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U3 Unicorns Puking Rainbow Recoveries
Do you ever feel a bit of a disconnect between the continuous media reports that the economy is doing awesome (here, here, and here to name a few) and how much it feels like the economy, to use a technical term, sucks outside of the stock market? Well, you’re not alone, and a couple of basic charts will validate your feelings. This is not data produced in the depths of my basement while I replace the tinfoil around my head. These are government-reported numbers on the health of the labor market. I call your attention to the time period during which the media was harping on the theme of, “It’s the economy, stupid!” and our recent “awesome recovery.”
This first chart shows the labor force participation rate, measuring the percentage of adults who are working. I’m using this instead of the commonly reported – and improving – U3 unemployment rate, because U3 has about as much correlation with the health of the labor market as the ratio of pixies to hobgoblins in Neverland. The reason I’m so down on U3 is that it behaves as if the underemployed are fully employed. (Settle down, James Pethokoukis, I mean the objectively underemployed, as in, part-time workers who want or need to work full time.)
Moreover, it suggests the long-term unemployed no longer count. Can someone please point to the recovery? Focus on the trend line in this chart. Up is good and down is bad, for those of you who, like me, attended public school. When you look at it that way, it’s clear that our situation now is worse than it was during the horrible recession of the early nineties.
Now, you might think, “Okay, fewer people are working, but I bet those who do work have it pretty sweet in the recovery, because the Times told me they do.” Unfortunately, no.
The next chart shows real wages in 2013 dollars. Again, no fancy statistics, just a line going up and down. Can someone please show me where the wage recovery that’s going to drive this economy forward takes place?
I don’t point these things out to depress anyone or to make large newspaper publications look even sillier than usual. Those are bonuses. I point it out because I’m tired of the media telling me that down is up, and I don’t see how anything can get better until we recognize the problem.
Published in Economics, General
This is excellent, thanks. I know I’m not feelin’ the awesome. The pain of this not-really-a-recovery has hit almost everyone and the leading media are just soooo not interested! If a Republican were president and people were getting far less than inflation in return on any “safe” investment for endless years in a row, we’d hear about their terrible plight. But with a Democrat anybody who even has any savings to invest is suspect.
Yes. I haven’t studied any charts, but when I drive down Main Avenue in Moorhead, MN I see a lot of empty storefronts. Locations where there used to be businesses that have been vacant for years now. Strip malls that have vacancy rates of 25-75%. There are small businesses that have had to downsize and could use more staff, but just can’t afford to hire more people. Is it just this part of Minnesota or is it like this all over?
Things really are awesome for us (commercial/industrial construction and capital equipment purchases). Nationwide: The business you want to be in now is RVs and if you can repair them, you will find a job. Utah: But there are a lot of hidden people, particularly here with our high birth rate, who have aged into the workforce, and it will take another five years of 2% growth just to get back to where we were before 2007.
I would argue that this is why our next President is going to be crappy no matter who he/she is. The best we can hope for is to be doing okay-ish by about 2020.
Anything residential or home improvement is still in the toilet because of the excess inventory.
Based on what I have seen from my daughter watching the show, Rarity (pictured above) would be not be covering up the problem.
Got to find my levity where I can take it ;)
I don’t know where you live, but that is not the case everywhere.
I’m not an expert, but I think that retail is to some extent a separate issue. Like newspapers killed by Craigslist, etc., brick-and-mortar stores have been killed by big online distributors. Very hard for consumers to resist.
Excellent post, PPF.
Disagree – not enough RVs out there to sustain that kind of work, and whenever the economy tanks the RV business is the first to go into panic mode.
South-central NY was weak ten years ago and is weaker now. The storefronts and strip malls are just as you describe. There was a little life briefly in anticipation of Marcellus gas drilling. But the governor secured his contributions from the Sierra Club by first dragging out a “moratorium to develop regulations” for six years while all the gas companies left or went bankrupt, then deciding to just ban fracking.
The second graph, “Real Income” is more informative than the first. With regard to “Labor Force Participation Rate”, a change from 67% down to 63% is only a matter of 5%. The truncated scale makes it look more dramatic than it really is. When you consider that the 67% was at a very high employment rate, it makes the magnitude of the change even smaller. Also, since employment participation rate is a proportionality, a consistent upward trend line is not to be expected. Given the unpleasant weakness of the current economy, I would have expected something more dramatic.
One of the things I have wondered about for years, though, is what would happen if people started deciding that they could get by just fine while working less. If a family has two full time incomes but the workers realize they could support themselves just fine on two half time incomes, would it not make sense if they did? If it were widespread, that could produce a significant drop in participation rate as well as an economic slow-down, but could, nevertheless, be a relatively harmless trend. A lot of economic effort goes into producing plastic crap and vile entertainment: what if people worked less and cut out the plastic crap and vile entertainment? Wouldn’t that be a good thing.
Artemis, there are non-scary reasons why people might not participate in the labor force: voluntary retirement, raising children. Those don’t account for the degree of dropoff which is drastic and unprecedented. That 4% represents over 10 million people.
The plastic crap is made in China.