How are we doing on Unemployment (Nov 2012 edition)

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Last time I looked at unemployment, in Feb 2012, the number of people employed was flat; but, with people dropping out of the workforce, the unemployment rate had started to fall.

The rate has continued to drop (upward in the graph from Calculated Risk, shown below). To the right, I've added a "naive linear projection" which would see pre-recession unemployment rates return by 2015.

Instead of the commonly-reported rate, we could simply look at the number of people employed as a percentage of the population.


This chart shows the core working-age range (25yrs -54yrs). Notice the slight uptick near the end of the chart. After a flat 2010 and 2011, we've seen a slight rise during 2012.

What if we do a naive extrapolation of this chart? When will we reach the pre-recession 80% for this age-range? We get the orange arrow drawn at the end... ... not getting back to pre-recession levels for at least 5 years (that's 2017). Unfortunately, if we look at data for all ages (16 - 65yrs) the uptick is barely discernible, with youth unemployment being the major issue.

Unemployment claims are flat too, stubbornly refusing to come down to levels seen in 2005 through 2007.

New normal: PIMCO's Bill Gross has popularized the phrase "new normal". This is the idea that the U.S. has moved to a phase where we are not going back to 5% unemployment and 3.5% GDP growth.

A new recession: Go back to the first chart in this post. Imagine that the "new normal" for unemployment is somewhere near 6%. If a recession does not hit in 2013, we could see a rate like that in  2014. Meanwhile, in Europe, Japan, China and India, all signs point to slower growth -- with Europe and Japan in recession. There is a strong likelihood that the U.S. will see at least a mild recession (as defined by the NBER) during the current presidential term. (Some economists think we're in one already.)

The summary: Flat, but not clear that were poised to improve; we could just as well be flattening out before a second dip.



























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