Friday, January 10, 2014

We're Not Seeing A Lot Of Progress Here

The latest U.S. employment report, or more accurately the household survey part of it, was actually stronger than many people thinks it was. If you look at the prime age (25 to 54) employment rate*, did in fact increase 0,1 percentage points, from 76.0% to 76.1%, as the drop in the unemployment rate overwhelmed the effect of the drop in the participation rate.

However, though the monthly change was stronger than many people think, the yearly change is weaker than what many people think.

Here is the December data for the latest 11 years:

2003 78.8
2004 78.9
2005 79.3
2006 80.1
2007 79.7
2008 77.6
2009 74.8
2010 75.0
2011 75.4
2012 75.9
2013 76.1

As you can see, it dropped from a high of 80.1% in 2006 to 74.8% in 2009. After having increased by 0.4 and 0.5 percentage points in 2011 and 2012, it then increased by a mere 0.2 percentage points in 2013. So, after four years less than a fourth of the drop has been recovered and  the already slow rate of recovery slowed further in 2013.

*= The prime age employment rate is in my view the best gauge of labor market strength, since unlike the official unemployment rate it isn't distorted by the hidden unemployment that is represented by the long-term unemployed dropping out of the work force as the many rejections have led them to believe that there is no point in applying for jobs, and unlike the 15+ employment rate, it isn't distorted by demographic shifts between age groups.


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