I’ve been tracking US employment and unemployment for the past couple years. Here’s an updated version of a graph looking at employment to population. One advantage over “headline” unemployment is that this corrects for people who drop out of the labor force. However, it does not pick up those working involuntary short hours, since those data are not broken down by age bracket. Those working short hours has fallen a bit but is quite volatile, and so at most results in a very modest understatement of the improvement in labor markets.
As you can see, the biggest impact of the Great Recession was on the youngest cohort, e.g., new school leavers; the second biggest impact was actually on prime-age workers. Now over the past year there has been an (all too) modest increase across all the cohorts for which I compiled data. The aging of the population masks that (a point in Paul Krugman’s latest blog, Constant Demography Employment). But I’ll reiterate that the masking effect is not large. The recovery continues, but at a slow pace.
Finally, employment increases were stronger in the second half of 2011 going into early 2012; it’s been muted since. For the employment numbers I used a simple OLS regression to calculate the trend; for the short-hours adjusted employment I eyeballed in a fairly optimistic rate of increase. The implications are not encouraging; if we’re lucky – headwinds abound so sustaining the rate of increase for that many years would be more-or-less unprecedented. But if things go well, we don’t return to the (old) normal until 2017 in one case, 2021 in the other.
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The recent monthly unemployment statistics have been circulating over news networks in the past week or so for more than one reason. Firstly, the unemployment rate is down to 7.8%, three-tenths of a percentage point from last month. This not only seems like a huge improvement for the one-month period, but it is also the first time the unemployment rate has dropped below 8% in several years. The sudden decrease is not the only reason this statistic is receiving attention, but the timing of its release has also caused skepticism to whether or not this statistic reflects reality. Many conservatives have questioned whether this statistic has conveniently surfaced a month before the presidential election to ease the hype around what has been an all-too-slow economic recovery.
I agree that the statistic does make one want to raise their eyebrow and question “the system,” but really – – there are many factors during the BLS’s sampling process that could affect the accuracy of this number. I do not doubt that the unemployment rate has decreased in the past month, but it is possible that some sampling error could have occurred, and this number could be increased slightly when it is corrected in the future. The following article addresses some of the skepticism surrounding the recent unemployment statistics, and argues how the 7.8% rate could actually reflect reality. For example, a large fraction of the newly employed could be part-time employees. Moreover, these part-time employees did not necessarily have to enter the labor force in becoming part-time, but they also could have been downgraded from full-time employment. (Which isn’t too encouraging…)
http://www.washingtonpost.com/blogs/erik-wemple/post/unemployment-rate-trutherism-a-taxonomy/2012/10/05/7eeba8c8-0eff-11e2-bd1a-b868e65d57eb_blog.html
Nevertheless, there are many factors that contribute to the unemployment rate statistic. In a month we could see the 7.8% unemployment rate increase slightly, or it just might in fact be accurate. Regardless, I don’t see the huge hype around the 7.8% unemployment rate in the first place. Just because the unemployment rate dropped below the seemingly taboo 8% mark does not mean that our economy is moving full-steam ahead. As shown in your graph posted above, if we continue on current trend, full economic recovery will not occur for another 4-6 years. Certain conservatives could relax with the skepticism around the “accuracy” of this new unemployment statistic — for it is not that much to brag about.
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