The unemployment Rate in the United States decreased from 7% in November of 2013 to 6.7% in December of 2013. Good news! Or not?
Unfortunately the unemployment rate is not a beatific 'economy health indicator'.
How come?
Unemployed who no longer search for a job are not 'counted in'.
Do we have a better labor economy health indicator?
An index that would probably be better related to the health of the U.S. economy would be something like the 'Not-Working Rate', implicating the partition of all the people (age 16 or above) that are not working, divided by the number of people that potentially could work.
In fact we can define the 'Not-Working Rate' more or less as 100% minus the 'Employment-population rate'.
'Not Working Rate' = 100% - 'Employment-population rate'
According to chief North American economist for Capital Economics Paul Ashworth,, the employment population ratio is one of the best measures of labor market conditions. This ratio is a statistical ratio that measures the proportion of the country's working-age population (ages 15 to 64) that is employed, inlcuding people that have stopped looking for work.
Enough index-talk discussions... let's look at the Not-Working Rate outcomes.
Not-Working Rates 1948-2013
Let's compare the Not-Working (NW) Rates with the Unemployment (UE) Rates.
The next chart clearly shows that the NW-Rates are about 4 times the UE rates.
In other words: Unemployment is only a small part of 'Not Working'......
Not-Working Rates 2000-2013
Let's zoom in to the development of the 2000-2013 rates.
Now it becomes clear that the UE Rate keeps up with the NW Rate approximately until the UE Rate in October 2009 hits the 10% ceiling. After that (coincidence?) the UE Rates starts a spectacular downfall from a 10% to a 6,7% level at the end of 2013. However the percentage of people that are not working stabilizes around 41.5% and doesn't decline!
Let's zoom in to detect this remarkable development..
Conclusion
I'll leave the detailed conclusions up to you.
My main advice is to introduce the 'Not-Working Rate' as an indicator for the labor health of the U.S. economy.
Despite all this labor math, let's hope and pray that people find a job and that the U.S. economy recovers!
Sources/Links:
- BLS Employment-population ratio
- BLS Unemployment rate
- Wikipedia Employment-to-population ratio
- Actual U.S. Unemployment Rate
- Cartoon
How come?
Unemployed who no longer search for a job are not 'counted in'.
Do we have a better labor economy health indicator?
An index that would probably be better related to the health of the U.S. economy would be something like the 'Not-Working Rate', implicating the partition of all the people (age 16 or above) that are not working, divided by the number of people that potentially could work.
In fact we can define the 'Not-Working Rate' more or less as 100% minus the 'Employment-population rate'.
'Not Working Rate' = 100% - 'Employment-population rate'
According to chief North American economist for Capital Economics Paul Ashworth,, the employment population ratio is one of the best measures of labor market conditions. This ratio is a statistical ratio that measures the proportion of the country's working-age population (ages 15 to 64) that is employed, inlcuding people that have stopped looking for work.
Enough index-talk discussions... let's look at the Not-Working Rate outcomes.
Not-Working Rates 1948-2013
Let's compare the Not-Working (NW) Rates with the Unemployment (UE) Rates.
The next chart clearly shows that the NW-Rates are about 4 times the UE rates.
In other words: Unemployment is only a small part of 'Not Working'......
Let's zoom in to the development of the 2000-2013 rates.
Let's zoom in to detect this remarkable development..
Conclusion
I'll leave the detailed conclusions up to you.
My main advice is to introduce the 'Not-Working Rate' as an indicator for the labor health of the U.S. economy.
Despite all this labor math, let's hope and pray that people find a job and that the U.S. economy recovers!
Sources/Links:
- BLS Employment-population ratio
- BLS Unemployment rate
- Wikipedia Employment-to-population ratio
- Actual U.S. Unemployment Rate
- Cartoon
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