Friday, November 2, 2012

The Great Employment Buckling

Click to enlarge.

Those who think lackluster employment growth is just a cyclical problem may wish to look more closely at the chart.


In science, buckling is a mathematical instability, leading to a failure mode. Theoretically, buckling is caused by a bifurcation in the solution to the equations of static equilibrium. At a certain stage under an increasing load, further load is able to be sustained in one of two states of equilibrium: an undeformed state or a laterally-deformed state.

In practice, buckling is characterized by a sudden failure of a structural member subjected to high compressive stress, where the actual compressive stress at the point of failure is less than the ultimate compressive stresses that the material is capable of withstanding.

See Also:
40.8 Million Missing Jobs

Source Data:
St. Louis Fed: All Employees: Total Nonfarm
St. Louis Fed: Population


Stagflationary Mark said...

This chart doesn't technically show an exponential trend failure but it does rely on nonfarm payrolls which has definitely experienced an exponential trend failure (starting in the year 2000).

Jazzbumpa said...

You come up with a lot of interesting stuff.

Why did you take 10 year averages?


Scott said...

Since equilibrium is a key concept of economics, your analysis is right on point. Very interesting.

Troy said...

yeah, this gets back to my warrrgarble I get into at DeLong's all the time, he says it's cyclical, and that just doesn't match with what I see happening.

$700B/yr trade deficits are not cyclical.

MANEMP back to 1930s levels isn't cyclical.

The Bush Boom being floated with suicide lending wasn't cyclical.

The trillion-plus hole in the government budget: isn't cyclical.

This nation is running out of runway, and the core problem is simply the top 5% running away with the game, just like how every Monopoly game comes to its own brutal end eventually.

Baby boom's not getting any younger, and there's about $40T of promises outstanding to them we've got to pay starting around now, too.

The bottom line is that the tax level has to be doubled sooner or later.

This is what this election is about -- one party just doesn't want to Go There -- to see big government tax with the same footprint that it spends.

The problem with that is that in today's labor-hostile world, without government cheese the 95% will be even more screwed this decade and next, and next.

Makes me want to get that doomstead and unplug the internet : )

Stagflationary Mark said...


Why did you take 10 year averages?

Long-term moving averages can remove short-term cyclical noise from a long-term structural trend.

There are times when removing the short-term cyclical noise doesn't offer much insight. There are times when it does.

With an r-squared of 0.9994 once the short-term noise was removed in this chart's case, I think it is safe to say that the latter applies here. It is my strong belief that the failure of this chart's long-term trend is extremely significant and not even remotely easily undone.

How does one unbuckle a collapsed bridge once too many trucks were placed upon it?

Stagflationary Mark said...


Since equilibrium is a key concept of economics...

With a physics background, I liken this chart to a steel beam that's experiencing ever increasing weight loads until the point of collapse. Everything seemed fine until it didn't.

Stagflationary Mark said...


yeah, this gets back to my warrrgarble I get into at DeLong's all the time, he says it's cyclical, and that just doesn't match with what I see happening.

Since 2004, I have been firmly in the structural problem camp. There are short-term cyclical issues too. There always are. In this case, they are masking the long-term trend though.

It allows people to believe that once the cyclical issues are gone (which I strongly suspect is already the case), all the prosperity will be restored. I'm pretty sure pension fund managers are when they assume 8% returns from here over the long-term (5-6% real yields in a 0% real yield bond market world). Good luck on that theory!

Stagflationary Mark said...

From my post...

At a certain stage under an increasing load, further load is able to be sustained in one of two states of equilibrium: an undeformed state or a laterally-deformed state.

If it was our ultimate goal to maximize our economy's deformed state, then I say mission accomplished, lol. Sigh.

Troy said...

it just occurred to me that these two lines: may be inherently linked.

The more we owe, the bigger the military we're going to need?

A political candidate that the top 5%, the social conservatives, fundamentalists, and the military could really get behind would be electoral dynamite!

TJandTheBear said...

Keep up the good fight, Troy.

The problem with DeLong (among others) is he doesn't realize the cycle this time is at the very least a K-wave, and very possibly an EW Grand Super.

Oh, and there's no way to tax ourselves out of it, either.

Troy said...

and there's no way to tax ourselves out of it, either.

I strongly disagree with that.

To get the current fiscal mess sorted out we need to increase taxes $1.5T.

