Employment statistics are the best statistics
Because they can tell any story you like – just the way economists like it.
On Friday, the government will release the latest employment report, which will help clarify whether the economy is slipping into a recession. Wall Street forecasters are predicting that the February unemployment rate will have inched up to 5 percent, from 4.9 percent in January.
Whatever the survey shows, however, you can be sure of one thing: Politicians will be quick to point out that joblessness remains low by historical standards.
Ed Lazear, the chairman of the Council of Economic Advisers of President George W. Bush, said recently that “5 percent is still a low unemployment rate.” He added: “It’s below the average for the last three decades.”
You will note that “the last three decades” conveniently includes one or so in which employment was crap. Hell, we’d do better to compare today’s numbers to the last five decades.
Consider this: The average unemployment rate in this decade, just above 5 percent, has been lower than in any decade since the 1960s.
Yet the percentage of prime-age men (those 25 to 54 years old) who are not working has been higher than in any decade since World War II.
In January, almost 13 percent of prime-age men did not hold jobs, up from 11 percent in 1998, 11 percent in 1988, 9 percent in 1978 and just 6 percent in 1968.
There are only two possible explanations for this bizarre combination of a falling employment rate and a falling unemployment rate. The first is that there has been a big increase in the number of people not working purely by their own choice. You can think of them as the self-unemployed. They include retirees, as well as stay-at-home parents, people caring for aging parents and others doing unpaid work.
If growth in this group were the reason for the confusing statistics, there should be no to worry. It would be perfectly fair to say that unemployment was historically low.
The second possible explanation – a jump in the number of people who are not working, who are not actively looking but who would, in fact, like to find good jobs – is less comforting. It also appears to be the more accurate explanation.
Why the latter is more accurate, I don’t know. In fact, the author has conflated the two. We went through this (hilariously) in class: suppose you’re in your mid/late-fifties and you get laid off. The economy has been in a jobless recovery since 2001, and is now in a jobless plateau/decline. What do you do?
First, the hilarity: a student raised his hand and said “I’d get a job”. Even re-stating the question did not help. I believe he ended up taking my word for the fact that ‘getting another job’ isn’t really on the cards for Hypothetical Man (my University is seriously middle-class and up – I doubt my students, overall, really understand unemployment as a lived concept).
The answer, for the rest of the group, is retire. Or call yourself retired. Live off savings until Social Security kicks in – maybe try for that sweet deal their offering. In the UK – and, no doubt, similar countries – people are going onto disability pensions, which is essentially becoming a path to early retirement for many (what would you rather be on: a disability pension, or unemployment benefits?).
It is my belief that retirement numbers contain a lot of the missing people, and are helping mightly to keep the unemployment statistics nice and low (relatively speaking). This is where the conflation occurs – calling one’s self retired and being retired are two different things (just ask Michael Jordan or Jay Z).
We should, of course, also bear in mind how dangerous/difficult tracking a macroeconomy in real-time is, but the unemployment rates indicate, reasonably clearly, the drivers of unemployment. From the latest release by the Bureau of Labor Statistics:
The over-55’s are the only group for whom the unemployment rate has declined:
And somehow I don’t think the Births/Deaths jobs are going to that group first.