2017

Speaking of recessions and teachers, the Hamilton Jobs Gap calculator now projects a return to pre-recession job levels sometime between January and August 2017.

The recession began in December 2007 (the crash came nine months later, in September 2008).

So ten years.

The Hamilton projection surprises me because everyone else I read seems to think we'll never return to pre-recession job levels -- "never" meaning not in this generation, at least. A big chunk of workers has been sidelined, the thinking goes, and they're not coming back.

But Hamilton seems to be assuming we can get back to the employment-population ratios of 2007.

At least, that's what I think Hamilton assumes. I don't have the patience to work through their explanation tonight. Or maybe ever.

~~~~~~~~~~

Employment-population:

In January 2007, 80.3% of people age 25 to 54 were employed.

Today that figure is 77.2%, up from a low of 74.8% in November 2010.

Prime working age.

Weaker economy, better teachers

Department of silver linings.

WEAK MARKETS, STRONG TEACHERS: RECESSION AT CAREER START AND TEACHER EFFECTIVENESS

Markus Nagler
Marc Piopiunik
Martin R. West
NATIONAL BUREAU OF ECONOMIC RESEARCH
1050 Massachusetts Avenue
Cambridge, MA 02138
July 2015

ABSTRACT

How do alternative job opportunities affect teacher quality? We provide the first causal evidence on this question by exploiting business cycle conditions at career start as a source of exogenous variation in the outside options of potential teachers. Unlike prior research, we directly assess teacher quality with value-added measures of impacts on student test scores, using administrative data on 33,000 teachers in Florida public schools. Consistent with a Roy model of occupational choice, teachers entering the profession during recessions are significantly more effective in raising student test scores. Results are supported by placebo tests and not driven by differential attrition.

~~~~~~~~~~

How do alternative job opportunities affect teacher quality? This is a crucial policy question as teachers are a key input in the education production function (Hanushek and Rivkin, 2012) who affect their students’ outcomes even in adulthood (Chetty et al., 2014b). Despite their importance, individuals entering the teaching profession in the United States tend to come from the lower part of the cognitive ability distribution of college graduates (Hanushek and Pace, 1995). One frequently cited reason for not being able to recruit higher-skilled individuals as teachers is low salaries compared to other professions (e.g., Dolton and Marcenaro-Gutierrez, 2011; Hanushek et al., 2014).

Existing research provides evidence consistent with the argument that outside options matter. A first strand of the literature has used regional variation in relative teacher salaries, finding that pay is positively related to teachers’ academic quality (e.g., Figlio, 1997). A second strand has used long-run changes in the labor market – in particular, the expansion of job opportunities for women – finding that the academic quality of new teachers is lower when job market alternatives are better (e.g., Bacolod, 2007). However, both bodies of evidence suffer from key limitations. First, relative pay may be endogenous to teacher quality. Second, measures of academic quality are poor predictors of teacher effectiveness (cf. Jackson et al., 2014). This important policy question therefore remains unresolved.

[snip]

We find that teachers who entered the profession during recessions are roughly 0.10 standard deviations (SD) more effective in raising math test scores than teachers who entered the profession during non-recessionary periods. The effect is half as large for reading value-added. Quantile regressions indicate that the difference in math value-added between recession and non-recession entrants is most pronounced at the upper end of the effectiveness distribution. Based on figures from Chetty et al. (2014b), the difference in average math effectiveness between recession and non-recession entrants implies a difference in students’ discounted life-time earnings of around $13,000 per classroom taught each year.2 Under the more realistic assumption that only 10% of recession-cohort teachers are pushed into teaching because of the recession, these recession-only teachers are roughly one SD more effective in teaching math than the teachers they push out. Based on the variation in teacher VAMs in our data, being assigned to such a teacher would increase a student’s test scores by around 0.20 SD.

[snip]

Our finding that the effect of recessions on teacher effectiveness is twice as strong in math as in reading is consistent with evidence that wage returns to numeracy skills are twice as large as those to literacy skills in the US labor market (Hanushek et al., 2015).

