According to household survey data from the latest employment report released by the Bureau of Labor Statistics, The unemployment rate in the US has improved from 7.9% in January of last year to 6.6% this January, a substantial improvement. The same survey (there are 2, and they don't exactly agree) shows that 1.84 million people have jobs than a year ago (according to the other survey 2.24 million more jobs have been created, the number of jobs being slightly different than the number of people who have jobs).
On the other hand, even though the unemployment rate has improved, the employment-population ratio has not changed much in the same period. It was 58.6 a year ago, and 58.8 now. A minuscule 0.2% improvement compared to the 1.4% improvement in the unemployment rate.
You can see the difference in this graph:
Meanwhile, a few days ago, a study was released by the Fed looking at the labor market, which made some interesting findings.
Bombshell Report From The New York Fed Suggests The Labor Market Is Tighter Than People Think
The reason is that we may be seeing a long-term decline in the civilian labor force. The following graph illustrates their model vs. actual data:
The title of the study is "A Mis-Leading Labor Market Indicator" referring to the employment-to-population ratio. In the recent past it has often been argued that the headline unemployment rate is sometimes a misleading indicator because of discouraged workers leaving the workforce, and the employment-to-population ratio gave a more accurate view of the health of the labor market. Almost every time the latest monthly unemployment report comes out, I have heard or read reporters repeating this mantra. That we should not get too excited about the falling unemployment rate because it's mostly due to discouraged workers giving up and leaving the labor force.
This study suggests another view.
On the other hand, even though the unemployment rate has improved, the employment-population ratio has not changed much in the same period. It was 58.6 a year ago, and 58.8 now. A minuscule 0.2% improvement compared to the 1.4% improvement in the unemployment rate.
You can see the difference in this graph:
Meanwhile, a few days ago, a study was released by the Fed looking at the labor market, which made some interesting findings.
Bombshell Report From The New York Fed Suggests The Labor Market Is Tighter Than People Think
Quote:
This is a bit of a bombshell: according to a new study by researchers at the Federal Reserve Bank of New York, the employment-to-population ratio — a widely-touted measure of purported slack in the labor market — is a misleading indicator. |
The reason is that we may be seeing a long-term decline in the civilian labor force. The following graph illustrates their model vs. actual data:
Quote:
"The E/P ratio is a misleading indicator for the degree of the labor market recovery," say Kapon and Tracy. The key is to adjust the measure for demographics, in order to capture a massive structural economic force that is now coming into play: the retirement of the baby boomer generation of American workers. "The normalized, demographically adjusted E/P ratio is a useful additional gauge of labor market conditions," write the researchers. "Adjusting for changing demographics has an important impact on the picture that emerges about the degree of the labor market recovery. The actual E/P ratio suggests that the labor market has made relatively no progress since the end of the recession in recovering from the 4.1 percentage point decline in this measure. In contrast, the gap between the demographically adjusted E/P ratio using our normalization and the actual E/P ratio is a much smaller 0.7 percentage points." Simply put, the employment-to-population ratio did fall sharply and has failed to recover since the recession. However, an estimate of where the employment-to-population ratio should be based on demographic trends shows that the picture is much better than the unadjusted figure suggests. |
The title of the study is "A Mis-Leading Labor Market Indicator" referring to the employment-to-population ratio. In the recent past it has often been argued that the headline unemployment rate is sometimes a misleading indicator because of discouraged workers leaving the workforce, and the employment-to-population ratio gave a more accurate view of the health of the labor market. Almost every time the latest monthly unemployment report comes out, I have heard or read reporters repeating this mantra. That we should not get too excited about the falling unemployment rate because it's mostly due to discouraged workers giving up and leaving the labor force.
This study suggests another view.
via JREF Forum http://ift.tt/1bF5K91
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