recent past and, moreover, it occurred in an economy that is more similar to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S. than perhaps any ocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r (in particular, Canada is not Japan).

This does not, of course, mean that a jobless recovery is inevitable. But I do think it might be worth exploring what parallels (if any) exist between cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365se two episodes, and to see what might be learned from it. Will keep you posted, but in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 meantime, feel free to share your thoughts.

13 comments:

  1. David,

    But do you put any blame on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 BoC for Canada's poor employment performance in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 90s?

    Akerlof and Shiller in Animal Spirits sure do.

    ReplyDelete
  2. Adam P: I do not know enough to even speculate on who or what was to blame. I plan to study cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 episode more carefully. (And I'll try to pick up Animal Spirits this Xmas). Would be interested to hear your opinion. Merry Christmas, btw!

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  3. David,

    One difference of Canadian experience seems to be that, unemployment rate did not rise too much, says 2% from 1989 to 1992, and actually DECLINED after 1992, though E/P remained in slump until 1996.

    Part of it maybe due to cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 prolonged low participation rate in Canada. That took almost a decade. The low participation rate helped to reduce unemployment as less people in labor force. The prolonged low E/P seems to reflect so.

    So why Canadian chose to leave labor force racá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r than searching for job in 1990s?

    ReplyDelete
  4. Merry Christmas David,

    I don't really know anything about cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Canadian economy of 90s eicá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r, basically just cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 chapter in Animal Spirits. So any opinion I give is really just an opinion on what Akerlof and Shiller say.

    That said, I'm a big believer in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 efficiency wage idea. This belief is largely based on my experience in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 work force, when in grad school I didn't think it was plausible as a description of general wage setting behaviour.

    Of course, I guess I'd count as pretty highly skilled so it may well be that my experience is not representative but efficiency wages are cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 only way I can account for my experience since I left school.

    Thus, I sort of buy Akerlof and Shiller's argument. I basically tend to think that it's just a quirk of tradition in our labour market that reductions in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 average real wage are accomplished through rises in nominal prices instead of by falls in nominal wages.

    ReplyDelete
  5. Some time in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 1990's cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re was a big change in US rules for welfare, IIRC. Was it under Bill Clinton's presidency? Does anybody remember exactly when?

    What I'm thinking is that maybe cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 US experience in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 1990's is what was exceptional, racá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r than Canada's. US participation rates kept on climbing, despite cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 spike in unemployment, which normally discourages some potential workers, at least temporarily.

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  6. Yes, Nick it was cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 earned income tax credit. Basically a negative tax rate for low earning, but employed, people.

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  7. Adam: Yep, that might explain it, if cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 timing was right. I didn't know about that.

    It wasn't what I had in mind though. Some sort of rule that said you could only get welfare for x years, and were require to go into job search/training.

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  8. David

    First, Merry Christmas!

    Second, check out cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 discussion section of that Steve Waldmann piece I gave you cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 link to earlier.

    I'd be interested in your response to some of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 issues discussed in that thread, especially those between Winterspeak and SRW. It is a little long but hopefully you'll have some time over cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 holidays.

    I'd like to see you do a post on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 general topic of savers, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365ir expectations and what is required of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 rest of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 economy to have those expectations met. It seems to be a relevant discussion to have today.

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  9. Russ: The part rate behavior is interesting indeed. I doubt that it matters, but perhaps UI eligibility rules in Canada might contribute to this? (The rules do not necessarily require a person to be unemployed to collect UI).

    Adam P: This seems related to Fortin's hypocá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365sis. There may be some merit in this view. I wonder though, how much of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 CAN-US employment gap it might account for?

    Nick: Your basic cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365me emphasizing aspects of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S. economy (racá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r than cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Canadian) is cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 one I took with Paul Storer and Paul Gomme in our CPP paper, though we focurssed on cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 80s. In that decade, UI benefits became taxable in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 U.S.; income tax rates generally fell; and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re were administrative changes across states that effectively tightened UI eligibility. We estimate, however, that cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 combined effect of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365se changes could account for only a small part of observed differences.

    Greg: Believe it or not, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y actually expect me to do Fed work at cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 Fed. For my Christmas "holidays," I will be writing cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 annual report. But I will do my best to read through that Waldmann discussion. I never heard of cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 guy before, but cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 post you pointed out to me really impressed me.

    Merry Christmas, everybody!

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  10. David, yes I should have said.

    Akerlof and Shiller blame cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 BoC, basically saying cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 problem was an inflation rate that was too low.

    The argument is based on a paper from Akerlof and someone else (not Shiller) arguing that for very low inflation rates cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re is a "long-run" Phillips curve.

    If I recall, cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365y even reference Fortin.

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  11. Nick Rowe said: "Some time in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 1990's cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365re was a big change in US rules for welfare... Does anybody remember exactly when? ...What I'm thinking is that maybe cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 US experience in cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 1990's is what was exceptional, racá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365r than Canada's..."

    Forgive me, Nick; I don't mean to be rude here. But I cannot respect cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365 analysis you offer: Pick a "cause" that suits your preconceptions, and cá cược thể thao bet365_cách nạp tiền vào bet365_ đăng ký bet365n try to get people to find evidence for you? Really??

    ReplyDelete
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