Putting the Slow Labor “Recovery” in Perspective
By Marc Chandler, Global Head of Currency Strategy, Brown Brothers Harriman
This Great Graphic is from Business Insider who in turn takes it from Calculated Risk. It puts the job growth during this recovery in the context of other recoveries.
Yes this recovery is different. Yet as we have noted before, what really stands out is that unlikely previous recoveries, this one has seen the government sector shed workers. In fact, the government sector shed another 9k jobs in July, the fifth consecutive month of job losses.
In addition then to the well rehearsed reasons for the reluctance of business to expand their payrolls, like economic uncertainty, fiscal uncertainty, increase productivity, replace workers with machines, the shrinking government employment is an integral part of the US labor story.
6 Comments
That graph if flawed because it does not take into account population change(constantly added new workers each month).
Here’s a better chart from the left-leaning Brookings Institution’s own special division ‘Hamilton Project’:
http://www.hamiltonproject.org/jobs_gap/
I guess population change does matter when the recovery is as long drawn out as the current one. For the shorter past recoveries it would not make any substantive difference.
There is a pattern here. Each post-1980 job recovery has been more drawn out and with a shallower slope than the previous one. 1980-1981 was the year with peak US interest rates, and the US economy has been leveraging up since that time to present, as 30 yr treasuries have dropped in yield by about 0.25%/yr. Each post-1981 recession was deeper than the previous one as well. The real question is when and how the pattern will break. Eventually, the USA must deleverage, and interest rates must start rising again.
If you look at absolute, rather than relative, changes in the unemployment rate, we’re doing just fine.
Here’s someone who hasn’t done his homework.
The actual unemployment rate(I’m talking about U-3 now) is 10.5 %
The reason why this ins’t the case is that because in every recession you have people dropping out and it’s usually relatively few and as the recovery springs the economy back to life, you usually had a very quick addition of new jobs, enough to absorb new entrants into the labor force AND those who were returning from the doldrums.
Well, each recession since several decades have been slower. The last recession under Bush was really slow too, but it was more shallow. Still, you never regained the previous employment-to-population ratio that the U.S. had during Clinton’s last year.
After 5 full years, we can no longer blindly count that the people who have dropped out are coming back quickly because the job market is still brutal.
And remember, according to the left-leaning EPI institute, 65-70 % of all labor dropouts are NOT baby boomers.
So yes, you can accept the current unemployment rate.. but that also means accepting a much, much lower share of the population working than the historical norm, which in turn will lower potential output by a significant dent.
And historically, these people have never been counted out or ignored, they’ve just been counted on to come back to the labor market and contribute. Well, they can’t now.
And the vast majority of them want to work but simply can’t find jobs. Therefore the official unemployment number is a fiction. It’s double digits and have barely moved the past 3 years. Perhaps 0.7 to 1 % at most. Remember, since June of 2009, you’ve had an average of 138,000 jobs created. That’s barely enough to dent the unemployment rate. What has had it tumbling down is the people dropping out. And that, for obvious reasons, is not a sustainable strategy.
We’ve become a nation of shop keepers. The shoppers are tapped out. BROKE! Consumers rule our economy. Without empowering them again nothing moves forward in the economy.
Until that is remedied we will wallow. There is no political solution because changing this means rewarding spenders with debt cancellations and a large cash transfer pissing off the savers.
Instead we will insist on stealing more from the rich and cutting benefits to the poor further exasperating the situation until a major change in our government structure.
Stay tuned!