## If We Added Up All the Hours Worked in the Economy, What Would it Look Like?

If you add up all the hours worked in the economy in June 2011 they are equal to all the hours worked in February of 1999.  That’s how much slack there is in the economy.

First, we are going to pull a graph we haven’t used before, index of aggregate weekly hours (thanks to Lee Price for the suggestion). What’s this? From the BLS’s definition:

Indexes of aggregate weekly hours and payrolls. Indexes of aggregate weekly hours are calculated by dividing the current month’s aggregate hours by the average of the 12 monthly figures, for the base year. Indexes are based on 2007 averages for all employees and on 2002 averages for production and nonsupervisory employees. For basic industries, the hours aggregates are the product of average weekly hours and employment of workers to which the hours apply (all employees or production and nonsupervisory employees). At all higher levels of industry aggregation, hours aggregates are the sum of the component aggregates.

So you add up all the hours worked in the economy and plot them on a graph, divided by a previous year to set a baseline. So this is total hours, not hours per employee or anything like that.  Total hours worked in the economy.

How does that look? Here’s the aggregate number of hours worked in the economy for the private sector:

Even though our population is larger, there are significantly fewer hours worked across all people in the economy. How does this look on a longer timeframe? This is the index of aggregate weekly hours for production and nonsupervisory employees for all private industries, which has a longer time series than other totals:

If you add up all the hours worked in the economy in June 2011 they are roughly equal to all the hours worked in February of 1999.  Is there some sort of supply-side argument about how we are less productive as workers than we were in 1999 or 2004?  This is part of what people mean when they say there’s unused capacity, and that’s a tremendous waste of people’s talents and lives.

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### 11 Responses to If We Added Up All the Hours Worked in the Economy, What Would it Look Like?

1. Mike says:

Correction: This post originally said “If you add up all the hours worked in the economy in June 2006…” where it should have been June 2011. My mistake, hopefully it was clear. Fixed in post.

2. robert says:

Perhaps this is in part because the economy simply requires far fewer hours of human labor in order to produce the same amount of output. Far too little attention is being give to the impact of technology and globalization on wages, unemployment and the concentration of income at the top.

Computers and robots are getting better and better. More jobs are being done by software, often incorporating artificial intelligence or machine learning. There was a recent piece in the NYT about teams of lawyers being replaced by e-Discovery software.

This is going to ACCELERATE in the future. A company called Heartland Robotics is working on a \$5000 robot; that means an employer can buy a robot for the price of a couple of months wages.

As jobs at all levels, from McDonalds to college-educated knowledge-workers, are increasingly automated, there will be more unemployment, more downward pressure on wages, and especially even more income inequality as the owners of capital realize even more gains. Ultimately, this will undercut consumer spending because there simply won’t be enough average people with discretionary money to spend on goods and services. In fact, we already see evidence of that.

For a great overview of this, see this book:

“The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future”

http://www.amazon.com/gp/product/1448659817

A free PDF is also available here: http://www.thelightsinthetunnel.com

Also see the author’s blog at http://econfuture.wordpress.com.

I think the issues raised in this book are among the most important that we will have to confront as a society. I encourage everyone to read it…

3. Ernie says:

BLS has even more specific data than this. They used to publish an Establishment Survey Table B-10 with aggregate seasonally-adjusted hours of nonfarm payrolls, broken down by sector.

BLS still uses this data for measuring quarterly productivity (GDP per hour worked), but Table B-10 is now technically “unpublished.” The good news, though, is that BLS still in practice publishes and updates this data on their FTP server:

ftp://ftp.bls.gov/pub/special.requests/opt/tableb10.txt

So, for example, we learn that in Q1 2011, nonfarm wage & salary workers put in about 223 billion hours (annual rate), a 1.9% increase over Q1 2010.

4. This probably has a lot to do with satellite technology, which is replacing more physical labor with wireless means of moving data and information. This is exactly why credit card rates need to be reduced.

