The June Household Employment Report: Morning Comment

Attention Conservation:

• The labor market over the past year: good cyclical news
• The labor market over the past year: a structural disaster for economic potential
• A further 0.7%-pt decline in participation of which demography only generates 1/4.

2.1 million more adults employed than there were a year ago. A labor force smaller by 100,000 then a year ago. 2.4 million more adults not in the labor force than a year ago.

From the viewpoint of the cyclical recovery, the labor market over the past year is a small plus: the civilian employment to adult population ratio is up by 0.3%-points.

From the viewpoint of the long-run structural health of the US economy’s potential output and ability to mobilize our resources, the labor market over the past year is a disaster: a further 0.7%-point decline in the participation rate when demography would meet us to expect the decline only one quarter as large as the baby boom generation ages into retirement.