13 Dec 2017

Assessing the Labor Market

Education 6 Comments

Check out the chart below. I am forming my own views but I’m curious to get reactions from you folks. I think it is extremely misleading to simply use the unemployment rate as an indicator for the health of the labor market. Note that the civilian-employment ratio is (obviously) not the same thing as the civilian labor force participation rate. What do you make of the US labor market since 2000, compared to the earlier pattern?

6 Responses to “Assessing the Labor Market”

  1. Darien says:

    What I see is that the labor force participation rate and the employment-population ratio track each other reasonably well, and that, prior to 2000, the unemployment rate was roughly opposite the e-p ratio, as one would reasonably expect. Since 2000, though, it appears to have become unhinged, and increasingly so after 2010. Since these are government statistics, my immediate thought is that some bureau or other (BLS, most likely) has monkeyed with definitions for political engineering purposes.

  2. Tel says:


    The green line represents long term trend changes in employment including but not limited to:
    * women coming into the workforce
    * men leaving the workforce
    * various age cohorts
    * shift from manufacturing to services

    The red line represents short term factors, closely linked to the boom/bust cycle (and that’s by design because once people have been unemployed long enough there are various reasons why they don’t get counted).

    The blue line is a bit of each of the other two.

    • Kevin Erdmann says:

      Tel is right. An easy way to get rid of all the demographic shifts that are going on is to look at LFP for just men age 35-44. You’ll see a pretty linear graph that has declined about 1% a decade since WW II.

  3. B Cole says:

    Yeah what I see is we never recovered from the 2008 recession.

    Also the Fed engages in wage suppression, not financial repression.

  4. Capt. J Parker says:

    Civilian employment population ratio ought to be declining over time because of the aging population so the fact that it is now only 60% isn’t very strong evidence of the economy still being far from full employment. While I curse and spit blood every time I am forced to admit it, Krugman taught me to look at the participation rate of prime age workers 25 to 54 years https://fred.stlouisfed.org/series/LNU01300060 By that metric there is still a little slack in the labor market but it isn’t huge.

  5. Capt. J Parker says:

    Here’s another metric: Employment rate of males 25 to 54. https://fred.stlouisfed.org/series/LREM25MAUSM156N The pre-recession peak employment rate for males 25 to 54 has been trending slowly downward for decades. When I eyeball where the peak ought to be for this current cycle based on a historical linear trend I get about 86% which is pretty close to where we are today. I haven’t yet decided if the downward trend in peak prime age employment is because progressives are destroying the incentive to work or because our rising standard of living, even for folks at the lower end of the income scale, is reducing the incentive to work all the time.

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