I thought this would be a good time to look at a range of labor market data, to see what we can learn. How does labor market performance look relative to performance before the Great Recession? What's different, and why?
We'll start with standard time series. Payroll employment growth (year-over-year) looks like this:
In terms of unemployment rates, let's look at the standard measure - what the BLS calls U3 - and the broadest possible measure, U6, which includes persons marginally attached to the labor force and those who report that they are employed part time for economic reasons:
Another way to slice the unemployment data is to look at unemployment rates by duration. The BLS reports the number of unemployed less than 5 weeks, 5-14 weeks, 15-26 weeks, and 27 weeks and over, so we can take these numbers and express them as rates, relative to the labor force. Here's what we get:
One feature of how the labor market looks different from before the Great Recession is captured in the Beveridge curve relationship, as shown here (vacancy rate vs. unemployment rate):
Other interesting, and unusual, observations relate to initial claims for unemployment insurance. If we plot initial claims relative to the size of the labor force (a weekly flow rate, in percentage terms), we get this:
We can also look at the insured unemployment rate, which is the number of people collecting UI as a percentage of the labor force. Here, I'll show that along with the standard unemployment rate (U3):
Here's something interesting. If we plot a Beveridge curve, replacing the standard unemployment rate (U3) with the insured unemployment rate, this is what it looks like:
There are also interesting details in the labor market flows, as measured in the CPS. We'll look at flow rates, as a percentage of working age population, among the three labor market states: employed, unemployed, and not-in-the-labor-force (NILF). First, flow rates into employment:
Second, consider flows into unemployment:
Finally, we'll look at flows into NILF:
Finally, we can look at the behavior of market wages. We'll look at year-over-year increases in average hourly earnings and the employment cost index:
What are the key conclusions we should draw from this? Employment growth is currently strong, and by most measures the labor market is currently somewhat tight to very tight. While labor force participation is low and falling, and there is an unusually large number of long-term unemployed relative to pre-recession times, those observations are tempered by observed flow rates from NILF to the labor force that are comparable to pre-recession times. Given the currently elevated number of long-term unemployed, the unemployment rate could drop much lower than it is now - possibly as low as 4.5-4.8%.