7/7/19: Employment to Population Rate in the U.S.: General Labor Force vs African Americans

With 'booming' and 'tight' labor markets, the White House is only happy to argue these days that we are in a Golden Era of employment/unemployment for all, including the African Americans. Is this, in fact, the case?

Firstly, I am not too keen on the arguments that any President in office should get the credit for jobs creation. At the very best, Presidential decisions simply support jobs creation by the private sector, and can be instrumental in creating jobs (albeit less in sustaining them) in the public sector. Secondly, jobs are just numbers, unless they are distinguished by their quality - something that is hard to do.

But the White House claims are usually about the aggregate jobs numbers / statistics, as opposed to the more granular analysis. So it might be worth taking them to the test.

One comparable - across different cohorts and time periods, as well as business cycles - metric is that of employment to population ratio. It takes total number in employment and divides it into the total population of working age for a specific group. Here is the chart (data from FRED database with calculations performed by myself):

Across the entire workforce, E-to-P ratio is sitting at 60.6%, statistically indistinguishable from the historical average of 60.64%, and 4.1 percentage points below all time high of 64.7%. For the category 'Black or African American', the E-to-P ratio is currently at 58.2%, which is above 55.13% historical average and is 3.2 percentage points below all time high of 61.4%.

Which means that current reading for African Americans population in terms of employment-to-population ratio is better, relative to their own historical trends than for the overall population. But, the ratio is still lower for African Americans than for the overall population in level terms.

What about the historical positioning of the gap between the overall population E-to-P ratios and that for the African Americans?

The gap between the employment-to-population ratio for the African Americans and that for the overall population is around the lowest levels it has ever been and is well below the historical average.

So, yes, the claims that employment has been relatively strong for both the general population and for the African Americans pans out to be true in at least this metric, which is - as noted above - by far not the only metric that matters.

15/4/19: One order of "Bull & Sh*t" for the U.S. Labor Market, please

The 'strongest economy, ever'...

Despite a decade-long experiment with record-low interest rates, despite trillions of dollars in deficit financing, and despite headline unemployment numbers staying at/near record lows, the U.S. economy is not in a rude health. In fact, by two key metrics of the labor force conditions, it is not even in a decent health.

As the chart above clearly shows, both in terms of period averages and in terms of current level readings, Employment to Population Ratio (for civilian population) has remained at abysmally low levels, comparable only to the readings attained back in 1986. Meanwhile, labor force participation rate is trending at the levels consistent with those observed in 1978.

Dire stuff.

Update: Here is a chart showing how the current recovery compares to past recoveries (hint: poorly):

30/11/18: Ireland’s Dependency Ratio Problem?

Ireland seems to have a twin dependency. or rather a triple dependency problem:

• Younger population means larger share of population is either below the working age or in education;
• Older population largely working less in their post-retirement age due to a number of factors, such as family/household work (‘grandparents duties’ in absence of functional childcare and early education systems), and tax effects (low thresholds for the upper marginal tax rate application act as disincentive to supply surplus labor over and above retirement income), plus the workplace practices and regulations that restrict post-retirement age work; and
• Working-age adults in large numbers drawing various forms of allowances (labor force participation rate being low for Ireland despite a relatively benign unemployment statistics).

All of which means that the aggregate (and very broad) dependency ratio for Ireland is yet to recover from the decade-old crisis, and is below that for other small, open economies, for example, Iceland:

The latter observation was true before the crisis, but the onset of the GFC and the Great Recession have pushed Ireland’s employment to population ratio to such dire lows that the country is yet to recover from its woes. Iceland recovered its pre-crisis levels of employment to population ratio back in 2016. It also endured much less pronounced impact of the crisis in terms of ratio decline (peak to trough) and duration of the peak-to-peak cycle. Ireland is still climbing out of the mess, and the rate of recovery is expected to slow down dramatically in 2018 (based on the IMF data).

While many observers and analysts are quick to discount this ratio, the reality is that economy’s resilience to shocks, its productive capacity today (and, via on-the-job training, learning by doing and other forms of career-linked investments in productivity growth, its future capacity) are determined by how many people work in the economy per capita of population. The lower the ratio, the less income producing capacity the economy has, the lower the absorption capacity of the economy in the face of adverse shocks.