Afternoon Must-Read: Julie L. Hotchkiss: Adjusted Employment-to-Population Ratio as an Indicator of Labor Market Strength

Julie L. Hotchkiss: Adjusted Employment-to-Population Ratio as an Indicator of Labor Market Strength: “There have been calls to pay closer attention…

…to the movement in the employment-to-population ratio (EPOP), as opposed to the UR, as a measure of labor market strength…. Since the end of the Great Recession… the UR has fallen dramatically… but the EPOP has barely budged…. The purpose of this paper is… to… propose a methodology for adjusting the EPOP in a way that accounts for individual willingness to work…. The basic strategy… is to estimate individual probability of employment as a function of month/year indicators, then to enhance the model… with individual characteristics and… the individual’s propensity to be in the labor force…. The adjusted EPOP has regained its prerecession level of nearly 63 percent. Youth have regained even more, and those 25 to 54 regained 71 percent of their loss over the sample period. As a point of reference, by the end of 2013 the UR had recovered roughly 66 percent of the climb to its peak of 10 percent…”