Category Archives: US economic conditions

8/8/19: Upbeat Jobs Reports Miss Some Real Points

Unemployment claims down, the weekly jobs report seemed to have triggered the usual litany of positive commentary in the business media

But all is not cheerful in the U.S. labor markets, once you start scratching below the surface. Here are two broader metrics of labor markets health: the civilian employment to population ratio and the labor force participation rate, based on monthly data through July:

The above shows that

  1. Civilian labor force participation rate is running still below the levels last seen in the late 1970s, and the current recovery period average (close to the latests monthly running rate) is below any recovery period average since the second half 1970s recession end.
  2. You have to go back to the mid-1980s to find comparable 'expansion period'-consistent levels of labor force participation rate as we have today. This is dire. Current recovery-period and President Trump's tenure period averages for labor force participation rate sit below all recovery periods' averages from 1984 through 2006. 
So much for upbeat jobs reports.

3/7/19: Record Recovery: Duration and Perceptions

While last month the ongoing 'recovery' has clocked the longest duration of all recoveries in the U.S. history (see chart 1 below), there is a continued and sustained perception of this recovery as being somehow weak.

And, in fairness, based on real GDP growth during the modern business cycles (next chart), current expansion is hardly impressive:

However, public perceptions should really be more closely following personal disposal income dynamics than the aggregate economic output growth. So here is a chart plotting evolution of the real disposable income per capita through business cycles:

By disposable income metrics, here is what matters:

  1. The Great Recession was horrific in terms of duration and depth of declines in personal disposable income.
  2. The recovery has been extremely volatile over the first 7 years.
  3. It took 22 quarters for personal disposable income to recover to the levels seen in the third quarter of the recovery.
So what matters to the public perception of the recovery in the current cycle is the long-lasting memory of the collapse, laced with the negative perceptions lingering from the early years of the recovery.

To confirm this, look at the average rate of recovery in the real disposable income per quarter of the recovery cycle. The next two charts plot this metric, relative to the (a) full business cycle - from the start of the recession to the end of the recovery (next chart) and (b) recovery cycle alone - from the trough of the recession to the end of the recovery (second chart below):

So looking at the trough-to-peak part of the cycle (the expansion part of the cycle) alone implies we are experiencing the best recovery on modern record. But looking at the start-of-recession-to-end-of-recovery cycle, the current recovery period has been less than spectacular, ranking fourth in strength overall.

Which is, of course, to say that our negative perceptions of the recovery are anchored to our experience of the crisis. We are, after all, behavioral animals, rather than rational agents.