The latest data (for January) on employment and unemployment came out this morning and the news is good.
The biggest news:
The labor force participation rate, which has been the sick puppy this century, rose by 0.1 percentage point, from 63.1 percent to 63.2 percent.
The employment to population ratio rose by 0.1 percentage point, from 60.6 percent to 60.7 percent.
The overall unemployment rate rose, however, from 3.9 percent to 4.0 percent. In most subcategories, by age, race, gender, etc., the unemployment rate rose slightly or stayed the same.
So with a higher unemployment rate, why do I say that the news is good? It’s because of the first two pieces of news above, on labor force participation rate and on the employment to population ratio.
The above data are all from the BLS household data, linked above.
On the establishment data side, which looks at employers, the number of jobs rose by a hefty 304,000, which is well above most people’s predictions. The odds that a correction of the data next month (such corrections always happen) will still show that the number of jobs gained is well above most people’s predictions.
READER COMMENTS
Benjamin Cole
Feb 1 2019 at 7:58pm
Great post.
It is well past high time to dispense with the bogeyman of “labor shortages”.
I hope America sees worsening “labor shortages” for generations to come.
john hare
Feb 2 2019 at 8:32am
This is a great post with a very serious point. The workforce participation rate is, to me at least, a far more important number than the unemployment rate. The unemployment number is a measure of people in the system that aren’t gainfully employed, while the participation rate is a more accurate measure of people not participating in the economy.
I don’t know what the good numbers should be on either side. Someone that can afford it taking off years to raise children or write a book may not be technically employed though I would maintain that this can be the best use of their time. On the other hand, people that contribute nothing, and intend to contribute nothing, or are prevented from contributing, I see as a major problem. IMO, considerable thought should be given to making it more desirable for people to participate in the economy to the extent of their capabilities.
If drugs were legal, how many dealers, users, and traffickers would have to reenter the legitimate work force? Some police, prison guards, lawyers and judges could renter a more productive economy instead of trying to control them. Occupational licensing, keeping illegals illegal, zoning, etc, I see as preventing active participation in the visible economy. I see the participation rate partially showing how many that are in the shadow economy or the dependent economy as opposed to the visible one, while the unemployment rate hides this.
Wes
Feb 2 2019 at 4:10pm
Am I missing something here or misunderstanding the numbers? Labor force participation rose from 63.1% all the way to 63.2%??!!
What’s the typical month to month variance on this rate or the typical seasonality effects or the measurement error? I don’t see why we should care; seems like it’d be hard get a result more meaningless than this.
David Henderson
Feb 3 2019 at 10:33am
You write:
Between the two choices you gave me, the first is the more likely. These numbers tend to move slowly and a 0.1 percentage point increase is substantial. To put it in perspective, a 0.1 percentage point increase, given an eligible population of 258 million, is 258,000. So if every month, when you hear that the number of employed people rose by, say, 200,000, you say that that’s meaningless, you would probably be comfortable saying that the 0.1 percentage point increase is meaningless. Otherwise, not.
And it is seasonally adjusted, so you can put that worry aside.
By the way, take a look at the first link in my post. The labor force participation rate rose from 62.9 percent in November to 63.1 percent in December to 63.2 percent in January.
Wes
Feb 4 2019 at 10:42pm
Thanks for the respond David.
Jon Murphy
Feb 3 2019 at 10:48am
Approximately 0.01 percentage points. So, a movement of 0.1 percentage points is quite nice
LK Beland
Feb 4 2019 at 2:45pm
Another useful monthly indicator from the BLS is the prime-age (25-54) employment to population ratio. It provides a first-order correction for demographic changes. It is at 79.9%.
https://fred.stlouisfed.org/graph/?g=mRYE
It has been steadily going up during the past 7 years. However, it is below the past peaks reached during the G.H.W. Bush (80.2%), Clinton (81.9%), and G.W. Bush administrations (80.3%). This indicates that there is still room for growth.
Here are some international comparisons:
Canada: 83.3%
France: 80.5%
Germany: 85%
Japan: 85.4%
UK: 84.1%
USA: 79.9%
This is another indicator that there is still room for growth in the US. Suppose that the cap is at 86%. It is growing at 0.63 percentage points per year. This means that such growth could possibly go on for 10 years!
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