A slightly off-center perspective on monetary problems.
What is the total number of months during the Ford, Carter, Reagan and Bush I administrations, plus the first term of Clinton, when the unemployment rate was lower than today?
Answer: 1
(March 1989, when it was 5.0%)
Come on discouraged workers, get out there and start looking!
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17 Responses to “Question of the Day”
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4. September 2015 at 08:57
Wow, 94+% employment? Surely all the jobs are taken now! I’ll just wait until it’s 80%.
4. September 2015 at 09:25
Approximately how many years during these administrations was the civilian labor force participation rate as low as it is today?
3
https://research.stlouisfed.org/fred2/series/CIVPART
4. September 2015 at 09:48
Taking a longer view, below several instances (many more in the 60s and 90s) of unemployment below 5.1% and the corresponding YoY core pce inflation:
Nov/66: 3.6% – 3.1%
Aug/73: 4.1% – 4.8%
Mar/89: 5.0% – 4.5%
Apr/00: 3.8% – 1.7%
May/07: 4.4% – 2.0%
Now: 5.1% – 1.2%
4. September 2015 at 09:53
[…] This is reproduced verbatim from Scott Sumner: […]
4. September 2015 at 10:11
Is just uninterested discouraged workers or has something else in our society changed for the drop in labor force participation? I know we are moving more to a “less work” society and maybe our population is adjusting to this reality. If we are returning to more single income families, then it will have a declining multiplier effect on the job market. (ie if more middle class families return to single income, then they will tend to eat out less or hire home contractors less.)
4. September 2015 at 10:33
On the flip side, at 1.9% the rate of “unemployment for 27 weeks and over” is still the *highest* it has ever been outside the most recent recession and the darkest days of 1982-83. If I had to guess, this probably indicates that the discouraged worker population not picked up by the headline rate is relatively large, since this population is better proxied by long-term than by short-term unemployment. (This guess is roughly confirmed by the formal stats on discouraged workers, part-time for economic reasons, etc.)
The currently low unemployment rate is driven by historically low short-term unemployment. Indeed, the rate of “unemployment for less than 5 weeks” is the lowest it has ever been aside from brief periods immediately before the Great Recession and immediately before the Korean War demobilization in 1953. See https://research.stlouisfed.org/fred2/graph/?g=JGE
This is a remarkable contrast, and it reminds me that the aggregate unemployment rate can be a confusing beast to interpret. It seems likely in retrospect that higher average unemployment in the 70s was driven in large part by a higher natural rate of short-term frictional unemployment. The determinants of this rate can be incredibly obscure — anything from demographics to the nitty-gritty of survey collection — and misinterpretation of the rise in the 70s as cyclical probably played a role in the easy monetary policy of that era. (Not to overstate, of course: while consistent overestimates of slack were a problem, the fundamental reason we saw inflation explode across so many countries is that policymakers initially had no idea how to manage a modern fiat money standard after the collapse of Bretton Woods removed any semblance of external constraint.)
4. September 2015 at 10:39
@foosion
-That’s 37 months, though, isn’t it?
4. September 2015 at 11:43
Mother truckers!
http://www.insurancejournal.com/news/national/2015/09/03/380647.htm
———quote———
More women have taken the wheel, according to the American Trucking Associations. They accounted for 5.8 percent of the 3.4 million U.S. truck drivers last year, compared with 4.6 percent in 2010. National safety figures don’t get broken down by gender, the group said.
Most of the female truckers at Covenant Transportation Group Inc. work in two-person driving teams, including some mother-daughter pairings, said Chief Executive Officer David Parker.
“They do a great job,” he said, and are proving to be more cautious and attentive behind the wheel. He said about 16 percent of the Chattanooga, Tennessee-based company’s 2,400 drivers are women.
More women are willing to go solo on the road, said Swift Transportation Co. COO Richard Stocking. He estimated that 6 percent to 7 percent of his 19,000 drivers are female, and about half of those drive alone.
———-endquote———-
There’s a shortage of qualified drivers, so the capitalists provide power steering and automatic transmissions, and mere women can drive Kenworths now.
Well, the patriarchy will see about that. Driverless rigs are already on the road.
4. September 2015 at 11:58
Why work when you get can disability and food stamps?
4. September 2015 at 12:06
>Why work when you get can disability and food stamps?
Because they don’t pay very much, even assuming you qualify.
4. September 2015 at 12:47
Maybe women are going back to their homes? I know one that will be.
4. September 2015 at 16:05
Matt, That’s interesting, and indeed the very latest reading looks even lower than 2007, so you could say the lowest since 1953. I also agree with your comments on the 1970s.
4. September 2015 at 20:53
To Matt, I think you’re looking at the graph a bit earlier than present, your graph stopped at August 2014. If you check out August of 2015 it looks just below 1.4%, still high but with more historical precedents. The overall point your making stands, but I think it’s important to know that the long-term unemployed rate seems to be falling back towards historical norms, it just reached an absurdly high peak in the Great Recession, 1.5 percentage points higher than the next highest peak.
4. September 2015 at 21:59
Chris H, thanks, that was a silly mistake on my part — didn’t notice that it stopped in August 2014. I made it around then and saved the link (as I do with a number of random econ stats), and apparently fred’s default was to leave the time window constant…
I’m actually glad that I made that mistake, because the contrast now that it’s corrected reinforces a key point — exactly as you point out, there was an absurdly high peak of long-term unemployment in the Great Recession but a remarkably robust rate of recovery since then, to the extent that being off a year makes the difference between 1.9% (Aug 2014) and 1.4% (Aug 2015).
A lot of the early nervousness about intractable long-term unemployment turned out to be quite wrong!
(And although it’s easy to say this in retrospect, I think the flaw in this story was clear enough from the beginning. When people talked about long-term unemployment being persistent, they generally had in mind people who were persistently excluded from employment. But the stats on transition out of unemployment have never been *that* terrible for the long-run unemployed — the ones I remember showed that the job-finding rate after a year of unemployment was about half the job-finding rate when newly unemployed. And at that rate, only a fraction of people are still going to be completely alienated from the job market after 3, 4, 5 years…
Much of the persistence in *aggregate* long-run unemployment comes from new long-run unemployed replacing the old long-run unemployed, due to persistent macroeconomic and EUI conditions — not the same old people never, ever finding a job. When those conditions change, therefore, the long-run unemployment prediction can be expected to improve substantially. As it has!)
5. September 2015 at 08:05
I don’t read you enough to know exactly what tone this is supposed to be in, but it seems to me like a horrible mix of hard fact and moralising. I’m not sure if that’s how you meant it!
Do you think that rhetoric like that will make a difference? Is the participation rate low because people don’t know that it is in fact easy to find work?
Perhaps this was just a throwaway comment, and I shouldn’t be reading it as an analysis of the causes.
5. September 2015 at 08:16
Having now just read your previous post, it seems painfully obvious that you’re saying almost the opposite of what I was imagining. Sorry about that!
6. September 2015 at 04:55
Phil, The final line was a joke, not moralizing. I don’t think there are many discouraged workers.