Inflation and Unit Labor Cost

[phk]

Link: http://www.princeton.edu/~mwatson/papers/King_Watson_GERZ25_Jan26_2012.pdf

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[Beet]

What happened around 1980?

[t_host1]

What happened around 1980?

Jimmy Carter, gas rationing, CD's at 10%, mortgages at 19%, misery index...

[Yelnoc]

What happened around 1980?

Decline in manufacturing, perhaps?

[opebo]

Clearly we have had a deflationary economy since neoliberalism was instituted by Reagan.  The only possible end result is a capitalist collapse and intractable depression.

[angus]

What happened around 1980?

There was some monopoly breakup, and deregulation got popular.  Channeling Ron Paul I could also say that stabilization policy by the Fed (monetary manipulation in order to decrease market volatility) was the main creator of the divergence between the red and blue lines. 

[opebo]

So, angus, you don't suppose China had anything to do with it?

[angus]

So, angus, you don't suppose China had anything to do with it?

Channeling Mitt Romney?

Sure, China too.  Why not?  I suspect it has multiple causes, including those given in the footnotes on pages 10 and 11 as well as section five of the linked file which cite peculiarities of the GG and SW models used in determining the parameters, but I prefer to cite a combination of Reaganomics and the Great Moderation.

[opebo]

So, angus, you don't suppose China had anything to do with it?

Channeling Mitt Romney?

Sure, China too.  Why not?  I suspect it has multiple causes, including those given in the footnotes on pages 10 and 11 as well as section five of the linked file which cite peculiarities of the GG and SW models used in determining the parameters, but I prefer to cite a combination of Reaganomics and the Great Moderation.

I'm not blaming China, angus, I'm blaming capitalism.

[phk]

What happened around 1980?

Decline in manufacturing, perhaps?

Manufacturing output has never declined. Lower-level manufacturing jobs have been automated though.

Not quite as early but from 1987 we can see the trends of manufacturing employment and manufacturing output:



Output per worker. As we note it doubled it's 1987 number some time in early 2005. Pretty much the same amount of time a child born in 1987 took to graduate high school.

[opebo]

Output per worker. As we note it doubled it's 1987 number some time in early 2005. Pretty much the same amount of time a child born in 1987 took to graduate high school.

Interesting that nearly all that increase took place in the 1990s.

[phk]

Output per worker. As we note it doubled it's 1987 number some time in early 2005. Pretty much the same amount of time a child born in 1987 took to graduate high school.

Interesting that nearly all that increase took place in the 1990s.

and the number of people employed stayed pretty much the same until the 2001 recession.

[Smid]

Output per worker. As we note it doubled it's 1987 number some time in early 2005. Pretty much the same amount of time a child born in 1987 took to graduate high school.

Interesting that nearly all that increase took place in the 1990s.

and the number of people employed stayed pretty much the same until the 2001 recession.

So about the time computers started becoming cheap?

[opebo]

So about the time computers started becoming cheap?

No, buddy, about the time globalization accelerated, particularly the movement of production to China.  Computers are not a big factor, and the small difference in price between a 1997 computer and a 2007 one is definitely not a bit factor.