A Mis-Leading Labor Market Indicator | Liberty Street Economics

From a paper by Samuel Kapon and Joseph Tracy at the Federal Reserve Bank of New York:

As the economy recovered and growth resumed, the unemployment rate has fallen to 6.7 percent. …..The employment-population (E/P) ratio frequently is used as an additional labor market measure. The E/P ratio is defined as the number of employed divided by the size of the working-age, noninstitutionalized population. An advantage of the E/P ratio over the unemployment rate is that it is not impacted by discouraged workers who stop looking for employment.

Employment-population (E/P) ratio

Since the end of the recession, the E/P ratio has largely remained constant—that is, virtually none of the decline in the E/P ratio from the Great Recession has been recovered to date. An implication is that the 7.6 million jobs added since the trough of employment in February 2010 has essentially just kept pace with growth in the working-age population. In its failure to recover, the E/P ratio would seem to depict a much weaker labor market than indicated by the unemployment rate. An important question is whether this is a correct or a misleading characterization of the degree of the labor market recovery…….

Read more at A Mis-Leading Labor Market Indicator – Liberty Street Economics.

Hat tip to Barry Ritholz.

2 Replies to “A Mis-Leading Labor Market Indicator | Liberty Street Economics”

  1. Aloha! When compared to all other past post crisis recoveries this supposed recovery has stagnated. According to Prof John B Taylor of Stanford Economics(Taylor Rule) his data suggests no recovery. When compared to the NFIB Optimism Index which surveys some 85,000 employers, the other side of employment, the current recovery is anemic at best as optimism is still at 2008-2009 levels. If employers have been reluctant to hire since 2008 then how is there is a real recovery no matter what population numbers are, smoothed or unsmoothed, seasonally adjusted or not. The NFIB employer data and the Taylor data corroborate each other. The official U3 unemployment rate, the rate global stock markets react to, as well as other Fed/BLS data have been manipulated to reflect an employment recovery to justify current radical economic and monetary policy. This serves to also support current political views of a more strong recovery as well. A positive spin is what every Fed participant and government politician seek.

    Taylor link:http://johnbtaylorsblog.files.wordpress.com/2014/01/emp-pop-dec-13.jpg?w=374&h=355

    Is Liberty Street Economics some sort of Fed public sampling to determine feedback on policy? Here is what the description of Liberty Street Economics says …
    “Liberty Street Economics features insight and analysis from economists working at the intersection of research and Fed policymaking.”
    What exactly does that mean? Are these economists paid by the Fed or not? It seems the two authors of this article are paid employees of the NY Fed. Look at the very end of the article at the comments and you get a lot of comments about the flaws of this “misleading indicator”. Read the blog author reply. He goes off into hypotheticals. Who or what comment is he responding to? It seems anything about 55+ population, but reading the comments suggests most consider the 55+ and 64+ data is causing flaws. In other words those boomers who were predicted to retire aren’t. Who can afford to retire in this prevailing corrupt economic and monetary system. If my 1970 money(labor units) could still buy the same amount of goods and services as it could when 55+ workers first started work then they could afford to retire. It seems the purchasing power of a USD has a lot to do with when older Americans retire since COLA is no real substitute for multi-decade government expansionism.

    1. nicely said.
      one might also mention the fact that working for 7.65/hr is still considered “employed”, versus the 250k/yr I used to make.
      less dollars with less purchasing power and “full employment”… still equal a pile of $#¡T

      >>>>> best wishes to all in this corrupt misguided nation

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