Must-View: Without nominal wage growth of 4%/year or significantly rising inflation, no way I am going to believe that the U.S. economy is in any sense at “full employment” with an essentially zero output gap right now:
Just saying. That is all.
Tag: Employment-to-Population Ratio
Unemployment rate truthers department
The very sharp Kevin Drum gets it largely right:
: U6 Is Now the Last Refuge of Scoundrels: “Tuesday Donald Trump repeated his fatuous nonsense about the real unemployment rate being 42 percent….
…Then Neil Irwin of the New York Times inexplicably decided to opine that ‘he’s not entirely wrong’ because there are lots of different unemployment rates. Et tu, Neil?
Bill O’Reilly picked up on this theme today, with guest Lou Dobbs casually declaring that unemployment is ‘actually’ 10 percent… [and] Bernie Sanders… ‘Who denies that real unemployment today, including those who have given up looking for work and are working part-time is close to 10 percent?’… The 10 percent number is colorably legitimate… U6… unemployment plus folks who have been forced to work part time plus workers who are ‘marginally attached’….
But you can’t just toss this out as a slippery way of making the economy seem like it’s in horrible shape…. What’s normal in an expanding economy is about 8.9 percent…. The US economy is not a house afire…. I’m getting pretty tired of the endlessly deceitful attempts to make it seem as if we’re all but on the edge of economic Armageddon, and the last thing we need is for liberals to sign up for this flimflam too. It’s good politics, I guess, but it’s also a lie.
There are two arguments you can make that are not lies but are, rather, coherent arguments that are more likely than not true:
- That the US labor market performs abysmally at the low-wage end essentially all the time, as evidenced by U6.
- that the unemployment rate is a misleading indicator today because of the long-run disruptions to the labor market occasioned by what we must soon start calling “The Longer Depression”, as evidenced by the divergence in the behavior of unemployment and the employment-to-population ratio. And, no, this divergence is not primarily due to population aging.
Thus I think the Sanders conclusion–that the U.S. labor market is not performing all that well right now–is more likely than not to be correct. I object to the road he claims to reach it by. And I join Kevin Drum in doubly objecting to Trump and Irwin.
Must-read: Ben Zipperer: “U.S. Job Growth Slows in January, as the Nation Remains Years Away from Full Employment”
Must-Read: Almost all of those believing that we are now near full employment here in the U.S. dismiss the low employment-to-population ratio by noting that the population is aging. They very rarely confront the collapse since the late 1990s of the prime-age employment-to-population ratio.
But when they do confront the collapse since the late 1990s of the prime-age employment-to-population ratio, what do they say? I have heard only:
- “Peak male”–that the rise of the robots will systematically disadvantaging male workers, and we are starting to see this already. The problem with this is that the decline in employment-to-population since 2000 is about equal for 25-54 year-old males and females.
-
“It’s too late”–that our failure to induce a rapid recovery in 2009-11 broke the connection of many prime-age workers to the social networks that allowed them to navigate the labor market, and that taking steps to get them back into the labor market could only succeed if accompanied by unwelcome and unthinkable inflation.
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“Stop and smell the roses”–that people found out in the late 1990s that they really did not want to work that hard and that long anyway.
May I say I find all three of these profoundly unconvincing?
: U.S. Job Growth Slows in January, as the Nation Remains Years Away from Full Employmenth: “Estimates of full employment vary, but one natural point of comparison is the tight labor market of the late 1990s…
…For the entire 1998-2000 period, the employed share of the prime-age population (ages 25 through 54) was at least 81 percent, reaching 81.9 percent in April of 2000. In the most recent business cycle, the prime-age employment rate was above 80 percent during the final quarter of 2006 and first quarter of 2007. A full employment standard of 81 percent therefore lies somewhere in between the peaks of the last two business cycles. Some of the brightest news in today’s employment report is that the employed share of the prime-age population moved to 77.7 percent, up from 77.4 percent in December…. Last month’s increase in the prime-age employment rate is excellent progress. But as part of its mandate to promote full employment, the Fed should consider the projected progress of the labor market as it considers slowing the rate of employment growth.