5. Misaki says:

“If you add up all the hours worked in the economy in June 2011 they are equal to all the hours worked in February of 1999. That’s how much slack there is in the economy.”

Well, it’s a good thing we’re not at war or anything, or this nonproductivity would be having a negative effect!

“This is part of what people mean when they say there’s unused capacity, and that’s a tremendous waste of people’s talents and lives.”

Wait, what?! I think a recent post at Economist’s View is relevant… “What’s the Point of Economic Growth?”

What does “low consumer demand” really mean?

From http://www.calculatedriskblog.com/2011/07/more-employment-return-of-teen-and.html : ‘That is why so many companies identify their number one problem as “lack of customers”.’

But as helpfully pointed out to me,
of course that is utterly and 100% meaningless and stupid.
It is like sayng the number one problem of cancer researchers is they have not found the cure. It is a given that no business has too many customers and no researchers have too many cures for cancer. OMG!!!!

More specifically, this means businesses would not increase profits by lowering their prices, because the slight increase in sales would not make up for the loss in per-unit profit, even if their product is significantly cheaper than others on the market.

Decreasing the cost of a car from \$35k to \$25k will not make a rich person buy it instead of a \$200k luxury car, because they don’t care about saving \$10k. In other words, companies that are NOT profitable enough are the ones who feel like they have problems from lack of customers.

Companies that are profitable don’t feel like they have a lack of customers because they are profitable, even if they could make more profit for every new customer.

This lack of competition is the same as described [here]: http:/pastebin.com/Q86Zhgs9 and derives from the very slightly higher amounts of utility of the more expensive goods, even if the utility is only “having a brand that people will recognize”. This is what lack of customers really means, that the low-end companies have problems not the high-end ones, and is exactly what changing the wage system would fix by lowering profits for the high-end companies and increasing demand for products of the low-end ones.

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7. tv says:

How ridiculous does this make the Fed look? These guys who recently ended QE2 on the grounds that risks between an overheating economy and wage-price spirals and soft labor market were equally balanced, erring on the side of doing too little for what, the 30th Fed meeting in a row?

This, in turn, makes the administration, who is still foot-dragging on Fed appointments, look ridiculous…

What on Earth is the administration waiting for on Fed Appointments? A mushroom cloud to hit the Fed?

8. Misaki says:

Terrible, terrible comment spam. Please delete this if it is unwanted.

“The argument that we are on a permanently lower growth path is an argument that there’s nothing we can do, nothing we need do, and nothing we should do (except, perhaps, measures such as sharing the jobs we have more broadly). This is the new normal and you may as well get used to it.”

An analogy (aka a lie):

Jens, Kirsten, and Niloufar constitute an economy. It doesn’t matter what they make. Each sells to the other two.

Enter William, who sells iPods. Jens wants an iPod, so he starts buying less from Kirsten and Niloufar. Eventually he has most of the money in the economy, and buys an iPod.

William now has most of the money, Jens has an iPod but no food, and Kirsten and Niloufar are selling less than half what they used to (mostly to each other).

Now, they could all reduce their prices to prevent Jens from starving to death, but they are too stubborn since after all it’s Jen’s fault no one has any money, and if he wants food he can make stuff for them (which they can buy only slowly because most of the money is gone). Anyway if they did lower their prices, they’d never get their money back from William after Jens gave it all away.

But William just likes collecting money, and only spends what he needs to survive… and before he completely runs out, Kirsten decides she needs an iPod too.

^ You are invited to ponder the solution to that situation before proceeding.

***
Yay I love replying to my own comments. For those who don’t know how to fix this simple economy of four persons: make Jens, Kirsten, and Niloufar all do some of the work of assembling iPods, so Jens has more time to spend money and has to pay the other three to make the iPods that they want to buy.

Again, http://pastebin.com/Q86Zhgs9 except people think companies are doing badly so the correct action is to reduce average wage for full-time work, but give the option to work part-time at the original wage **which is an offer which should be taken disproportionately more frequently by those working at profitable companies making iPods**.

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