How're we doing on Unemployment? (March 2013)
Since my last look in November 2012, the various measures of employment have remained along their recent trajectories.
A snapshot:
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:
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.
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:
- How're we doing on Unemployment and GDP? (Sept 2012)
- How're we doing on CPI Levels? (April 2012)
- How're we doing on home prices? (April 2012)
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