Employment Trends - Digging Deeper

As followers of Paul Krugman know, FRED is a veritable candy store for economics data junkies. It turns out that accessing and plotting FRED data is remarkably easy. With the quantmod package installed, the basic command is

getSymbols('datacode',src=“FRED”)

In what follows, most of the R code is hidden; what is displayed is the tag of the dataset and its dimensions. But as a starting point, we can look at corporate profits. The code shown below can be easily modified for any available FRED dataset.

getSymbols("CP", src = "FRED")
## [1] "CP"
dim(CP)
## [1] 261   1

We can quickly plot the whole thing with

plot(CP, main = "US Corporate After-Tax Profits")

plot of chunk unnamed-chunk-3

But in an election year, aren't we more interested in what's happened recently, in particular, let's say, in the last three administrations (1993-2012)? I'm sure there's a sophisticated way to pull out that subset of the data, but a brute force method is to start by looking at the last third of the data:
plot of chunk unnamed-chunk-4

Note that the starting point was found by trial and error. But the result is rather interesting. The Clinton Years were not great for corporate profits, while the Bush years were a mixed bag (great from 2002-2006 and then rather miserable afterwards). But the interesting years are the Obama years. Yes, the Great Recession had an enormous impact, but look at the recovery. In fact, one could argue that the growth in profits that started in 2001 has perked along just fine.

OK, so it was the Bush tax cuts, right? I won't argue the point, but the question that comes to mind is how has this translated into personal income?

## [1] "DSPIC96"

plot of chunk unnamed-chunk-5

Interesting juxtaposition. Throughout the Clinton and Bush years, despite the differences in corporate profit growth, personal income rose steadily. Not so recently. Although the time period is short, these data suggest that we are in a new mode - corporate profits are increasing without translating into income growth.

Now there are a lot more things that we could be looking at, like tax burden, cost of living, and so forth. All are available via FRED. But as another snapshot, let's look at unemployment rates over the same time period:

## [1] "LNS14100000"
## [1] 534   1

plot of chunk unnamed-chunk-6

And yet one more. The President got in trouble for saying that “the private sector is doing fine”, right? Well, let's look at nonfarm employment during his administration:

## [1] "NPPTTL"
## [1] 139   1

plot of chunk unnamed-chunk-7

and contrast that with total government employment

## [1] "USGOVT"
## [1] 882   1

plot of chunk unnamed-chunk-8

The difference is striking. We've already seen that corporate profits are increasing, and now we see that private sector employment is as well. So why the unemployment rate? Quite simple - government employment is shrinking. So great! Big Government is shrinking? Right? Well, there are a couple of problems. First of all, that goes against the narrative of Obama as the big government liberal. And second, we need to ask, from whence cometh the decline in government employment? Here's one source:

## [1] "CES9093161101"
## [1] 690   1

plot of chunk unnamed-chunk-9

And here's one final twist. When was the “era of big government”?

## [1] "CES9091000001"
## [1] 882   1

plot of chunk unnamed-chunk-10

Well what do you know? Ignoring the 10 year spikes caused by census hiring, the biggest increase was between 1981 and 1990. when Ronald Reagan, the patron saint of the Tea Party was president, and the biggest decline was from 1993 to 2000, the era of Bill Clinton, the philandering big-government liberal.

Of course all of the above is selective, and someone of a different political bent could frame things differently. But what I hope it points out is that focusing on any one measure is going to be deceptive. Fortunately, the data are readily available for further exploration.