We realized several years ago that there was an unmeasured problem on the U.S. labor landscape.
NEW YORK (PRWEB) November 14, 2019
Researchers at the Program on the Law and Regulation of Financial Institutions and Markets of the Jack G. Clarke Institute at Cornell University Law School (Cornell Law), the Coalition for a Prosperous America (CPA), the University of Missouri – Kansas City Department of Economics (UMKC), and the Global Institute for Sustainable Prosperity (GISP), today announced the launch of a new tool for evaluating the U.S. employment situation and predicting related variables: the U.S. Private Sector Job Quality Index (JQI). This new metric is likely to become a leading economic indicator on American jobs.
Conceived and begun in 2017, and representing over 18 months of cooperative work by economists Daniel Alpert, Jeff Ferry, Robert C. Hockett and Amir Khaleghi, the underlying work on the U.S. Private Sector Job Quality Index has resulted in an easily used measure by which to track and evaluate, with precision, changes to the U.S. jobs base that are of great consequence.
By tracking and measuring the shifting balance between high-wage/high-hours jobs and low-wage/low-hours jobs across time, the JQI shows that an intuitively compelling measure of job quality in the U.S. has deteriorated substantially since 1990, especially since 2006. This in turn goes a long way in explaining both depressed household income growth and overall economic growth below potential notwithstanding “good jobs numbers” over much of the past 30 years.
The JQI is a real-time economic indicator, and will be published monthly. Using data on private sector jobs provided by third party employers and aggregated in the U.S. Bureau of Labor Statistics (BLS) Current Employment Statistics (CES), the JQI is a weighted ratio of high-quality jobs divided by low quality jobs, with a reading of 100 evidencing an equal distribution. It covers all non-farm private sector production and non-supervisory (P&NS) jobs in 180 distinct industry sectors and several sub-divided categories. High-quality jobs are those offering a combination of hourly wages and weekly hours (i.e. weekly incomes) above the mean level for all P&NS jobs, and low-quality jobs are those below the mean, as that mean changes from month to month.
“We realized several years ago that there was an unmeasured problem on the U.S. labor landscape,” said co-author Daniel Alpert, Senior Fellow/Adjunct Professor at Cornell Law and Managing Partner of the investment bank, Westwood Capital LLC, who first conceived of the index in 2017. “Despite high and sustained levels of job formation, particularly since late 2012, and historically low levels of headline unemployment reached in recent years, hourly wages and weekly incomes have been acting as though there were considerable labor slack. The solution to this puzzle is found, in large part, in the composition of the jobs base and the deteriorating quality thereof over decades.”
The JQI white paper demonstrates highly significant correlations between movement in the U.S. Private Sector Job Quality Index on the one hand, and quarterly or annual changes in other economic data on the other hand, including: the U.S. Balance of Trade in Goods; Prevailing U.S. Sovereign Interest Rates; Labor and Multifactor Productivity; Capacity Utilization; and, Non-Residential Fixed Investment.
“The path of economic growth the U.S. has opted for since around 1980, and accelerating after 2000, has produced widespread underemployment, deteriorating job quality, and slower economic growth,” said co-author Jeff Ferry, Chief Economist at CPA. “The U.S. Private Sector Job Quality Index captures this phenomenon and points the way to new, superior measures of the U.S. employment market. This has important implications for growth strategies and labor market policies, and can also help us better understand voter decisions.”
“The macroeconomic and even socioeconomic implications of the JQI are tremendous, and put to rest many widely held false beliefs concerning the challenges faced by American workers and our broader economy. As it turns out, the aging of the U.S. population and the advent of the so-called ‘gig economy’ pale in comparison, where accounting for recent developments is concerned, to the steadily worsening characteristics of jobs now on offer from U.S. employers,” said co-author Robert C. Hockett, a faculty director of the Program on the Law and Regulation of Financial Institutions and Markets and the Edward Cornell Professor of Law at Cornell Law School. “The reality that multi-income families struggle more and more to make ends meet, even in a quantitatively “low unemployment” environment, is both unmistakable and explanatory of low growth, high debt, worsening inequality and a host of other ongoing economic and social problems. Current quantitative metrics are speechless about these causal relations, while our qualitative metric accounts for all of them.”
The index can also contribute valuable insight into the collapsing of the relationship between unemployment and price inflation, known as the Phillips Curve, over the past decade or more.
“The reality is that the structure of the labor market is changing and as job quality declines, economic risks spike,” added co-author Amir Khaleghi, a PhD candidate at UMKC and a Research Fellow at GISP. “Unlike any other economic indicator, the JQI encompasses the composition of the labor market and movements within the JQI have shown to be qa predictive signal for economic turns. Most recently, the JQI accurately predicted the downturn in economic growth commencing in the fourth quarter of 2018, well before the evidence thereof in other indicators. As a monthly index, the JQI trend has shown surprisingly sensitive predictive characteristics relative to other factors that are heavily linked to aggregate consumer demand.”
Beginning in December, the JQI will be released at 12pm Eastern Time on the same day as the BLS monthly jobs report, with the first report on Friday, December 6.
“The JQI should serve as a game-changer for the media that reports on economics, finance and trade,” said Michael Stumo, CEO of the Coalition for a Prosperous America. “This new tool will help policymakers, business leaders and academics better understand employment trends, household demand, aggregate economic growth, demand for capital and more. We’re also excited about its potential impact on trade, exchange rate and industrial strategy.”
The paper, explanatory deck and future U.S. Private Sector Job Quality Index releases can be found online at http://www.jobqualityindex.com.
About the Jack G. Clarke Institute of Cornell Law School
The Clarke Program on the Law and Regulation of Financial Institutions and Markets is devoted to understanding the key functions performed by banks, broker-dealers, investment companies and other financial institutions in the U.S., as well as global economic systems, and the roles played by law both in optimizing those functions and in constituting the market environments in which they are performed.
About the Coalition for a Prosperous America
The Coalition for a Prosperous America is the nation's premier nonprofit organization working at the intersection of trade, jobs, tax and economic growth. It is a bipartisan coalition of farmers & ranchers, manufacturers and labor groups working for a national strategy to eliminate the trade deficit, create good paying jobs and deliver broadly shared prosperity to America.
About the University of Missouri Kansas City – Department of Economics
The Department of Economics is committed to promoting excellence in broad-based undergraduate programs; graduate and interdisciplinary doctoral education; research; and community, university and professional service. The department focuses its research, teaching and service efforts on the urban mission of the University by fostering a diversity of research and teaching perspectives for faculty and students.
About the Global Institute for Sustainable Prosperity
The Global Institute for Sustainable Prosperity (GISP) is an independent public policy think-tank dedicated to the promotion of interdisciplinary research in the service of an improved quality of life for all members of society. The institute focuses on developing solutions that provide decent employment opportunities for everyone ready, willing and able to work at a living wage.