Friday, January 05, 2018

2017 Was The Fourth Straight Year With At Least A 0.5 Increase In The Percentage Of 25-54 Year-olds Employed

One weakness of the unemployment rate is that if people drop out of the labor force they cannot be counted as an unemployed person and the unemployment rate goes down. They are no longer actively seeking work and it might be because they are discouraged workers. The lower unemployment rate can be misleading in this case. People dropping out of the labor force might indicate a weak labor market.

We could look at the employment to population ratio instead, since that includes those not in the labor force. But that includes everyone over 16 and that means that senior citizens are in the group but many of them have retired. The more that retire, the lower this ratio would be and that might be misleading. It would not necessarily mean the labor market is weak.

But we have this ratio for people age 25-54 (which also eliminates college age people who might not be looking for work)

Click here to see the BLS data. It rose to 78.63% in 2017 from 77.925% in 2016. The last time we had 4 or more straight years of a 0.5 or more gain was 1984-89. But we are still below the 79.9% of 2007 (the recession started in Dec. 2007).

Here is a good graph from the St. Louis Fed. It shows that there are about 125 million people in the 25-54 year old group. So since we are 1.26 percentage points below the 79.9% of 2007, that is still 1.58 million fewer jobs (Hat tip: Vance Ginn of the Texas Public Policy Foundation).

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