February 06, 2015
The celebrations over the economy’s strong performance are really getting out of hand. That makes it incumbent on those of us who have access to government data and know arithmetic to work harder to set the record straight.
The basic point is a simple one. The economy is recovering, and at least recently, at a relatively rapid pace. I say “relatively” because if we saw the same job growth rates as we did after steep recessions in prior decades we would be seeing 500,000 to 600,000 jobs a month, but hey 257,000 is better than we had been seeing until 2014.
So this is good news. The problem is that the Wall Street boys (e.g. Robert Rubin, Alan Greenspan, etc.) created a really really deep hole. So things are getting better, but we have a very long way to go to get back to anything we can consider a normal labor market and economy.
There are many different measures that can be cited to make this point. The employment to population ratio for prime age workers (between the ages 25-54) is almost three full percentage points below its pre-recession level. (This gets around the claim that the problem is baby boomers retiring. These people are not leaving the labor force to retire.) The number of people who report working part-time involuntarily is still close to 2 million (@50 percent) above pre-recession levels.
But my favorite measure is the quit rate, the percentage of unemployment due to people who voluntarily quit their jobs. This is very useful because it is a real measure of people voting with their feet. The quit rate is telling us the extent to which workers have enough confidence in their job prospects to tell their asshole boss to get lost and then walk out the door.
In a good labor market people are willing to do this. In a bad labor market the risk is just too great. Workers are worried that it may be months, or longer, before they get a new job. So what do the data say?
Well, the quit rate is up a great deal from the troughs of the Great Recession. It had been as low as 5.6 percent in the middle of 2009 just after the economy had shed almost 8 million jobs. In the January data it was up to 9.5 percent. But this only looks good by comparison. The quit rate had been hovering just under 12.0 percent in the two years prior to the recession.
And for those old enough to remember, that was not exactly a great job market. Wages were at best inching ahead of inflation. if we go back to the late 1990s, which really was a good job market, the quit rate was over 13.0 percent and even got as high as 15.2 percent in April of 2000 Here’s the picture.
Voluntary Job Leavers as a Percent of the Unemployed
Source: Bureau of Labor Statistics.
So the moral of this story is that yes, things are definitely getting better, but no things are not good. And we know this, not because some overpaid economist or pundit says so, but because workers are voting with their feet.
So it’s your call. You can believe the expert (who couldn’t see an $8 trillion housing bubble) on your favorite news outlet, or you can believe the people who actually have their jobs on the line.
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