Thursday, 25 April 2013

A couple of charts about the US labour market

I haven’t done a post on the US for a very long time. The data point that is in most people's mind is unemployment. Suddenly everyone “discovered” that the fall in unemployment is kind of artificial and is due to people dropping out of the labour force and cannot be attributed to the exorbitant number of new jobs created. 

One data-point that I haven’t seen mentioned anywhere is that of the numbers of persons in the civilian labour force.

source: FRED

The number of people in the civilian labour force stagnated of even decreased a little bit, since the Great Recession kicked in and has only lately started rising anemically. This is something unprecedented, at least in the years that the FRED data cover.
Since the unemployment rate is skewed by people dropping out of the labour force one has to resort to alternative indicators to get a whiff of the actual state of the US labour market (well as much of a whiff as you can get when you are sitting behind your screen in Athens tapping your keyboard). An indicator that in my humble opinion matches the above description is the employment / population ratio.

source: FRED, own calculations

After the floor was taken off its feet the said ratio has not budged despite the alleged fall in unemployment rate. It even stands below its long term average.

From where I’m sitting the situation in the US labour market does not seem that rosy and it certainly does not appear to be improving. What this speaks of is structural problems in the economic model of the US, something which is also obvious in the largest part of Europe. These issues cannot be addressed by monetary policy but by structural policies.


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