Where have the jobs gone? Where did they come from?
A few weeks ago, Donald Trump made the confusing remark that the “real” unemployment rate was 42%, not the official 5% from the Bureau of Labor Statistics. This was a ridiculous claim, but there is a nugget of fact behind it.
Take a look at the civilian employment–population ratio over the last generation:
So, in fact, yes — 41% of the working-age population of the United States is not employed at the moment.
But this is a pretty meaningless number. “Working-age,” according to the BLS, means “aged 16 years and over.” So this graph includes kids in high school as well as centenarians.
So, let’s try to find a more meaningful measure. To come up with this measure, I’m limiting the data to people ages 25–54 — the core working population. Since FRED does not have a measure of the 25–54 Employment:Population ratio, I’m crafting my own. I’m looking at the Civilian Labor Force Participation Rate — the percentage of the population that is “in the labor force.” Next, let’s multiply that by the labor force employment rate, i.e., 1–unemployment.
This graph is pretty much the same shape, but transposed upwards a little. Of people ages 25–54, about 77% are employed.
This on its own is not particularly alarming. There are a lot of people who are stay-at-home parents or who — from illness, disability, or otherwise — cannot work.
But what I find interesting is the boom-years surge and the dropoff in the Time of Shedding and Cold Rocks. If the same percentage of 25–54-year-olds were employed today as were employed in 2000, we’d have around 6 million more jobs for this age range alone. Which is a troubling thought. What are those 6 million people doing?
But what if we looked at it from the other direction? Here’s a slightly longer-term view of the same data.
Today’s numbers are still relatively high by historical standards. The big driver of the upwards surge in this chart is, of course, women’s participation in the workforce.
But let’s reframe my earlier question in the context of this graph. Assume social dynamics stopped changing in 1970 and that 70% employment was a “normal” rate of employment. By the late 90s, there were 14 million people (ages 25–54) employed who would not have been employed a generation earlier. Today, there are still almost 9 million people employed who would not have been employed in 1970.
So, instead of asking, What are the people doing who would have been employed in the 90s?, maybe we should ask, What are the people doing today who would not have been employed in the 60s? What if the 80s and 90s were an aberration — an unsustainable employment bubble? What if instead of having 6 million jobs too few, we actually have 9 million jobs too many?
I’ll get into the implications of these questions in a future essay.
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