[snip]

Our results also suggest that recent improvements in cognitive skills among new teachers in the US documented by Goldhaber and Walch (2013) may be attributable to the 2008-09 financial crisis, rather than an authentic reversal of long-term trends.

[snip]

To our knowledge, ours is the first paper to document a causal effect of outside labor market options on the effectiveness of entering teachers in raising student test scores.

[snip]

We find that teachers who started their careers during recessions are more effective.

[snip]

Chetty et al. (2014b) find that students taught by a teacher with a one SD higher value-added measure at age 12 earn on average 1.3% more at age 28. Using this figure, our preferred recession effect translates into differences in discounted lifetime earnings of around $13,000 per classroom taught each school year by recession and non-recession teachers (evaluated at the average classroom size in our sample).

Mark your calendar

According to the Hamilton Jobs Gap Calculator, at the current rate of job creation, we will be back to the level of employment we had before the crash in June 2017.

It seems to me that, on the present course, we'll never be "back to trend." Or, rather, the slope of the trend line will continue to decline:

source: Quantitative Easing Is Ending. Here’s What It Did, in Charts.

That is one lousy recovery.

A real recovery is a V-shaped curve. Growth spurts up above the trend line, averaging out the dip, and the trend line remains the same. Back to trend.

Here's what Wikipedia has to say on the subject of L-shaped recoveries:

"An L-shaped recession occurs when an economy has a severe recession and does not return to trend line growth[citation needed] for many years, if ever. The steep drop, followed by a flat line makes the shape of an L. This is the most severe of the different shapes of recession. Alternative terms for long periods of underperformance include "depression" and lost decade; compare also "malaise"."

An L-shaped recovery is a bad thing, but the Federal Reserve has signed off on it, so that's what we've got. Where is Milton Friedman when we need him?

While I'm on the subject of desperately seeking Milton Friedman, is it not possible for journalists and pundits and economists and the like to recall the principles of supply and demand when discussing inequality?

As far as I can tell, the single best medicine for income inequality (if you're concerned about income inequality) is a tight labor market. (The other competitor for single best medicine is closing the trade deficit, also unmentionable in polite punditry, it seems.) Ed has finished a draft of his European history textbook, and has been writing about decades when income inequality plunged because countries were experiencing labor shortages.

When lots of employers are bidding on janitors, the price of a janitor goes up.

I'm in favor of labor shortages myself, but we're not going to see another one in my lifetime, not with the Federal Reserve in charge.

The Federal Reserve believes in a little thing called Nairu. Nobody knows whether the Nairu exists or, if it does, what its value is, but the Fed believes in it, so there is nothing to be done.

I ask myself, not infrequently, whether things would be different if the country at large knew that the Federal Reserve fights inflation by raising unemployment.

Have I mentioned I don't like policy elites?

I opened up my NY Times app the other morning to discover this opinion from Richard V. Reeves, fellow in Economic Studies and policy director for the Center on Children and Families at Brookings:

"Let" affluent children fail is a thinkable public policy goal?

At Brookings?

The logic shoots off in all kinds of horrifying directions. E.g.: granting for the sake of argument that letting affluent children fail is a good thing, wouldn't giving them a little push off the cliff be even better?

(And how much should we pay suburban teachers for that service?)

Uggh.

I haven't been able to bring myself to read the column, especially after spotting this line:

"It is a stubborn mathematical fact that the top fifth of the income distribution can accommodate only 20 percent of the population."

Twenty percent is 20%, so the "bottom" 80%, a supermajority of the population, is forevermore locked into the bottom 80% unless we "let" affluent children "fail."

By that reasoning, whenever a child grows up in the top 20% and then, as an adult, descends to the top 21%, that child has "failed."