One third of that should come from corporations:

that would still leave them with $1T after tax.

Another third can come from the top 5%:

The top 10% should see another $500B/yr, which would close to double their burden, from $600B tax on $3.4T in AGI (17%) to $3.9T, 33%.

That leaves $500B to be borne by the 10-50%, which can come from spending cuts (say $250B) and tax rises ($250B).

Interestingly, the 10-50% group earn as much as the top 10% -- $3.4T -- so a $500B hit would be a similar shock. But it's spread over more households, so the $500B works out to $9000 per household.

hmm, maybe you're right. We can't phase in a $9000/yr hit on households making $50-60,000 without major demand destruction.

I'd like to think all that extra taxation would come directly out of housing rents and land values, but even if it did that would produce really bad follow-on effects -- mass defaults as housing was driven down to actual replacement value and not all the embedded rents we pay now.

This of course does not address added taxes needed to support the baby boom's SSA and Medicare.

We need to double the Medicare tax going forward for sure, plus I'd like to see FICA raised a point or two to give retirees a bit more money.

Not to mention in my thinking the top 10% -- 14M households --are on the hook for the $2.6T SSTF, that's about $7000 per household in added taxes ($100B/yr) needed to liquidate the SSTF down to its statutory minimum by 2030 or so.

So . . . what's plan B? Start studying Swedish?

Troy said...

For clarity, delete this line:

"Another third can come from the top 5%:"

in my above.

Stagflationary Mark said...


The more we owe, the bigger the military we're going to need?

As seen in the following chart, military spending appears to be cyclical. The last two cycles are interesting to me. Are they an aftershock of high real oil prices?

Real National Defense Consumption Expenditures & Gross Investment per Capita (September 2012 Dollars)

Stagflationary Mark said...


So . . . what's plan B?

(5346) 1981 QE3!

Gallows humor, lol. Sigh.

TJandTheBear said...


You saw Teri's comment over on MoM's blog. What are you seeing in your hood? Seems motivation is lacking for both sides this election, but if so the effects would not be spread evenly.

Stagflationary Mark said...


Oh, and there's no way to tax ourselves out of it, either.

I lean this way as well. If we tax the corporations then they'll simply pass that tax on to us. If it is, we'll spend less. If we spend less, corporations will layoff workers. Round and round we go. Sigh.

There are unintended consequences for every solution that requires higher taxes and/or less government spending.

I'm also not much of a believer that these high corporate profits are sustainable. That's just an opinion though.

Stagflationary Mark said...


I did see her comment.

My girlfriend can't stand Romney. She hasn't lost any motivation.

That said, I'm not a big fan of either candidate.

I think Obama is paving a road to hell with good intentions.

I think Romney Pledges More of the Same. However, I do think he'd prefer to fly us to hell directly. It's more efficient that way, lol. Sigh.

Cthulhu for president in 2016!

TJandTheBear said...

Did you see the Joss Whedon video? Hysterical!

Stagflationary Mark said...

He IS the right pick for the Zombie Apocalypse. ;)

Troy said...

As seen in the following chart

I yield my FREDfu cape & cane to you!

Awesome, awesome chart. Something CR no longer gives a care about apparently.

"Peace mode will cost ya $1800. War mode, $2800, plus maybe a limb or two. Who's for war?"

Stagflationary Mark said...


The chart was inspired by Scott at Wasatch Economics.

Yeah, I gave you chart leftovers, lol. ;)

Stagflationary Mark said...


I think CR believes our problems are mostly cyclical. Cyclical arguments allowed him to spot the housing bubble fairly easily. He's sticking with what worked.

We believe that our problems are mostly structural. Structural arguments allowed us to spot the housing bubble fairly easily. We're also sticking with what worked.

I'm still permabearish. He never was.

Somebody is going to be wrong here. I hope it is us but I don't think that's the case. Cyclical arguments don't explain the amazingly low real yield on the 20 year TIPS or the amazingly slow growth in job creation 3 full years into the recovery.

In the coming years, we'll certainly find out who was right. Sigh.

If I am right to be permabearish, then I will certainly be annoyed if the "couldn't have seen it coming" flag is waved yet again.

That said, there may be other things that annoy me even more. You know. People attempting to break into my house to steal my vast toilet paper hoard comes to mind. Well, that and not having a Plan B, lol. Sigh.

Gallows humor! Well, it's mostly gallows with just a hint of nervous laugh. Sigh.