Though payroll jobs (establishment survey) increased by 204,000 in October, overall employment (household survey) declined by 735,000, indicating that the U.S. employment situation remains dismal. More telling, long-term employment (of 27 weeks or more) remains at 4.1 million, approximately double the level of prior recessions. The Official Unemployment rate also remained essentially unchanged, increasing slightly from 7.2% to 7.3%. The more accurate U-6 unemployment rate which takes into account discouraged workers and workers working part-time who would like full-time work also rose from 13.6% to 13.8% in October.
In order to understand the long-term picture, especially the October data is affected by the Government shut-down, it is useful to compare the change in employment to population (over 16) ratio during the current “Lesser Depression” with all prior post war recessions. The employment to population (E/P) ratio controls for declines in Labor Force participation during recessions. Figure 1 shows how this ratio changed relative to its value on the official starting month of each post war recession. Note that E/P never fully recovered from the 2001 recession and has shown almost no improvement in the current “expansion” from the official June 2009 trough of the current Lesser Depression.
Figure 1: Percent change in Employment/Population Ratio from Start of Recession
For Post-War Recessions
(Labeled by Official “Trough” Month and Year)
Recently Floyd Norris of the New York Times has shown that when controlling for demographic changes (the ratio of 16-24, 25-54, and 55 and over, in the population) there has been some improvement in the Employment to Population ratio which at least has risen above its lowest value in the 1991 recession. Norris points out that labor force participation has risen among older workers (the 55 and over cohort) since the start of the recession in 2007, even as it has declined among younger workers, especially the 16-24 group. But since prime age workers (26-54) have the highest participation rates, an aging population will cause the employment to population ratio to decline even if employment rates by age cohort were constant. Norris’s adjusted figure looks at what employment to population ratios would be if earlier populations had the same age cohort shares as today’s population.
Norris’ figures show a positive trend in “adjusted” employment to population participation ratio after a precipitous drop (to the lowest point in the last 25 years) in 2009 so that recently the ratio climbed above its level in the early 90’s recession. But this comparison to the 1990’s E/P ratio is clouded by the long-term trend of increasing E/P as more women have joined the labor force due to economic and cultural factors since that time. A more telling comparison would look at recessionary impacts on short-term changes in E/P, specifically from the beginning of a recession. Figure 2 below performs such an analysis (using similar cohort specific E/P ratios, holding population cohort shares to their October 2013 level for all prior years) and shows just how severe job loss in the Lesser Depression has been relative to all prior post-war depression even after taking population demographic changes into account. Because these are shorter term comparisons, these specifically recession related job losses are less clouded by long term cultural and economic trends in E/P.
Figure 2: Percent change in Employment/Population Ratio from Start of Recession
For Post-War Recessions Adjusted for Major Age Cohort Population Changes
(Labeled by Official “Trough” Month and Year)
Moreover, it is unclear whether this “adjusted” figure provides the more accurate picture, as the ratio of employed people to total population is a key factor in economic productivity regardless of their relative ages, and a shift toward less relative labor force participation by younger workers (regardless of population demographics) is, as many have pointed out, a negative trend both for the future prospects of younger youngers, the retirement propects of older workers, and for society at large.
However one measures our current economic malaise, and the employment to population ratio is one of the best indicators of our condition, we are in a very bad way, and it appears very clear that unaided private sector growth will not provide adequate full employment at living wages any time in the near future. For this a large-scale federal jobs program which could be largely funded by a financial transactions tax, and equally robust trade and industrial policies will be necessary.