I skimmed long enough to spot the term "opportunity hoarding" and to discover that it originates with Charles Tilly, with whom I think Ed and I had dinner in Los Angeles years ago. I remember liking Professor Tilly immensely, assuming our dinner companion was in fact Charles Tilly; Ed doesn't remember. On the other hand, Ed did know Tilly, so I think it was Tilly.

Anyway, on the strength of one nonverifiable memory of a fabulous evening with Charles Tilly, I have decided that if I want to know more about opportunity hoarding, and I may want to know more about opportunity hoarding, I will go directly to the source and bypass Brookings.

In the meantime, I am now sufficiently well-versed in macroeconomics to know that the answer both to twenty percent being twenty percent and opportunity hoarding is a roaring economy and a weaker dollar.

Today's factoid: our strong-dollar policy apparently originated with Robert Rubin.

Another member of the policy elite.

sticky

At the other blog....

school employment factoid

From the White House blog:

The local government education sector has now lost 339,400 jobs since its recent peak in November 2009.
The Employment situation in January

Sticky wages = job loss. (see: Why Wages Don't Fall in a Recession by Truman F. Bewley)

Meanwhile Catherine Rampell, at the Times, reports that "Getting the economy to 5 percent unemployment within two years — a return to the rate that prevailed when the recession began — would require job growth of closer to 284,984 a month."

Jobs added this month: 157k

BLS puts job growth in 2012 at 181,000 per month. At that rate, the country will return to full employment 10 years from now.

in other words, the answer is homeschooling

For some reason, I stumbled upon an Education News interview with Joshua Angrist that contains the following exchange:

[QUESTION]
School quality and human capital ARE major issues for all Americans. But we all know that some schools are failing. What can the typical parent do for their child other than attempt to home school?

[ANSWER]
Some schools are better than others. For many parents, however, this is not worth worrying about. For example, I never worried much about my kids schooling. I told them that teaching is hard, many teachers are mediocre at best, and they should try to get something out of badly taught classes as well as inspiring ones. The evidence suggests that’s a reasonable approach for children in educated families like mine. I worry most about the children of teen mothers, from families where there isn’t much adult supervision, little in the way of role models, and little hope for a middle class life. In this situation, a good school can make a huge difference.

An Interview with Josh Angrist: School Quality - Who Decides? 

For white kids, good enough is good enough.

My first reaction was exasperation. Don't worry, be happy doesn't cut it, and I am in a position to know. I am the parent of a (white) college freshman, and I teach (some) white college freshman as well as black and Hispanic students. None of them -- black, white, or brown -- are where they should be, and Ed, who occasionally teaches (mostly white) freshmen at NYU, will tell you the same.

Maybe "the evidence" used to "suggest" that graduating high school as a white 18-year old with mediocre skills was "a reasonable approach," but this interview was published just 9 months ago, and things are different now.

See, e.g., the Hamilton Jobs Gap calculator. If the economy continues to create 155,000 jobs per month, which has been the rate for the past two years, full employment does not return until after 2025. At that point today's college freshmen will be 31 years old and will have spent their first decade of employment in a buyer's market for labor. In a buyers' market, employers have more applicants than they can sort through and, often, no real need to hire if they can't find a purple squirrel.

See Urban Dictionary for the expression that covers that situation.

"Never worrying much" about your kids' schooling is a luxury white parents no longer enjoy, along with all those other luxuries that disappeared when household wealth fell by 40% in 3 years time. Assuming Angrist is right about what parents "can do" (nothing) and I'm sure he is, then homeschooling is the answer.

That was my first reaction.

My second reaction was: jeeeeeezzz.

"...many teachers are mediocre at best..."

"...the children of teen mothers, from families where there isn’t much adult supervision, little in the way of role models..."

In one short paragraph, he's managed to insult both teachers and a fair share of minority parents, while dismissing afterschoolers and math warriors out of hand.

