Unemployment Levels and Labor Participation Rate

Tuesday, February 07, 2006 | 10:45 AM

Yesterday, we discussed the lack of wage inflation and all the slack in the Labor market. To really understand how little "[wage] inflation and wage growth" there is, we need to go to the charts.

These will help explain why the Street has been so wrong on wage inflation; (I have no answer as to why they have been so wrong on every other type of inflation).

NOTE: I took some of the terrifically instructive charts from a recent commentary by Northern Trust's Paul Kasriel, and then annotated them. Italicized comments are his also. While credit for creating these graphs goes to Paul, don't blame him for mucking them up – that’s my handiwork.

 

>
All Employees: Total Nonfarm
% Change - Year to Year     (NSA, Thousands)

"Year-over-year nonfarm payroll growth appears to be peaking out around 1.6% -- lower than any other cyclical peak in the past 45 years."

All_employees_total_nonfarm_1


>

As this chart shows, on a year-over year basis, average hourly earnings improvements have been lackluster, only recently rising off of half century lows:

Average Hourly Earnings: Total Private Industries
% Change - Year to Year     (NSA, $/Hour)

"On a year-over year basis, average hourly earnings of nonsupervisory private sector workers increased 3.3% in January. This is well below the peaks of over 4% in the prior two expansions."

Average_hourly_earnings


>
Since 2000, overall total employment compensation continues to trend lower:

Employment Cost Index

"The fact ECI growth is slowing at the same time that the unemployment rate is falling adds credence to the notion that the unemployment overstates the degree of “tightness” in the labor market."

12-Mo %Chg
Employment_cost_index_1


Participation Rate & Unemployment Rate

"There has never been an expansion cycle in the past 45 years in which the participation rate (those actually in the labor force as a percent of those that could be in the labor force) trended lower save for the current one. Had the labor participation rate risen in a normal cyclical fashion, today’s unemployment rate would be considerably higher"

Participation_rate_unemployment_rate

 




These charts make clear there that the labor market is anything but tight and that the headline numbers are misleading. 





Source:
January Employment Report - The True Story is in the Details Not the Headlines
Paul Kasriel
Northern Trust, February 03, 2006   
http://tinyurl.com/dukw8

Tuesday, February 07, 2006 | 10:45 AM | Permalink | Comments (17) | TrackBack (3)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

bn-image

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c52a953ef00d834264f6d53ef

Listed below are links to weblogs that reference Unemployment Levels and Labor Participation Rate :

» THE TAX CUTS ARE WORKING from MaxSpeak, You Listen!
. . . unless you care about jobs. PGL at Angry Bear Barry Ritholtz at The Big Picture Menzie Chin at Econobrowser (here too) Labor market genius Jared Bernstein (Mama MaxSpeak: "How come that Jared Bernstein person always gets quoted... [Read More]

Tracked on Feb 7, 2006 12:17:02 PM

» THE TAX CUTS ARE WORKING from MaxSpeak, You Listen!
. . . unless you care about jobs. PGL at Angry Bear Barry Ritholtz at The Big Picture Menzie Chin at Econobrowser (here too) Labor market genius Jared Bernstein (Mama MaxSpeak: "How come that Jared Bernstein person always gets quoted... [Read More]

Tracked on Feb 7, 2006 4:25:59 PM

» Jobless vs. Unemployed from The Big Picture
In today's NYT, Floyd Norris hits on a subject that has been a favorite of ours over the years: Finding the true measure of the economy's labor situation.The unemployment rate is low. The jobless rate is high.Those two seemingly contradictory statement... [Read More]

Tracked on Apr 12, 2008 9:24:10 AM

Comments

Aren't these charts an clear statement that the current measures of unemployment, participation and wage pressures inaccurate?

Posted by: Simon | Feb 7, 2006 11:34:41 AM

The comments to this entry are closed.



Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      

Archives

Complete Archives List

Blogroll

Blogroll

Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:


Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites

FeedBurner


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo

Disclaimer

Disclaimer

Odds & Ends

Site by Moxie Design Studios™

FeedBurner