What’s up with the labor market?

The latest numbers for the national labor market came out this morning and they look good.  The headline figures: 4.9 percent unemployment and 242,000 jobs created in February.

There’s lot of detail that gets overlooked in the headlines, so let’s take a look at a couple additional measures; the complete release is available here.

  1. Headline unemployment versus other measures

U^ (click to enlarge)

The standard unemployment rate (shown in red) doesn’t include people working part time who want full-time work, nor does it include those who’ve quit searching for work but would do so if they thought their chances of getting a job were better.

The blue line includes these factors and is known as the U-6 measure of unemployment. U-6 continues to follow the headline rate, and this is comforting because it indicates we don’t have a long-term structural unemployment problem.  That is, there isn’t a larger-than-typical pool of people who have left the labor market or are working at part-time jobs who need special attention in terms of labor market policies.

2. Unemployment duration

duration - feb

 (click to enlarge)

Another detail economists watch is the duration of unemployment, i.e. how long a typical unemployed person searches for work.  Again, things are looking pretty good here: after spiking in 2008-2011, greater-than-27-weeks unemployment has returned to roughly its pre-recession level.

These data support my hypothesis that in 2008 the US economy suffered the economic equivalent of a heart attack.  Recovery was too slow for most people but broad indicators have returned to roughly where they were in 2007.  But like a heart attack victim, the US certainly suffered lasting damage.  Here’s the chart that I look at with long-run concern:

employment population ratio

 (click to enlarge)

The chart shows the employment-population ratio, i.e. the fraction of the 16-year-old and over population that has a job of some kind.  This number fell off a cliff during the recession and is straggling up over the past five years. This might be demography (an older population within which a smaller percentage are employed) or it might be a signal that the U-6 unemployment rate isn’t picking up discouraged workers accurately.

Economists are in the same position as a general practitioner: the vital signs look good, but there might be a widowmaker artery that our instruments can’t see.

Update, 2:15 pm: Neil Irwin in the New York Times looks at similar numbers and leaves out the pessimism.