To add a little zing to Ed Lazear’s op-ed in the Washington Post (“This is the real unemployment rate”) you might want to consider the graph above. Scroll over to the left for the good part. Then read Dr. Lazear’s op-ed:
There are two measures of the employment situation. The most widely reported is the unemployment rate, which is defined as the proportion of the labor force that is without a job. To be in the labor force, a person must have a job or be actively seeking work.
The other measure, which is generally preferred by many who study labor markets, is the employment rate, which is defined as the proportion of the working-age population (that is, 16 and above) that has a job. The employment rate is the bottom line because it measures the number actually working compared to the number who could work. But to the extent that failure to actively seek work is voluntary — for example, reflecting retirement or school attendance — taking that into account as the unemployment rate seems relevant to assessing the strength of the labor market. So which is right — the unemployment rate or the employment rate?
If credible, October’s unemployment rate of 5 percent would mean that we have essentially recovered from the recession. But Friday’s reported employment rate of 59.3 percent signals an economy that is well below capacity. Is the unemployment rate higher than it appears, or is the employment rate too low to reflect the appropriate strength of the labor force?
He follows that up with the standard caveats about an aging population. Unfortunately, he doesn’t mention the plunging labor force participation rate in the 25-54 cohort and the rising LFPR in those 55 and above.
I believe that economic is a behavioral science like psychology, sociology, or anthropology rather than a physical one like physics or chemistry. If people are behaving as though the economy had not recovered, it hasn’t recovered regardless of what the numbers may say.
Keep in mind that economists are people, too. If they’re rewarded for producing statistics that prove the effectiveness of the Powers-That-Be’s preferred policies, then that’s what they’ll do gosh darn it.
If we were at full employment it would be reflected in wage growth.
For those of us who actually employ people, and I know this is unpopular and will be dismissed by the partisans as anecdotal, but it’s becoming hard to find people. We are on the cusp, but for the wrong reasons. People are not working because the benefits supplied to not work have gotten to a point of sufficient comfort. In addition, an issue avoided like the plague by some, you have more people than you think who within weeks of new employment seek disability. “My aching back.” It’s become a standard cost of doing business. I guess economists would call that a friction to growth.
Some sectors are going to have tighter labor supply than others. It could be private equity is full of slackers.
I keep hearing of these benefits I’m getting for not working. I’m wondering what those are?
It could be. It could be true that monkeys can fly too. Make your best guess.
You are looking at it through your personal prism, ice, not that of someone with lesser expectations.
If there were a shortage of workers because everyone is sitting at home, then wages would increase. Not happening. Also, people who hire, but don’t work in private equity, learn to not generalize from individual markets. I am hiring intensivists and have a bunch of applicants, and from really good places. My competitor across the valley is hiring pediatric fellowship trained people, or trying to do so. He is having trouble finding anyone, and they live on the good side of the tracks and pay more. However, neither case inspires me to generalize about the US labor market.
But, you know your market better than I do. Do PE folks tend to draw from the same segment of the labor market that would be happy living on the 25k they would get from disability rather than work? I would not have thought there would not be much overlap, but you know better.
Steve
What is a lesser expectation than zero, Drew? I haven’t received anything since my UEC ran out, and that was years and years ago. Fuck, I couldn’t even get interviewed at MacDonald’s or Wal-Mart when I finally gave up – they knew they could get people even more desperate than me. Maybe if I didn’t speak English and has MS-13 tattoos on my face , and was over age 55, I could crack the labor market again….