I found this nifty employment calculator tool on the Atlanta Fed’s website while perusing articles on The Economic Populist blog. I used it to get a sort of back of the envelope, ballpark figure regarding what it would take to get back to comparable labor force participation and unemployment rates as in 2006, 66% and 5.5% respectively, if all things remain the same. The answer is shocking – seven years with a job creation rate of ~200K per month. If we want to get there in a year, it would take a whopping 750k jobs created each month, which is nearly quadruple the current trend. So, if a reasonable definition of maximum employment in 2006 was 66% LFPR with a headline unemployment rate of 5.5%, recent Fed decisions seem rather inexplicable considering the legal mandates of maximum employment, stable prices and moderate interest rates, and persistent downside missing of the core PCE target (what’s up with that?!?!).
Of course, very little remains the same over the course of seven years. The longest we’ve gone without a recession in the past handful of decades is ten years, and I am not full of confidence that the Fed as currently constituted will be able to handle the next one (it obviously has yet to figure out how to deal with the last!). They can be difficult to see coming and none of the bureaucrats at the Fed have much to worry about on a personal level. And so, we’re probably talking about something greater than seven years to return to employment conditions that resemble a reasonable definition of maximum employment.
On a personal note, I am very happy to have found this tool, because there been a considerable lack of context in discussions about unemployment recently and it helps to clear some of the fog surround the issue. It would be hard to just shrug this data off as if people who have dropped out of the labor force over the last six years did it for personal preference reasons. Another handy statistic collected by BLS is labeled Not in Labor Force – Want a Job Now. The Bureau actually asks that question in the household survey and reports the findings each month. I also looked at labor force atrophy by gender, and there are almost twice as many women who have left the labor force since the start of the Great Recession as men, and nearly twice the amount of women who are not in the labor force but want a job now as men. I find the gender differences intriguing and will have to put some more thought about why there is a striking difference. But, both statistics are elevated by ~50% since December 2007, as well as statistics collected that cover those not in the labor force but searched for work that can be found here.
In short, the general employment report is largely deceptive regarding overall employment conditions and doesn’t particularly reflect the ongoing and very real waste of human potential, the humanitarian tragedy considering that we are not an agrarian society and employment is a means of survival, that comes with the monetary authority using fuzzy math to weigh imaginary costs and risks to righting a grave wrong and erring on the side of not doing so. It’s way past time for a monetary regime change, and I want it yesterday!