Wednesday, September 19, 2012

The Close Tie Between Energy Consumption, Employment, and Recession

ourfiniteworld | Since 1982, the number of people employed in the United States has tended to move in a similar pattern to the amount of energy consumed. When one increases (or decreases), the other tends to increase (or decrease). In numerical terms, R2 = .98.

I have written recently about the close long-term relationship between energy consumption and economic growth. We know that economic growth is tied to job creation, so it stands to reason that energy consumption would be tied to job growth1. But I will have to admit that I was surprised by the closeness of the relationship for the period shown.

This close relationship is concerning, because if it holds in the future, it suggests that it will be very difficult to reduce energy consumption without a lot of unemployment. It also would seem to suggest that a shortage of energy supplies (as reflected by high prices) can lead to unemployment.

I tried to consolidate a number of employment-related issues into one post, so in this post I also show that employment is shifting to Asia and other less developed countries, as energy costs (and total costs) are lower there. I also show that the US appears to have reached “peak employment” as a percentage of population in 2000, likely as a result of this shift in employment to Asia. The Kyoto Protocol may indirectly have helped enable a shift in production to Asia, through its emphasis on local production of carbon dioxide, without considering the indirect impact on world markets2.