Pretty efficient, I'd say.

the chart I'd like newspapers to use from now on

re: "writing is rewriting" at the New York Times

the chart:













the data:

how to find the chart (it's not easy):

1. GO TO Bureau of Labor Statistics
2. MOUSE OVER Data Bases & Tools
3. Under "Customized Tables," CLICK on News Release Tables: link takes you to Historical News Release Tables
4. Under "Access to Historical Data Series by Subject: Previous years and months," CLICK wizard to right of "Browse labor force, employment, unemployment, and other data by subject": link takes you to Access to historical data series by subject
5. SCROLL DOWN to Employed Persons & CLICK Most Requested Series
6. CHECK Civilian Employment-Population Ratio - LNS12300000
7. CLICK Retrieve Data et voilà:
8. Labor Force Statistics from the Current Population Survey
9. CLICK "Include graphs" if you want to include graphs

64.6% of the population employed in 2000
58.4% employed today

update 8/8/2012:
unemployment rate has been decoupled from the employment-population ratio



update update 8/8/2012:
Here is Scott Sumner explaining why level NGDP-targeting is not inflationary. (I don't entirely follow, but am passing this along.)

And here is Boston Federal Reserve president Eric Rosengren endorsing NGDP targeting. Sumner writes: "Two down, 17 to go."

"writing is rewriting" at the New York Times

I'm not sure how journalism works these days.

Last Friday, shortly after the BLS released payroll data showing 163,000 jobs created in July, the Times posted its story. The American economy, it said, had "continued" its "long slog upward from the depths of the recession." That was the lede.

The next paragraph reported that the economy was "just barely treading water."

I found this exasperating. Where jobs are concerned, the economy has not "continued" a long slog "upward." Employment crashed in 2008 and never came back, and there's an end to it. The economy is slogging sideways.

But even more annoying in some ways, to me at least, the metaphors are mixed. Barely treading water is not compatible with continuing a long slog upward. One is up, the other is down, or down as much as up. A person who is just barely treading water is not gaining altitude, and I'm pretty sure I remember a time when anyone working for the New York Times would have known this without having to think about it.

A half hour or so later, the story changed. Someone had cleaned up the mixed metaphor, which was good, but the story itself had gotten worse.

The lede was the same--the economy was still slogging upward (not true for jobs!)--but now the 2nd paragraph opened with the observation that while the payroll survey was better than economists had expected, "no one is yet popping champagne corks."

Yet?

I saw one estimate showing that if the economy continued to produce 163,000 new jobs every month from now on it would take 8 years -- 'til 2020 -- to return to the employment level we had in 2007. Eight years to produce a jobs recovery for a 4-year 5-year slump (to date): nobody uses 'yet' in a context like this.

And nobody pops champagne corks at the end of an 8-year slog.

So Take 2 was even more exasperating, and then finally a third version of the story cropped up:

America added more jobs than expected last month, offering a pleasant surprise after many months of disappointing economic news. Even so, hiring was not strong enough to shrink the army of the unemployed in the slightest.
Hiring Picks Up in July, but Data Gives No Clear Signal
By CATHERINE RAMPELL | Published: August 3, 2012

This is the same story! We've gone from the economy slogging upward to economists not popping champagne corks to an army of the unemployed not having been shrunk in the slightest, and all of this in just a couple of hours.

How does this happen?

How do mixed metaphors and bad metaphors get through copy editors at the Times, and how does a story completely change meaning within just a few hours?

I'm wondering whether, these days, news organizations post stories as soon as they possibly can, knowing they can clean things up later.

Do newspapers deliberately post first drafts these days?

update 8/8/2012: Anonymous leaves word that the story changed 9 times.

(click on the images to enlarge)

not your father's bell curve

Sticky wages in 2011:

The tall bar in the middle represents workers who had a wage increase of $0
People to the right of the bar had pay raises
People to the left of the bar had pay cuts
Why Has Wage Growth Stayed Strong?
By Mary Daly, Bart Hobijn, and Brian Lucking

I've been meaning to post this for a while now.

I find this chart fascinating. I have never, not once in my entire lifetime, seen a curve that looked like this -- although they must be out there.

