The Latest Employment Data: No New News Here

A few months back back I used FRED to draw a graph of the employment situation in America, in particular the health of the jobs recovery from the great recession. I argued, pretty uncontroversially, that the recovery was largely underwhelming, using three data series to make my point: the employment rate, civilian labor force participation ratio, and employment to population ratio. As I explained:

The three lines appear to tell three different stories. The employment rate has been inching steadily upward since the end of the Great Recession, while the workforce participation rate has been decreasing just about as steadily. The employment-population ratio, meanwhile, has hardly budged.

The simplest and, I believe, best explanation for what’s going on here is that the US economy is adding just enough jobs each month to keep up with population growth. This explains why the [employment-population ratio line] is flat. But since we’re not adding jobs any faster than that, the principal reason the employment rate appears to be going up is, unfortunately, that the workforce participation rate is going down.

When you go (back) to school, decide stay home with the kids, go on disability, or just give up looking for a job you essentially move from the [top] line to the [middle] one. The near-perfect symmetry of those two lines suggests strongly to me that more and more people over time are making these kinds of choices instead of heading back to work.

And how do the three lines look now? Essentially unchanged:

Unemployment is three ticks lower than  it was in January (7.6% now, 7.9% then), while both the labor force participation rate and employment to population ratio are one tenth of a percent up. So this is good news, but really mild and slow-moving good news.

The workforce participation rate, already lower than it’s been for more than thirty years (before women entered the labor force in large numbers), has been on a declining trajectory even since the end of the great recession. I hope this latest tick upward marks the reversal of this trend, but I’m not confident. Are you?