How're we doing on Unemployment? (March 2013)

By -
Since my last look in November 2012, the various measures of employment have remained along their recent  trajectories.

A snapshot:
  • Unemployment rate slightly better each quarter (largely because so many people have stopped looking for jobs)  [About 200K jobs were created, but this was plus 400K part-time jobs and minus 200K full-time jobs]
  • Participation rate (how many want jobs) between flat and slightly worse.
  • Employed-to-population ratio, between flat and slightly better
The source of all the graphs below is the excellent gallery at "Calculated Risk".



The unemployment rate has been dropping slowly but steadily for over two years. This "headline number" that is reported the most widely. It is also the one that gives the most positive picture. A "naive linear" projection gets us back to a pre-recession rate by the second half of 2014. 

As the graphs below show, the "quality" of this rate will be much lower than what we had in 2006-07. There will be more part-time jobs, and a huge number of people would have just stopped looking. Nevertheless, this is the most-reported number on unemployment, so it's useful to keep an eye on it.



The Employment-population ratio shows a more dismal picture. Look at the black line above. It is more or less flat -- so much worse than the headline unemployment rate. If we take the most naively optimistic view, and assume this will suddenly turn upward at a pace as fast as we saw after 1975, it would still be 2017 before we get to pre-recession levels. If we assume it will turn upward and grow at a historically-average rate, we're probably talking about 2019. If we look back at the times when the rate flattened out for a few years (mid-1960's and 2003-04), we'll see that it grew slower than normal. 

Does that mean it will be the mid 2020's before we can be back to pre-recession levels? My best guess is that we're "never" getting back to those levels. The biggest change we have seen is that many fewer 16-19 years olds are working. This aspect might be here to stay. We are probably talking about a "new normal" where we get back to a little below the pre-recession levels over the next 5 or 6 years, and stay there.


a


Core age-group, Employment-population ratio: If we leave out those below 25 (yes, I know 25 is pretty old), and leave out those above 54 (yes, I know that's just a few years away for me, and I don't feel old), we get an age group (25-54) which is in its core working years. Mostly, these people cannot delay looking for work while they do still more college, nor can they retire yet.

Most optimistically, it will be 2016 for this group to reach its pre-recession level of employment. A more reasonable assumption would put it around 2019 or 2020.


Summary of projections: 

 If we do not have a new recession, various measures of unemployment are likely to improve. However, some measures appear to be headed for a "new normal", never returning to pre-recession levels. Except for the "headline rate", they will take well into the next presidential term to return to "good times". The headline unemployment rate should be back in about 2 years, barring a new recession.

No new recession? With a booming stock market, a recession appears a distant idea; but that's how it always feels as we head to a "top". Some commentators think we might be seeing early signs of a recession (Europe is already in recession, China is faltering, and India too.)  Forget all that, and simply look at the frequency of recessions in the chart above. A "naive-projection" would say that there's a pretty good chance we will have another recession in the next 4 or 5 years. If that happens, the linear projections for unemployment can be thrown away, since we'll start another downturn.


Previous, related posts:






Comments

Post a Comment

Popular posts from this blog

Country Shares of World GDP

By -
Image
Here's a chart of world GDP, broken down by country share. ( HT: Carpe Diem ). Careful with the x-axis, it is not at all to scale! The basic idea is that India and China had large shares pre-industrial revolution, after which Europe rose. The U.S. shoots up, to over 40% of world GDP by 1950. Then, Japan begins to grow in the 1960s, and China in the 1980s. Suppose countries end up with GDPs proportionate to their populations. What would that picture look like? I've added a bar to the right, showing the break-down of world-population. Look at the U.S. squished down, with less that 400 million out of a world population of over 7,000 million. The biggest change is in the previously un-noticed 'rest of the world". If Africa, the Middle East and so on moved toward freedom, that could be the story of the century.  What if they do not? Here's a chart with a new assumption. Suppose the "rest-of-world" does not increase its relative s
Read more

von Mises on the Quantity Theory of Money

By -
Reading von Mises a while ago, I was surprised to see him speak against the Quantity theory of Money, but what he said made a lot of sense. A recent Facebook comment sent me back looking for the source, and I decided to blog a few choice quotes, because others may find it interesting. My summary of von Mises's position is as follows: The supply of money is an important factor in its value. This is the element of truth in the Quantity Theory However demand for money is the other factor. The quantity theory gives short shrift to demand for money. (One must look to individual decision-making processes and their objective context to understand the demand for money. One cannot start with the aggregate demand for money.) Even if supply were the only factor, it is wrong to assume the value of money will change in direct proportion to the change in supply It is also wrong to assume that an increase in supply of money changes all prices generally and similarly A good theory o
Read more

U.S. Economy: Federal Debt- How big is it?

By -
Image
( Updated: Dec 2012 ) Lots of numbers:  Trying to get a clear picture of U.S. government debt can be frustrating. The government owes: 60% of GDP : bonds owed to private entities , both foreign and domestic 100% of GDP : if we add bonds owed to the government-itself (e.g. Social Security "trust fund", Federal Reserve) 400%+ : if all Fed promises to social security and medicare recipients are met (they won't be) [Note: the GAO claims that adding another 2% (of payroll) to the current 13% payroll tax would keep social security funded for more than 70 years!] A snapshot: The U.S. government (officially) owes about US $16 trillion to the public, plus to the Fed, plus to the "trust funds".  The GDP of the U.S. is approximately $16 trillion. (Both these were about $15 Tr. last year.) To put this in perspective:  adding up the assets of everyone in the U.S. and subtracting liabilities, we get a "net worth" that adds up to about $ 64 trillion ($5
Read more