Here's the San Francisco Fed write-up:

Researchers generally point to asymmetries in the distribution of observed wage changes among individual workers as evidence of nominal wage rigidities. Figure 2 plots an example of this type of wage change distribution in 2011. The dashed black line shows a symmetric normal distribution. The blue bars plot the actual distribution of nominal wages.

The figure’s most striking feature is the blue bar that spikes at zero, indicating the large number of workers who report no change in wages over a year. This spike stands out in the distribution of actual wage changes, suggesting that, rather than cutting pay [in line with reduced earnings], employers simply kept wages fixed over the year. This is supported by the large gap to the left of zero between the actual distribution of wage changes and the dashed black line representing the normal distribution. This gap suggests that the spike at zero is made up mostly of workers whose wages otherwise would have been cut.

Once you start thinking about sticky wages, you see them everywhere.

For instance, Ed and I were watching an episode of Friday Night Lights a couple of weekends back, and the story line, which spanned multiple episodes, revolved around budget cuts to the schools. First the cuts were rumored, then the cuts were announced, and then there was rending of clothes and tearing of hair and parents mobbing board meetings to demand that cuts happen to other people's programs, not theirs. (And, yes, this sequence of events does sound familiar).

It was high drama.

Teachers would be FIRED!

Football teams would be MERGED!

Fire and flood, death and despair!

Two years ago, right up to the moment I found out about  downward nominal wage rigidities over the business cycle, ^* this story line would have made perfect sense to me. Like everyone else on the planet (including pick-up farm workers and their employers in India, apparently), I simply took it as a given that people can be cut but wages can't. In hard times, fear and loss (and television drama) follow directly from this belief.

But once you know about the money illusion, a school budget crisis loses most of its oomph as dramatic premise. Watching the pandemonium onscreen, I was unmoved. I kept thinking, "How about a wage freeze? How about a furlough? How about a wage cut?"

"How about everyone sit down and do some arithmetic and, while you're at it, figure out that it's not like the Dillon School District is a family where the sole breadwinner just lost their^** job. You've still got money coming in, you just don't have as much money coming in next year as you did this year. (Or, if Dillon is anything like Westchester County, you don't have as big an increase coming in next year as you did this year, but you've still got an increase.) So everyone's gonna have to make do with less, but nobody's gonna starve, not unless you insist on firing the young teachers so the old teachers don't have to take a cut."

No dice.

The story arc ends with teachers getting fired and football teams getting merged, and nobody says 'boo' about the possibility of 'shared sacrifice' and the like.

I realize that, in real life, employees do take freezes and furloughs to keep everyone on the job. But they don't do it often, as the chart reveals.

^* I have now consumed so much macroeconomics that I can read formulations like downward nominal wage rigidities over the business cycle almost as fast as I can read twinkle, twinkle, little star.
^**It pains me to write "the sole breadwinner just lost their job," as opposed to "the sole breadwinner just lost his job," but I think the time has come.

jobs

Interesting short video at the WSJ.

The video documents a massive loss of manufacturing jobs but doesn't discuss where those jobs went or why.

Ben Bernanke urges soldiers to combat high unemployment

Federal Reserve chairman Ben Bernanke took his message about the U.S. economy to military servicemen, making a pre-Veteran’s Day visit to the Fort Bliss headquarters for the Army’s 1st Armored Division and urging soldiers to combat high unemployment by focusing on training and education.
Bernanke's Fed Takes Message to Texas
November 10, 2011

What next?

The chairman of the Federal Reserve advocating small class size and school uniforms?

from the FRBSF: Recent College Graduates and the Labor Market

Haven't read it yet, but here's the link.

I'm a big fan of the San Francisco Fed's Economics Letters.

boom and bust

in 1977:

Two of Washington D.C.'s most splendid institutions -- the Board of Governors of the Federal Reserve System and the Capitol Hill Baby Sitting Co-operative -- are currently fighting their own separate battles against the scourge of inflation. Neither seems to be winning.

