The chart below shows something you should worry about more than the upcoming BLS employment situation report on Friday. The blue line shows the declining energy intensity of real GDP in the U.S. It's the "underappreciated positive trend" in energy efficiency that Jared Bernstein highlighted in his Odds and Ends a couple of days ago. Jared remarked that it takes half as much energy per dollar of GDP as it did in the 1960s. Actually, it takes about half as much energy as it did in 1977.
But there is a dark cloud surrounded by that slender silver lining. The red line shows the energy intensity of employment since 1973. [My original chart was "upside down" and erroneously showed the energy intensity actually increasing].
|Sources: U.S. Energy Information Agency, Table 1.5 Energy Consumption, Expenditures, and Emissions Indicators, 1949-2009 and BLS Labor Force Statistics from the Current Population Survey, 1949-2009.|
I've indexed both series so that 100 = the average intensities for 1970 to 1973. This highlights that both trends entered a transition during that period. The energy intensity of GDP began a steeper decline after 1970 while the energy intensity of employment reversed its trend after 1973 from increasing to decreasing energy intensity. However, that decreasing trend slowed considerably after 1986.
So what happened from 1970 to 1973? The period is bracketed by the demise of Bretton Woods, symbolized (although not initiated) by the August 15 1971 Nixon "New Economic Policy" and the Arab oil embargo announced in October 1973. In 1970, the Brookings Institution published a paper by Lawrence Krause, titled "A Passive Balance of Payments Strategy for the United States." In The Origins of International Economic Disorder, Fred Block credited Krause's article as the "highest expression" of a view that had been emerging since the late 1960s regarding how to manage the U.S. balance of payments deficit. The Nixon administration pursued a strategy roughly along the lines of the Krause strategy culminating in the August, 1971 "New Economic Policy" that closed the official gold window, established a 10 percent import surcharge and imposed a system of domestic wage and price controls. In October 1973, the Organization of Arab Petroleum Exporting Countries imposed an oil embargo "in response to the U.S. decision to re-supply the Israeli military during the Yom Kippur War."
Far be it from me to try to tease out all the implications of my little energy intensity chart. Let's say it's a piece of empirical evidence that challenges John Quiggin's and Brad DeLong's confidence that, as Brad put it, "it all depends on the facts, and the jury is in" or in John's words,"Most economists would regard it (Jevons Paradox versus the fallacy of the lump of labor), on the basis of the empirical evidence, as being generally true for employment and generally false for energy." While energy consumption per dollar of GDP in 2009 was less than half what it was in 1973, consumption per employed person less than 25%, almost all of which was in the period from 1973 to 1986. What do most economists have to say about the stagnating energy intensity of employment (call in "ENINEM" for short)?