Just a Reminder About the Condition of the Labor Market…

Emp-pop

Someone should do something.

This piece is cross-posted from Economist’s View with permission.

One Response to "Just a Reminder About the Condition of the Labor Market…"

  1. benleet   November 21, 2013 at 9:43 pm

    Today's unemployment rate should be 12.4%, not 7.3%. The labor participation rate dropped enormously with the onset of the recession, from 66.0% in a steady decline to today's 62.8%.
    The average labor participation rate was 66.5% for the 20 years before the Great Recession, 1988 to 2007. I tediously calculated it. Today's rate of 62.8% has not been equaled since 1978. The difference between the 20 year average and today's rate (66.5 less 62.8) is 3.7% of the civilian noninstitutional population of 246,381,000; and that adds back the workers who supposedly are not participating, another 9,116,000 as unemployed. This raises total unemployment to 20,388,000, and it increases the "working age population" to 163,843,000, and the resulting unemployment rate is 12.4%. My conclusion is that 12.4% is the true U3 unemployment rate.

    This is the table I used for calculating the average over 20 years, http://www.bls.gov/web/empsit/cpseea01.htm
    If you take the 67.1% participation rate of 1997, 1998, 1999, 2000, and call that the normal participation rate, then U3 reaches 13.2%.
    With an unemployment rate of 12.4%, the U6 rate rises also, to over 18%.
    "Participation" is not quiet accurate, but I can't think of another word for it. Workers are drawn by the demand for hiring, not by a vague urge to participate.
    With an Employer of Last Resort policy the participation rate could be much higher.
    My blog: http://benL8.blogspot.com