Whatever the lessons of the board's experience, the lessons from the co-op's are clear. (1) The co-op has been increasing its money supply ("scrip") per capita, by running budget deficits, and this has generated inflationary forces. (2) However, the main "commodity" this scrip money buys is baby-sitting time, and the price of baby sitting is constitutionally pegged at one unit of scrip for every one-half hour of baby sitting. Hence, this system of price controls means the inflationary pressure does not drive up the scrip-price of baby sitting, inflation is suppressed, and shortages are found. (3) The political process of rectifying the situation holds little hope. Few members see the problem as fundamentally monetary, but instead believe others are not doing their part in removing the shortages.

Monetary Theory and the Great Capitol Hill Baby Sitting Co-op Crisis: Comment (pdf file)
Author(s): Joan Sweeney and Richard James Sweeney
Source: Journal of Money, Credit and Banking, Vol. 9, No. 1, Part 1 (Feb., 1977), pp. 86-89

I love this!

A tiny, 200-person economy complete with recessions, inflations, and even -- potentially -- a Great Depression, all of its very own.

In an odd sort of way, the Sweeneys' tale reminds me of Colleen Moore's fairy castle at the Museum of Science and Industry, which my parents took us to see every year when we were growing up.

Like the fairy castle only not fun.

it's come to this, part 2

Sad Guys on the Trading Floor

(probably not appropriate for children)

it's come to this

I now live in a state of suspense over what the Fed will say at its next meeting.

In the department of silver linings, I am finally reading Reinhart and Rogoff's This Time Is Different. 

a bad economy depresses math scores

Given the magnitude of the recent recession, and the high-stakes testing the U.S. has implemented under the No Child Left Behind Act (NCLB), it is important to understand the effects of large-scale job losses on student achievement. We examine the effects of state-level job losses on fourth- and eighth-grade test scores, using federal Mass Layoff Statistics and 1996-2009 National Assessment of Educational Progress data. Results indicate that job losses decrease scores. Effects are larger for eighth than fourth graders and for math than reading assessments, and are robust to specification checks. Job losses to 1% of a state’s working-age population lead to a .076 standard deviation decrease in the state’s eighth-grade math scores. This result is an order of magnitude larger than those found in previous studies that have compared students whose parents lose employment to otherwise similar students, suggesting that downturns affect all students, not just students who experience parental job loss. Our findings have important implications for accountability schemes: we calculate that a state experiencing one-year job losses to 2% of its workers (a magnitude observed in seven states) likely sees a 16% increase in the share of its schools failing to make Adequate Yearly Progress under NCLB.

Children Left Behind: The Effects of Statewide Job Loss on Student Achievement
Elizabeth Oltmans Ananat, Anna Gassman-Pines, Dania V. Francis, Christina M. Gibson-Davis
NBER Working Paper No. 17104
Issued in June 2011
NBER Program(s): CH

Here's the Curious Capitalist: Is the Economy Hurting Your Kid's Report Card?.

on beyond zebra

A friend sent me a link to this story last night:

"Infinite" is not a word you expect to find in a report on municipal spending. It's more of a science fiction–type term — Tremble, Earthling, before the infinite might of Galaxor! But there it was, in a recent report on San Francisco's finances: Spending on the city's employee retirement system in the past decade had grown at an "infinite" rate.

Naturally, that's an exaggeration. If you do the math, the city's retirement costs for employees in the past 10 years actually grew only 66,733 percent.

Still, you might call that a Galaxor-sized number.

In fiscal year 1999-2000, the city spent about $300,000 on its retirement system. In fiscal year 2009-10, it was $200.5 million. Benefits alone — not salaries, just benefits — for current and retired employees this year are budgeted at $993 million. Spending on retirees' health care and pensions is conservatively projected to triple within five years.

And after that? Infinite.

Let It Bleed
By Joe Eskenazi and Benjamin Wachs
Wednesday, Oct 20 2010
San Francisco Weekly News

I actually didn't even know there was such a thing as an infinite rate.