There are a lot of of confusing – and sometimes misleading – numbers thrown around to characterize the state of the employment market.
As we’ve been harping the past several weeks, the BLS has been consistently underreporting the weekly unemployment claims numbers that get headlined on the news – only to revise them up quietly the following week.
Similarly, there are lots of questions about the BLS’ seasonal adjustment factors … which sometimes cause more variance than they explain.
Finally, there’s understandable confusion about the reported unemployment rate and the labor force participation rate. Since the latter has been going down, the former benefits – i.e. there are fewer unemployed people because some (or many) have left the work force.
The St. Louis Fed published a chart that puts the factors into perspective.
The chart is brilliant in its simplicity.
It simply plots the percentage of the able-bodied population who are employed. The difference to 100% is the percentage of able bodies that either choose not to work or can’t find jobs.
What it shows: prior to the financial crisis, about 63% of able bodies had jobs.
The rate fell quickly to about 58.5% and has – save for some statistical noise – hasn’t budged despite the trillions of fiscal and monetary action.
In other words, about 1 in 20 (the difference between 63% and 58.5%) able bodied folks who used to work, aren’t employed now … and the trend isn’t good.