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Where the job losses are in one graph

Annie Lowrey intervenes in the structural-vs.-cyclical unemployment argument with a nice graph showing job losses by sector (click on it for a much larger version):

Unemploymentstructure1.png

You're seeing sharp drops in the industries involved in building things (construction, mining and logging, durable goods manufacturing), more gradual drops in pretty much everything else, and a slight rise in the health and education sectors. This doesn't yet look like structural unemployment, as there aren't large industries begging for workers they can't find. But it's easy to see how this could become structural unemployment if its left to fester.

Either way, the one thing we're sure it is, as Lowrey says, is geographic unemployment. States that relied on the housing sector -- think Nevada and Michigan and California and Florida -- have seen their labor markets collapse, while the Dakotas, Nebraska and Kansas are doing alright. And since many of those workers own homes that they can't sell (and have families, roots in the community, etc.), they're effectively trapped in a jobless market. "Four years ago," Lowrey writes, "you might have been working in construction in Nevada and overpaid for your house. Today, you’re likely out of a job and, worse, can’t move to a state like North Dakota because you can’t sell the property."

By Ezra Klein  |  September 1, 2010; 9:39 AM ET
Categories:  Charts and Graphs , Economy  
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Comments

Surely it's both: a layer of low-aggregate-demand unemployment on top of structural unemployment in construction and auto manufacturing (where there has been chronic global overcapacity for years).

Quibble: Michigan should not be listed as a state that "relied on the housing sector." Home prices have fallen a lot in Michigan due to horrible economic and demographic fundamentals. There was never a housing bubble in Michigan, which is clearly in "flatland" (as opposed to the "zoned zone" in Krugman's pity description of where it is possible to have a housing bubble).

Posted by: Anno3 | September 1, 2010 10:16 AM | Report abuse

The "structural-vs.-cyclical unemployment argument" is one of those bags of gas that nothingheads like to pass back and forth amongst themselves as they try to figure out new ways to foist their nothingheadedness on their fellows.

Posted by: msoja | September 1, 2010 10:41 AM | Report abuse

However, if you graphed employment by different earnings levels (a rough proxy for skill and education levels) you would find significant differences. Mid-level earners would be losing employment, and low-wage and high-wage earners would be gaining employment. So we have a structural mismatch in the skill and education of most workers -- we have many high school graduates with little or no college education, and dwindling jobs that seek those skills and education. Isn't that just a different kind of structural unemployment?

-Shane, Omaha

Posted by: spekny | September 1, 2010 10:43 AM | Report abuse

What are the axes? Presumably jobs on the vertical axis (millions?) and time on the horizontal, but what dates do those numbers represent?

Posted by: dwsmall | September 1, 2010 10:43 AM | Report abuse

Uh, almost nobody lives in North Dakota so taking that state's unemployment rate as an indicator of economic opportunity is ridiculous. And there aren't very many people in Nebraska or Kansas either.

Admittedly, they didn't have a housing bubble (in N. Dak?!!! Hah) so they aren't deleveraging and they did get stimulus so they are 'doing better'. But really, nobody is 'moving to N. Dakota for a job'.

The x-axis represents years; 1=2005, 2=2006...

Mining and Lumber fell off the charts when new housing finally ran out of steam (lumber) and when everyone figured out that this recession wasn't going to be like other recessions -- demand will be depressed for a loooong time, so you don't need to stockpile raw materials.

Education employment held 'steady' because of last year's stimulus -- watch it tank this year.

Posted by: grooft | September 1, 2010 11:03 AM | Report abuse

That's the worst graph I've ever seen. What are the axes??

Posted by: akent07 | September 1, 2010 11:05 AM | Report abuse

Thanks for the interesting post. I would appreciate it if graphs such as this had labelled axes (or a verbal description in the blog post of what the axes represent). Often I'm trying to read the post quickly, and it's much easier to see the point at a glance when the label is actually in the graph.

Posted by: KevHall | September 1, 2010 11:23 AM | Report abuse

Annie Lowrey has a better idea of what is going on than DeLong seems to.

The 'construction and manufacturing are both falling so its not structural' line has never made much sense. It wasn't one sector that went down, it was the whole structure of production.

The bubble in construction lifted other sectors. The housing boom provided something to do for construction workers, bankers, laywers, real estate agents etc. on quite a direct level. New homes also helped retail because new homes usually mean new furniture and consumer electronics. Also, the asset bubble created artificial wealth which consumers decided to consume over the 2002-2006 period (give or take).

All of these effects on the other sectors were lost when housing crashed. This cascades to sectors not quite as attached to housing (if construction workers, bankers and real estate agents aren't working, they are not generating the income to buy cars, if consumers aren't as wealthy as they thought, they might decide not to buy a car as often as part of their long-term savings strategy).

Housing construction will not return to 2005 levels for a very long time, and so some of those directly and indirectly employed by the housing boom need to find something else to do. That factories don't have 'help wanted' signs on their doors does nothing to change this fact.

Also, as Lowrey noted its hard to find the next job or go to school if your mortgage was given a snorkel by the housing crash and you can't move.

These are all structural things. While the government could indeed direct construction workers back to building houses, all we'd be doing is using debt to pay for houses no one wants - and once the government decides it doesn't want to be spending hundreds of billions per year funding housing construction, the economy would be right back to the readjustment phase.

Posted by: justin84 | September 1, 2010 11:52 AM | Report abuse

--"Annie Lowrey has a better idea of what is going on than DeLong seems to."--

Both of them, and Klein, too, are just gassing.

It's like talking about a drought so that eventually someone can broach the idea of throwing money at the sky, while someone else will gravely intone that, no, we need to encourage more rain dances with an appropriately applied mix of policy and coercive taxation. And then everyone will argue about the precise mix.

Posted by: msoja | September 1, 2010 12:39 PM | Report abuse

The jump in education jobs seems like it should kill any suggestion that we need to pour a lot of federal money into saving state and local government jobs.

Posted by: tomtildrum | September 1, 2010 12:39 PM | Report abuse

Sorry for the confusing graph. The years are along the x-axis, starting with 2005 and ending with 2010. On the y-axis, I made 2005 data equal to 1 (to make it easier to read, as some industries are much bigger than others). The y-axis therefore shows the size of the industry in comparison to 2005 (so, 1.05 would be 5 percent more than in 2005, .95 would be 5 percent less, etc.).

Posted by: AnnieLowrey | September 1, 2010 1:55 PM | Report abuse

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Posted by: josecailin1 | September 2, 2010 4:49 AM | Report abuse

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