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Sunday, September 3, 2017

Quick Update: US Labor Force Graphs, including autos

Mike Smitka

Here is an overview of (i) unemployment across the Great Recession and the subsequent recovery, highlighting U-6 "total pain" versus U-3 "headline unemployment." U-6 peaked at 17% of the labor force. It doesn't reflect those who dropped out but weren't "discouraged" or "marginally attached" by the BLS – currently, as per the graph below, that's still about 2% of prime-age workers, and 4% for age 20-24 workers. See the graph on the right for details.

I also calculated a "normal" level of total employment, using the relatively constant age-specific rates in the period prior to 2007, but adjusting the total for demographic changes, particularly "boomer" retirement. That's the graph immediately below. By that measure we're still a year away from "full" employment, assuming no slowdown. We have however added 12.2 million jobs, relative to population growth, since the trough of the Great Recession.

Finally there's the auto industry. On the retail side employment is at a historic high. However on the manufacturing side, despite robust domestic production, the industry employs about 130,000 fewer workers than at the onset of the Great Recession, or about 12% fewer. That is, one in eight jobs vanished. Why? – productivity. This reflects a long-term trend, it simply takes fewer people to turn out a vehicle today than in 2006, primarily due to more efficient parts production, because that's the sector where nearly 3 out of 4 workers in vehicle manufacturing are located.