What a treat! A reader of mine from the old days read this latest post and sent me some charts he’d ‘borrowed’ from me, with attribution, for his website. That is flattering.
One I referenced in the latest post; it was about how the low unemployment rate masks what’s probably a more debilitated workforce.
I wrote that due to the nature of the ‘gig’ economy, many people are simply not counted in the grand ranks of the employed and unemployed in official surveys that look at payroll data and, importantly, Initial Unemployment Claims. These are people we know and use. They are the school tutors, the self employed performers who moonlight as guitar instructions, those working at Wal-Mart less than 30 hours a week, the Uber drivers, the part-timers, the consultants. Simply, people are don’t work for a company full time.
Well the thing is they also aren’t eligible for unemployment. So when you see a low unemployment rate today, you can’t ignore the nature of employment more broadly and how the economy has changed. Hence, the chart below.
What you see is weekly claims as a % of the labor force over the last 50 years or so. It’s low, right? Well of course, because the labor force has a ton of people — some estimates run up to 40% — of people who aren’t able to claim unemployment and so don’t hit these numbers. These are the very people who are more likely to be out of work if only on a temporary basis due to the nature of their work. When a consultant loses a gig, no one other than beleaguered family members will notice.
So while we may tout the lowest unemployment rate in X number of years, we need to recognize that it excludes potentially 40% of the labor force at least. It’s no wonder that wage gains have not accompanied the ostensibly low unemployment figures.
As long as I’m on this role, I took some data from FRED — the St. Louis Fed’s data site — on any phenomenon about unemployment; labor participation. Well it’s fallen. It rose when women started entering the workforce in the 1980s and baby boomers blossomed into workers. It’s fallen. Sharply. Why? Retirees I suspect, but also people permanently out of work or spending time caring for aging parents or kids because daycare is too expensive.
Out of the last recession I made note that with more than half the households dual income, husband and wife work, when spouse A loses a job spouse B can’t simply pick up and relocate if spouse A finds work that requires relocation. What happens is spouse A will tend to settle for lesser work to say employed if they can get that. Or give up and drop from the labor force altogether.
In any event, what this chart means is that IF labor participation was where it was before the last recession, then arithmetically the unemployment rate would rise abruptly — I figure to well over 5%.
