What struck me about Robert Samuelson’s most recent column:
First, let’s admit that we don’t really know where “full employment†is. Economists define it as the “natural rate†of unemployment: the rate when tight labor markets begin to generate higher wage inflation. The Fed’s estimates of today’s “natural†rate range between 5 percent and 5.2 percent unemployment. At 5.5 percent, we seem close.
But suppose the natural rate is nearer to 4 percent. If so, we’re not so close. Despite the label, the natural rate isn’t natural. It reflects laws (say, the minimum wage), institutions (unions) and worker behavior. At any time, the natural rate is an educated guess based on past relationships that could be outdated.
The “Great Recession†might have reduced the natural rate. If workers worry more about job security — as seems likely — companies can pay less to keep them at their present jobs. Similarly, some economists argue that there are millions of labor dropouts who are not counted as unemployed but who would accept a job if it were available. Both these behavioral changes would depress the natural rate. But there’s no consensus among economists.
was that I wondered what he has against more jobs? Do you believe we are nearing full employment? Me, neither. I think he’s been staring at the BLS employment situation reports too long.
The 5.5% unemployment rate that he’s citing doesn’t include a laundry list of people including those who’ve given up looking for jobs and those whose unemployment benefits have run out. It does include hundreds of thousands of jobs that may not even exist, products of the birth-death ratio the Bureau of Labor Statistics uses to adjust the establishment employment figures. Note that the household employment stats have diverged from the establishment survey for quite a while now.
If the labor force utililzation rate today were what it was back in 2007, the unemployment rate would be closer to 10% than to 5%. Although Baby Boomers retiring may explain a portion of of that, it doesn’t explain most of it. Let’s keep our eye on the ball. This economy still needs to put a lot more people back to work.
It certainly doesn’t explain the big hole in FT employment for people aged 25-54. That drop is far larger than the demographic decline, and puts the lie to all the employment happy talk of the everything-for-the-rich and open-borders crowds.
One can dig into the weeds of the employment numbers and find much is missing in the 5.5 UE pabulum. Like ice said above, it’s just a lot of “happy talk,” as most of the recovery is being felt by the elitists — people who the government publicly scorns while they privately enable with favorable policies, as they court them for political donations. And, like Dave already stated, the real UE figure, when taking into account the labor participation rate of the past, underemployment etc is something like 9.7%, just under 10%.
This is the pattern, though, of the current administration — to state “happy talk,” rather than true talk, whether it involves the nitty gritty of the PPACA, foreign policy misadventures, or the latest agreement with Iran, whose version looks very different from the agreement being touted over here.
It’s hard to imagine retiring demographics don’t have some effect. However, it can’t be very significant. As ice points out, any time I’ve seen the numbers sliced and diced older people are hanging on and the younger demo is getting slaughtered. It’s a charade.
And a question for people. How is it that a vigilant (snicker) media does not point out the fallacy? Ice has put the Fred and BLS data up right here a number of times. I know it can’t be bias………..
Looking up numbers is hard, Drew. You’ve got to open up new tabs & everything! Thinking about them is even harder. There’s a good chance they just aren’t up to the task. Not all of them can be as good as Sabrina Rubin Erdely when it comes to eeking out all the details of a story.