Posts Tagged ‘unemployment’

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On one hand, as the Wall Street Journal observes,

For President Obama, the steep ascent of the unemployment rate heading into the 2010 midterms made it tough for Democrats to call for patience while the economy healed. But the economy in the past three years has been on a much rosier trajectory.

On the other hand,

Wages are the weakest part of the current economic recovery, as is evident by this chart. Virtually every midterm election since 1994 has seen better wage gains than what many Americans are currently experiencing. Weak wage growth can weigh on voters–and on a president’s approval ratings.

And the bottom line? Nate Silver continues to have the Republicans as slight favorites (59.4 chance) to win the Senate.

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I often explain to students, when I’m teaching economic models, they have to look at what’s happening behind the blackboard—all the implicit mechanisms that allow the models to work as they do.

By the same token, we have to ask, what’s going on behind the unemployment headlines?

The headlines today all trumpet the number of new jobs added in September (248,000), such that the official unemployment rate fell for the first time since August 2008 to below 6 percent (5.9 percent, to be exact).

That’s good news. Employment is picking up. But, of course, that’s not the end of the story. And Tyler Durden helps us see why.

quality of jobs

First, most of the new jobs (4 of the top 5 categories) were in retail trade, leisure and hospitality, education and health, and temp help.

So yes, America added a whole lot of minimum wage waiters, store clerks, groundskeepers and temps: truly the stuff New Normal “recoveries” are made of.

participation rate sept 2014

Second, the labor force participation rate dropped once again—from an already three decade low in August—to 62.7 percent. In other words, as against the 232,000 people who found jobs, the number of people not in the labor force rose to a new record high, increasing by 315,000 to 92.6 million!

average hourly earnings sept 2014

And finally, even while new jobs are being created, hourly earnings are not moving at all (in fact, to be accurate, they actually declined by a penny from the $24.54 in August). In other words, real wages—accounting for inflation—continue to decline.

So, that’s what’s happening behind the triumphant unemployment headlines: the continued creation of lousy, low-paying jobs; the continued exit of hundreds of thousands of workers from the labor force; and the continued decline in real wages.

Anyone want to talk about the reserve army of labor?

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According to Andrew Levin [pdf], the current employment gap of 3 percentage points is roughly three times the oft-cited difference between the official unemployment rate and the so-called natural rate of unemployment.

Levin defines the overall employment gap as the the deviation of actual employment from its maximum sustainable level. It is the sum of three components: (a) the unemployment gap, the deviation between actual unemployment and its longer-run normal rate; (b) the participation gap, the deviation between the actual labor force and the level that would solely reflect demographic and structural factors; and (c) the underemployment gap, the extent of involuntary part-time work (measured in full-time equivalent jobs) relative to its longer-run normal incidence.

Those who can’t find a job, have given up looking for a job, and are working a part-time job when they’d prefer to be working full-time watch with disbelief as the inflation hawks push the Fed to raise interest rates and private employers say they’re doing all they can to hire available workers.

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Map of the day

Posted: 1 September 2014 in Uncategorized
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unemployment

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