Great Depression vs. Great Recession: Unemployment - Updated March 2016

The reported unemployment rate during the Great Depression was significantly higher than the reported unemployment rates of the Great Recession.

But are the two rates comparable? Before 1938, children were a significant part of the labor force.  In 1900, children younger than sixteen made up as much as eighteen percent of the labor force.  It was only when the Fair Labor Standards Act of 1938 became law that children younger than sixteen were barred from working in manufacturing and mining but not agriculture.

To make the numbers more comparable, it is better to get the ratio of Employment to the Total Population (which includes children). When we do this, the two measures are not so far apart.  In 1929, the year "0" for the Great Depression, 54.41% of the total population was employed.  By 1933, year "4", only 41.97% of the population was employed. But the rise in employment was dramatic.  Four years later, 47.63% of the population was employed, almost six percentage points higher. The employment momentum only stalled when the tax hikes of 1937 induced another recession in 1938 and new child labor laws barred children from the labor force.  If the momentum had continued, the employment ratio would have recovered in less than five years.




In 2007, the year "0" of the Great Recession, 48.38% of the population was employed.   Four years later, only 44.82% of the population was employed, a drop of less than 4 percentage points.  By March 2016 or four years after the Great Recession bottomed out, only 46.70% of the population is employed, an increase of only 2.01% percentage points.  The growth rate of employment was less than a third that of the Great Depression.  At this rate, it will take four more years or 2020 before employment recovers to that of Year "0".

Great Depression vs. Great Recession


Sources: www.worldbank.org, www.bea.gov, www.bls.gov,  Reinhart and Rogoff, "This Time is Different"

Great Depression vs. Great Recession: Unemployment - Updated February 2016

The reported unemployment rate during the Great Depression was significantly higher than the reported unemployment rates of the Great Recession.

But are the two rates comparable? Before 1938, children were a significant part of the labor force.  In 1900, children younger than sixteen made up as much as eighteen percent of the labor force.  It was only when the Fair Labor Standards Act of 1938 became law that children younger than sixteen were barred from working in manufacturing and mining but not agriculture.

To make the numbers more comparable, it is better to get the ratio of Employment to the Total Population (which includes children). When we do this, the two measures are not so far apart.  In 1929, the year "0" for the Great Depression, 54.41% of the total population was employed.  By 1933, year "4", only 41.97% of the population was employed. But the rise in employment was dramatic.  Four years later, 47.63% of the population was employed, almost six percentage points higher. The employment momentum only stalled when the tax hikes of 1937 induced another recession in 1938 and new child labor laws barred children from the labor force.  If the momentum had continued, the employment ratio would have recovered in less than five years.



In 2007, the year "0" of the Great Recession, 48.38% of the population was employed.   Four years later, only 44.82% of the population was employed, a drop of less than 4 percentage points.  By February 2016 or four years after the Great Recession bottomed out, only 46.76% of the population is employed, an increase of only 2.07% percentage points.  The growth rate of employment was less than a third that of the Great Depression.  At this rate, it will take four more years or 2020 before employment recovers to that of Year "0".

Great Depression vs. Great Recession


Source: www.worldbank.org, www.bea.gov, www.bls.gov,  Reinhart and Rogoff, "This Time is Different"

Great Depression vs. Great Recession: Unemployment - Updated January 2016

The reported unemployment rate during the Great Depression was significantly higher than the reported unemployment rates of the Great Recession.

But are the two rates comparable? Before 1938, children were a significant part of the labor force.  In 1900, children younger than sixteen made up as much as eighteen percent of the labor force.  It was only when the Fair Labor Standards Act of 1938 became law that children younger than sixteen were barred from working in manufacturing and mining but not agriculture.

To make the numbers more comparable, it is better to get the ratio of Employment to the Total Population (which includes children). When we do this, the two measures are not so far apart.  In 1929, the year "0" for the Great Depression, 54.41% of the total population was employed.  By 1933, year "4", only 41.97% of the population was employed. But the rise in employment was dramatic.  Four years later, 47.63% of the population was employed, almost six percentage points higher. The employment momentum only stalled when the tax hikes of 1937 induced another recession in 1938 and new child labor laws barred children from the labor force.  If the momentum had continued, the employment ratio would have recovered in less than five years.


In 2007, the year "0" of the Great Recession, 48.38% of the population was employed.   Four years later, only 44.82% of the population was employed, a drop of less than 4 percentage points.  By January 2016 or four years after the Great Recession bottomed out, only 46.62% of the population is employed, an increase of only 1.93% percentage points.  The growth rate of employment was less than a third that of the Great Depression.  At this rate, it will take five more years or 2021 before employment recovers to that of Year "0".

