Monday, March 03, 2008

NAFTA: No Statistically Significant Effect on Jobs

From a comment from Spencer about this CD post:

"Is this how they teach you do do econmic (sic) analysis at GMU?You should compare the percent increases rather then (sic) the absolute numbers. Take the payroll number you use, for example. You show a gain of 21.4 million in the first period and 25.6 million in the second. The gain in the first period is 24% while the gain in the second period is 13%. That means that job gains after NAFTA were nearly cut in half."

Actually, using
these payroll data from the BLS (via FRED), the percentage increase from January 1980 (90,800,000) to December 1993 (112,206,000) is 23.57%, and the percentage increase from January 1994 (112,474,000) to December 2007 (138,119,000) is 22.80%, and not 13%! In other words, on a percent change basis, job growth in the 14-year period before NAFTA was almost exactly the same as the 14-year period after NAFTA.

For a more sophisticated statistical analysis, see the chart above with results of a difference-in-means t-test of the null hypothesis that there is no difference in monthly job growth in the pre-NAFTA and post-NAFTA periods. The results suggest that there is no statistical difference in job growth during the 1980-1993 period and the 1994-2007 period. Further, especially for payroll employment, the variability of monthly job growth (measured by the standard deviation) was much lower post-NAFTA (.1300%) than pre-NAFTA (.2152%), suggesting much greater stability in job growth after NAFTA.

Bottom Line: NAFTA had no statistically significant effect on U.S. job growth.


At 3/03/2008 10:46 PM, Anonymous Anonymous said...

"Is this how they teach you do do econmic (sic) analysis at GMU?"

One wonders where one acquires the skills to be a hack analyst at Angry Bear....

At 3/03/2008 11:20 PM, Anonymous Anonymous said...

My momma always told me when someone said free to run the other way. Nothing is ever free there is always some kind of cost.

At 3/04/2008 12:00 AM, Anonymous Anonymous said...

Everyone's analysis is far too simplistic, completely and utterly worthless and an exercise in futility.

One might just as well say that non farm payrolls as a percent of the US population increased 8.9% from 1980 to 1993 but only 6.2% from 1994 to 2007. A full 30% decrease in the rate of increase of payrolls as a percent of US population after implementing NAFTA. Was this because of NAFTA?

It is totally worthless and useless information because too many factors are left out of the analysis.

At 3/04/2008 8:13 AM, Anonymous Anonymous said...

anonymous 12:00 AM,

Actually it is pretty simple. The job market shifted from manufacturing to service because of increased efficiency and information technology (and a little outsourcing and off-shoring that saves consumers money). In addition, some states picked up jobs while some states lost jobs. Some people win and some people lose: it’s always been that way. Anyone blaming NAFTA, the Japanese, or Chinese is just sticking their head in the sand and not facing the reality that we live in a continually changing world.

At 3/04/2008 8:43 AM, Blogger Jack McHugh said...

Walt G has the right of it. Let's back up here: The purpose of simple observations about reality tested with simple analysis is to counter the horse-puckey that spews from the mouths of politicians for whom reality is nothing more than a "social construct" upon which they undertake their relentless pursuit of power. So we normal folks need some touchstones including simple observations like this to put things in context.

At 3/04/2008 9:15 AM, Blogger said...

Interesting the way political tripe sort of fades away in the face of facts.

Then again, it's a never-ending battle to convince some that objective truth even exists.


At 3/12/2008 10:12 PM, Anonymous Anonymous said...

But what about the effect(s) on standards of living. It had to be beneficial. Re Economics in One Lesson by Henry H.


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