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Another Way to Look at the Job Market

Among the Federal Reserve’s dozen or so ways to look at the labor market as they debate monetary policy next week will no doubt be this new alternative found at the Wall Street Journal Economics blog in which the difference between the U3 jobless rate and the U6 gauge of under-employment is charted (recall that U6 includes U3 plus discouraged workers and those stuck in part-time jobs who would like full-time work).

Interestingly, back in January 1994 (the first month that U6 is available), the two components were slightly different. The U3 rate back then – about three years after the 1991 recession – was nearly 12 percent and the U3 rate was 6.6 percent versus, today, when U6 is 11.0 percent and U3 is 5.5 percent.

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The Jobs “Recovery”

Between the dubious calculation of the 5.5 percent unemployment rate (e.g., last month’s decline from 5.7 percent had much more to do with the 354,000 people who left the labor force than the 96,000 who found jobs) and the quality of the jobs the American economy now creates (e.g., employment for waiters and bartenders surpassed the 11 million mark for the first time last month), the current environment will someday probably be looked back upon as “the recovery that wasn’t” despite all the signs being clear to see such as the chart below from this item stumbled upon at Confounded Interest.

It seems that more people have been added to the disability rolls than to the labor force over the last four years and, while I suppose it’s better that the former are not starving, I can’t help but recall a conversation with an 82-year old skiier a couple weeks ago where he described his recent double-knee replacement surgery.

While being quite pleased about being out and about again (I hope I’m still skiing at 82), his biggest gripe was that all the other people getting knee replacements were much younger and obese. “No wonder they need new knees”, he remarked.

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Timing is Everything Pretty Important

The combination of sharp increases in the cost of higher education (and the corresponding crushing debt load for many), the long-lasting effects of the Great Recession, and the reality that an undergraduate degree is the new high school diploma has made things surprisingly difficult for Millennials and, as noted in this report from the New York Fed, one of their responses is to live at home while in their twenties in rapidly rising numbers.

Yes, I’m a sucker for a good .gif, but this one is pretty illustrative of how policy makers in the U.S. and elsewhere are affecting an entire generation. When it becomes the rule, not the exception, for twenty-somethings to spend an inordinate amount of time living at home for financial reasons, then something has gone terribly wrong in the world.

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Can You Spot the Trend?

From The Increasingly Unequal States of America(.pdf) at the Economic Policy Institute (via this item at The Nation) comes the graphic below that helps explain why so many Americans feel so strongly that the economic recovery hasn’t yet reached them, despite news that U.S. job creation in 2014 reached a 15-year high and that the unemployment rate has tumbled.

The report notes this is “not just a story of those in the financial sector in the greater New York City metropolitan area reaping outsized rewards from speculation in financial markets”. These are broad-based trends that have occurred nationwide since the 1970s following many decades when, for example, there “was a cultural and political environment in which it was unthinkable for executives to receive outsized bonuses while laying off workers”.

That’s progress, I suppose.

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