Payroll employment peaked in December, and according to numbers released today had declined by 260,000 jobs as of April. (Source: BLS.) Since we have not yet seen a single negative number on GDP growth, this job loss is easily the most tangible statistical evidence we have so far that the much-heralded recession indeed may have started in the first quarter of 2008.
It has been noted that the unemployment rate started out from a low level — averaging 4.6 % in 2007 — so that even after a period of gradual increase, it remains relatively low by historical standards: 5.0% in April. This is still inside the range that has usually been considered by politicians as too low to generate serious discontent (and by central bankers as too low to put downward pressure on wages and prices). But why, then, is there so much popular dissatisfaction with the economy?
One answer is the old “discouraged worker” effect. Workers who stop looking for a job are not counted in the labor force, and so are not counted as unemployed. There is an obvious way to capture this phenomenon. Compare employment to the entire population, rather than only to those who are actively in the work force. The chart does that. (These figures include farm jobs, as in the standard BLS employment ratio.)
The path of the employment/population ratio during the current decade has been remarkable. The steep slide in jobs that began with the 2001 recession continued thereafter, and actually accelerated in late 2002. Finally the freefall leveled out. (The Bush Administration trumpeted the turnabout in terms similar to those it now uses to sell the aftermath of the troop surge in Iraq: the response to an unacceptable casualty rate was to make things worse for a half-year, and thereafter to compare the post-surge rate of casualties to the high-point, rather than to the period that came before.)
Employment did indeed rise between the years 2003 and 2007. But it barely stayed ahead of population growth. It did very little to make up for the decline equal to 2-3% of the population that had taken place during the first two years of the Bush Administration. The labor force participation rate normally rises in a boom, as good labor market conditions lure workers out of homes, schools and retirement. This is certainly what happened during the record expansion of 1992-2000. But it did not happen during the most recent expansion. To the contrary, the labor force participation rate was at a minimum in 2007, even though that year appears to have been the peak of the business cycle. As a result, employment as a share of the population was well below what it had been at the preceding business cycle peak year (2000). The fraction of Americans with jobs shows a decline from 64.7% to 62.6%, which translates into 4.9 million missing jobs ! Little wonder that, as employment once again starts to decline even in absolute terms, workers are unhappy.
Are you sure the data in this graph is correct? I think the employment/population ratio should top out around .647 in April 2000 and then fall to .626 in March 2008. That is for the civilian non-institutional population, age 16 and over. For the latest figures see http://www.bls.gov/news.release/empsit.t01.htm. Or did I misunderstand the definition of what is in the graph?
You were doing so well until you slipped in that parenthetical Bush Derangement Syndrome episode right near the end. You are in therapy for that, aren’t you? It’s not the kind of thing that should be left untreated for long.
Lee,
Yes, you are right. But I am afraid that we are all going to need therapy for many years before we have recovered from the trauma of the Bush policies.
JF
Reply to Abiel,
The difference is because we used civilian non-farm employment, whereas the standartd employment/population ratio that BLS reports includes the farmers. I will probably revise the graph and numbers to include agricultural employment, because I think that is the more standard way of doing it. Thanks for pointing this out.
JF
The debate should focus on this employment to population ratio (EP). A while back I sort of hinted that the natural rate of EP was around 64% - something that Brad DeLong gratiously picked up on. David Altig and a few other conservative economist bloggers pushed back just a little arguing some of the fall in the labor force participation rate over the past several years might be voluntary. but David et al. have never suggests that the natural rate of EP has retreated to anything close to say 63%.
This could be an entirely stupid question, so forgive me in advance for asking it.
Are we looking at total population over 16, or total population 16-65? From the way you talk about pulling people out of retirement (and the BLS figures don’t make it entirely clear in their press release…but total numbers of some 220 million including economically active and non active leaves room for 80 million children and given roughly 4 million births a year times 16 gives us roughly that number) I think you’re using population aged 16- death.
Which, given rising life spans makes comparing these figures over time a little odd really. Saying that the rising number of centenarians are discouraged from being in the workforce (to take an absurd example) is a sign of a bad labour market strikes me as, well, a little odd really.
Standard BLS data implicitly (establishment survey) or explicitly (household survey)looks at population and workers 16 and older. With the aging of the boomers the employment population ratio should begin to fall as those age 55 and older have lower to much lower participation rates than the younger set. This is a nontrivial factor and would lead to a 1 percent decline in the employment population ratio over the 2000-2007 period (holding the age specific rates constant and letting the pop shares move.)
Lee,
You a denialist aren’t you? Did Jeff disparaged the President?
No!
So what is you problem dude?
Oh! I see! It just so happen that the period 2003-2007 took place during the Bush presidency. He inc illae irae?
According to this logic of yours, ANY critic of what’s going wrong in the USA during the Bush presidency MUST BE an attack on the President?
Who is suffering from the Bush Derangement Syndrome here?
You remind me of the politik komissars of the Confederation Generale du Travail, this Comunist pro-Moscow union the French had to suffer for too long. Exactly the same ayatollah-like zeal twith the same dogma: “If you disagree with 1% of what I believe, you are 100% against us.”
Get this Lee: people in this country are getting sick and tired of this coarsening of the political discourse in America. I, for one, came to this country precisely because I witnessed what this coarsening and dumbing down can do to the fabric of a democratic society. I don’t need the same bullshit happening in my country of adoption.
Forgot to post this (hat tip Dean Baker)
“Here’s the rate of job growth for the administrations since 1960:
Kennedy-Johnson 3.27%
Nixon-Ford 4.93%
Carter 3.06%
Reagan 2.06%
Bush I 0.60%
Clinton 2.38%
Bush II 0.59%”
Bush Derangement Syndrome huh? I guess the facts suffer from it!
Following up on Tim’s question and what rana said, a convenient way to get around the shifting age issue is to just look at the employment/population ratio for a fixed age group. A common one to look at is workers 25-54 years old. According to the BLS household survey data, the ratio for that group peaked at 72.9% in Sep/Oct 2000, declined through early 2005, recovered to a high of 69.5% in Dec 2006 and Mar 2007, then fell to 67.1% in Mar 2008.
Ignore my last post, I accidentally gave the stats for the 20-24 year old group. For the 25-54 year old group, the employment/population ratio peaked at 81.9% in mid 2000, declined through late 2003, recovered to 80.2% at the start of 2007, and then fell to 79.7% in Mar 2008.
Is there any estimate on the number of hidden self employed? like someone starts business in the Ebay or Amazon market place but did not file tax? Does that somehow estimate in the employment figure?
Thanks
Reply to Tim,
Yes, it is everybody over age 16. And the statistics in Abiel’s post #11 are a good way of getting at the age-span issue.
JF
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