Friday, August 1, 2014

Are We At Full Employment?

Republicans would never admit to this.

Democrats would like to believe it’s true.

I’ve made the case repeatedly in this blog that a lot of what we’re seeing right now is that the baby boomers are now in late middle age or the early years of retirement.

Here’s a workup from Idiosyncratic Whisk about what would happen if you adjusted JOLTS data for how demographics have changed since the turn of the millennium due to the aging of the baby boomers.

JOLTS data is a more detailed look at the data than is provided by the commonly trumpeted unemployment rates, labor force participation rates, and raw numbers of the disabled and otherwise out of work. It tracks separate series on the rates of things like quits, layoffs, openings, hires, and separations (a collective measure of people leaving jobs for any reason).

You don’t have to think too deeply to figure out what would happen as people age: quits goes down. Without quits, there aren’t as many openings. Without openings, there aren’t that many hires, and so on.

The point Idiosyncratic Whisk is making is that the economy of 2015 will be one in which the median baby boomer is 60, while the economy of the last great boom we had (in the late 90’s) was one in which the oldest baby boomers were in their early 50’s (and the youngest, like me, didn’t even have kids yet).

What’s the conclusion?

So, the measures, demographically adjusted to compare to the previous recession, give us a picture where Openings and Quits suggest that Unemployment should be nearly 1% lower than it is.  I have separately estimated that about 1.2% of the labor force remain drawn into unemployment because of the unprecedented generosity of Emergency Unemployment Insurance (EUI).

The net result may be that we have a labor market that, for the most part, is operating at full employment.

In sum, the vast majority of the working age population is operating in a full employment economy. But, we add in a small minority that have been offered long-term benefits for being unemployed, and that boosts the rate.

So, for students, if you feel like there aren’t any jobs, it isn’t because the economy sucks. It’s because it’s operating at full capacity.

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