This chart from JPMorgan shows three things:
1. The current U-3 or “official” unemployment rate (red line).
2. The unemployment rate if you counted all the labor-force dropouts as unemployed (dark blue line).
3. The unemployment rate if you added back only labor-force dropouts under age 55 — in order to separate out the retiring baby boomers (yellow line).
Clearly, the 8.2% unemployment rate that gets played up in the media significantly understates the problems in the U.S. labor market. The Labor Department has disappeared millions of discouraged workers who’ve stopped looking for a job in the stagnant economy of the Long Recession.
The reality is that, three years into a supposed economic recovery, America continues to suffer from double-digit unemployment.
And, of course, if you add in workers who are employed part-time but wished they had full-time jobs, the unemployment rate is just shy of 15%.
The left-leaning EPI institute(the best economic think-tank of the left) has estimated that about 70 % of the dropouts out of the labor force are non-generational. This means that they are not baby boomers or people close to retirement but who dropped out when things were tough and just stopped looking for work.
Historically, recessions in America have not been deep. The exception was the one who greeted Reagan just as he came to office but he added a stunning 500 k jobs in *average* in 1983 (adjusted for population).
Not only did he cover what the economy had lost, but he also had to cover the rising tide of women entering the workforce which happened en masse in the 1980s.
So people dropping out has always been the case, it’s just that the Feds have not counted them because historically, they would snap back into the labor force once the recovery got going.
And obviously, now that model is broken because there has been no snapback – at all.
It’s like the CPI index of inflation, which excludes energy prices because they are volatile. Now imagine if the price of oil is *fixed* at $120 no matter what happens. After several years, we would have to revisit the assumption that they are volatile and that this is the ‘new normal’.
This is what has happened with employment(and unemployment) statistics.
The chart from JP Morgan is illustrative. The EPI’s own chart showed around 10.5 % unemployment and they were cutting the president a lot more slack.
So we’ve gone from a peak of 10.7 % unemployment to 10.5 % despite four straight years of trillion dollar deficits.
And for those of you who want to have an overview over the next decade of the jobs challenge that has sprung up because of the lack of job creation, the Hamilton Project(via the left-leaning Brookings Institution) has a good chart that is interactive:
http://www.hamiltonproject.org/jobs_gap/