Looking behind US (un)employment rate

US centric: I recently read an excellent article on unemployment and supposed full employment, but decided to clarify and visualize the situation a bit for myself by employing different periods than supposed periods of “full employment” and just see, how the employment situation has changed during the last 4 recoveries. Over the 35 year period (1981-2016) the population pyramid has changed quite a bit with life expectancy at birth increasing about 4.5 years while, at the same time, people 65 years and older have been participating in the workforce in significantly larger numbers, but the latter data only goes back to 2008. So, to eliminate the effects of a top-heavier population pyramid and incomplete data on the change in employment population numbers regarding senior citizens, I decided to go with employment population ratio (ages 25-54) (EPR) peaks that preceded the recessions, as defined by the National Bureau of Economic Research (NBER). The present cycle’s termination point is in march 2016, which has shown the highest reading of 78.0, after the last recession.

Employment population ratio: 25-54 years
Emloyment population ratio (25-54) with pre-recession peak to the following pre-recession peak cycle highlighted. Data sources: https://fred.stlouisfed.org/series/LNS12300060, http://www.nber.org/cycles/cyclesmain.html

For a comparative view on the last 4 peak to peak cycles, including duration in months, look at this:

Employment population ratio (25-54) cycles compared
Emloyment population ratio (25-54) changes in each of the last 4 cycles (pre-recession peak to the following pre-recession peak). Data sources: https://fred.stlouisfed.org/series/LNS12300060, http://www.nber.org/cycles/cyclesmain.html

Now, looking at this and other data:

  1. The EPR for this age group is about 3pp higher than the early eighties, but down about 4pp from 2000 high. In general, this increase over 1981 can probably be attributed to EPR for women being up about 6pp, from 48 to 54, in the same period. So, on a comparative basis, women have made larger gains over this period, compared to men.
  2. All these 4 cycles saw unemployment levels fall to nominally healthy levels, but the first (1981-1990) and second (1990-2000) cycle saw a healthy increase of EPR, while the last two have shown declines in EPR ratios, with the last cycle’s crisis drop-off being particularly harsh.
  3. A significant contributor to the current low unemployment rate is the fall in civilian labor force participation rate (LFPR), ie people giving up on finding a job. This has especially affected the young, while elderly people as a group are doing fine, on a comparative basis, at least. To put simply, the current low unemployment rate is in large part synthetic. Some people gain jobs, a lot of people give up on looking for a job and the result is a superficially healthy unemployment rate.
  4. It seems, The EPR (and LFPR) peaked during 2000 and is now in a secular decline, with each successive cycle peaking at lower highs.

Conclusion

It sucks to be looking for a job, especially if you’re young, and it’s probably gonna suck a whole lot more after the next recession, whenever that may come to pass.

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