A striking Unemployment divergence
This is an election year and I sincerely hope that all persuadable undecided voters will form the mass perception that the economy has never been better. I hope Obama wins 50 states. And I hope the headline unemployment rate number continues to go down, down, down.
I am, however, fairly certain that my posts do not, in and of themselves, create a fantastic new economic reality so I feel no moral obligation to dissemble. Really looking at the economy is useful in thinking about policy and priorities, which I assume some DUers enjoy doing.
So with that said... the jobs picture in the US continues to suck. And with Europe already several months into recession and Republicans actively favoring plunging the world into flat-out depression there is no reason to expect the jobs picture to improve much.
Whoever is elected in November will find himself handling an employment crisis. Same shit, different term.
Here's the difficulty:
While the headline unemployment rate has declined two percentage points the equally real "Unemployed whether looking for a job or not" has remained flat and at almost twice the already-high rate during the Bush "jobless presidency."
One way to count unemployment is to ask people if they are unemployed. Another way is to see how many people are actually employed. In 1998 or 2006 we could not be sure what "no job but not looking for one" meant because some people were making huge money in stocks and real estate respectively. Some people simply felt they didn't need to work, and God bless 'em. No reason to work if you don't need to.
But in today's world we know that the continuing deterioration in labor force participation is not due to a bunch of people hitting the lottery. People on average are retiring later. They are making less money. There is no economic indication of a new Golden Age of leisure.
So the ongoing decline in labor force participation is a genuine cause for worry. Whatever the reason, a lot less people are working than used to be working. (In % terms)
And in the first chart you can see that all of our recent drops in the unemployment rate have not resulted in more people working. (In % terms) We have been enjoying, if that is the word, a strange divergence of two lines that used to move in tandem. When the unemployment rate goes down that must mean more people are working, right? No. Not today... for whatever reason, not in this economy.
On the plus side, the economy seems to be up to the task of stabilizing the workforce drop-out rate. It is flat. That is good.
But it is unlikely that we can continue declining headline unemployment much longer without an actual increase in the percentage of people working.
It is possible that the Unemployment rate adjusted for workforce drop-outs will start down soon, eliminating the divergence. That the two data sets will get back into sync. It is also possible that the unemployment rate will start back up, even without a decrease in the number of people working.
I hope it is the former. And either way, I hope the statistics continue to "play ball" for a while. This is an important election. But assuming Obama wins in November he will find that jobs are still job one
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