capitalism, Consumer Price Index, CPI, employment, energy consumption, great stagnation, industrial production, labor force, output, PCE price index, price deflators, production, production and nonsupervisory, productivity, stocks, United States
Recently, I viewed Tyler Cowen’s TEDx talk on the post-1973 Great Stagnation in the U.S. (and, therefore, the rest of the First World). I wrote a few sentences on this stagnation in a post Tyler Cowen ended up linking to, thus setting a new record of daily pageviews for this blog. I tried at first to write a post on the causes of this Great Stagnation, but before I could do that, I had to identify the trends of this era. Since I’m more familiar with the country I live in than with countries in which I do not, this post will focus almost exclusively on U.S. trends. It’s not like trends in any other country besides Singapore are significantly better; there is no country with a higher per capita GDP (PPP) than the U.S. that is neither a tax shelter, a gambling island, nor an oil kingdom/oligarchy. This post took me about three days to write.
The post-1973 trends I find relevant to this Great Stagnation are:
*No more military conscription (or its effect on the unemployment statistics) since 1973.
*A rising consumption share of GDP (slowing nondurable goods consumption drove the fall in the consumption share of GDP before 1968/73; you can check).
*Complete and permanent stagnation in U.S. per consumer nondurable consumer goods production, with a very sharp turn in 1973, as well as stagnation in U.S. per consumer durable consumer goods production, with a very sharp turn in 1973, with the exception of significant growth during the 1991-1999 period and the post-Great Recession era.
*No (or hardly any) general stagnation or slowdown in per-manufacturing-worker U.S. manufacturing productivity, at least, as of 2007, as there has been a productivity slowdown since the Great Recession. Some stagnation is evident in the 1973-1981 period, but this was made up for later.
*More gradual stagnation or slowdown (depends on price index; see below) in per consumer nondurable goods consumption, clear slowdown in per consumer services consumption, and per consumer durable goods consumption being almost on (exponential) track, if the PCE durables price index is used. Similar results if you look at U.S. Multifactor Productivity.
*Definite stagnation in per consumer food and energy consumption.
*Falling labor compensation share of GDP (this has accelerated since the Great Recession).
*Average production and nonsupervisory worker compensation falling behind GDP.
*Rising share of production and nonsupervisory workers in the labor market.
*Stagnating government share of employment after a peak in 1975.
*The 1947-1973 boom’s picket fence of equitable earnings growth being replaced by a stepladder of both labor and capital income concentration.
*Black-White income gap slightly narrowing (see above link).
*More slowly growing consumption inequality than earnings inequality.
*Greater divergence between price deflators (CPI starts rising significantly above PCE deflator in 1973; PCE deflator starts rising significantly above nonfarm business output deflator in 1983). Most of this, as a useful table from the BEA points out, is due to the weight effect; that is, the CPI gives more weight to goods and services with greater price increases than the PCE price index.
*Stagnating per-worker total carbon dioxide emissions in the U.S. (since 1973) along with stagnating per capita energy consumption (since 1979 and especially since 1999).
*Stagnating worldwide per capita oil consumption (since 1979).
*Growing immigrant share of labor force.
*Declining unionized share of labor force since peak in 1954.
*Increased imports (with stagnation after mid-2008).
*Growing financialization of economy (since 1979), with hourly compensation of production&nonsupervisory workers in finance growing faster than those of production&nonsupervisory workers in any other sector.
*Booming stock market (since 1979; after a bearish stock market between 1973 and 1978), with the exception of the 2000-2003 and 2007-9 stock market deflations. Great divergence between DJIA and industrial production.
*Newly rich replacing heirs in top of wealth distribution.
*An explosion of Federal regulation beginning in the early 1970s, which continues unto this day.
*Stagnating U.S. High School graduation rates since the mid-to-late 1960s.
A note: U.S. pre-tax, pre-transfer income inequality is by no means unique in the developed world. What is unique are its unusually low taxes and transfers.
Another note: As you can see, I’m using total civilian employment and the labor force as rough proxys for the number of U.S. consumers. You can easily change the charts if you want to use some other series in place of these.