Great Depression vs. Great Recession

Source: www.worldbank.org, www.bea.gov, Reinhart and Rogoff, "This Time is Different"

Charting the US Jobs Recovery - DelMarva + DC Edition - May 2014

Most media discussions on the US Jobs Recovery focus on just one number - the headline Unemployment Rate.  To add color to the first number, financial pundits like to add a second number - the Labor Force Participation Rate.  Both are intertwined and affect each other.  But in the aftermath of the Great Recession, there is a third, much more meaningful number that is almost never discussed - the Employment to Population Ratio.

Definitions

Now, what are these numbers?  Many people will give you a technical description that can be hard to grasp and make your eyes glaze over the minute you hear them.  But the reality is simple.

The Unemployment Rate is the percentage of:

PEOPLE WHO WANT  A JOB BUT DON'T HAVE ONE (Unemployed)/
LABOR FORCE

The Labor Force is:

PEOPLE WHO WANT AND HAVE JOBS (Employed) + PEOPLE WHO WANT A JOB BUT DON'T HAVE ONE AND ARE LOOKING FOR ONE (Unemployed)

The Labor Force Participation Rate is percentage of:

[PEOPLE WHO WANT AND HAVE JOBS (Employed) + PEOPLE WHO WANT A JOB BUT DON'T HAVE ONE AND ARE LOOKING FOR ONE (Unemployed)]/
WORKING AGE PEOPLE

Working Age People are generally defined as PEOPLE WHO ARE 16 YEARS AND OLDER.  In reality, they are:

[PEOPLE WHO WANT AND HAVE JOBS (Employed) + PEOPLE WHO WANT A JOB BUT DON'T HAVE ONE AND ARE LOOKING FOR ONE (Unemployed) + PEOPLE WHO ARE NOT IN THE LABOR FORCE (Not in Labor Force)]

The category PEOPLE WHO ARE NOT IN THE LABOR FORCE includes:


PEOPLE WHO ARE IN THE MILITARY
PEOPLE WHO ARE INSTITUTIONALIZED
PEOPLE WHO ARE STUDENTS
PEOPLE WHO ARE HOMEMAKERS
PEOPLE WHO ARE RETIRED
PEOPLE WHO ARE MARGINALLY ATTACHED TO LABOR FORCE (INCLUDING DISCOURAGED WORKERS)


The Employment to Population Ratio is the percentage of:

PEOPLE WHO WANT AND HAVE JOBS/
WORKING AGE PEOPLE

In other words, PEOPLE WHO WANT AND HAVE JOBS/
[PEOPLE WHO WANT AND HAVE JOBS + PEOPLE WHO WANT A JOB BUT DON'T HAVE ONE AND ARE LOOKING FOR ONE + PEOPLE WHO ARE NOT IN THE LABOR FORCE


How does this work out?

According to this chart from the popular financial blog, Calculated Risk, the US, in May 2014, gained back all the jobs lost since the Great Recession started in November 2007.

But this is deceptive.  For one, the working age population of the US grew by 15.795 million people or 6.81% from 2007 to May 2014, while the labor force grew by 2.489 million people or only 1.63% during the same period.   The number of employed persons actually shrank by 233,000 people and unemployed people grew by 2.721 million people or 38.44% during the same period. People Not in the Labor Force grew by 13.266 million or 16.85% during the same period.

United States
Employment Situation
In Thousand Persons
									2007 to May 2014
	2007	2008	2009	2010	2011	2012	2013	May 2014	Variance	% Variance
Civilian Non Institutional Population	231,867	233,788	235,801	237,830	239,618	243,284	245,679	247,662	15,795	6.81%
Labor Force	153,124	154,287	154,142	153,889	153,617	154,975	155,389	155,613	2,489	1.63%
Employed	146,047	145,362	139,877	139,064	139,869	142,469	143,929	145,814	-233	-0.16%
Unemployed	7,078	8,924	14,265	14,825	13,747	12,506	11,460	9,799	2,721	38.44%
Not in Labor Force	78,743	79,501	81,659	83,941	86,001	88,310	90,290	92,009	13,266	16.85%

Source: bls.gov

For the United States, the headline Unemployment Rate has dropped down significantly, from a peak of 9.9% in 2009 to just 6.3% as of May 2014.  The Labor Force Participation Rate continues to drop and is now at 62.8% - levels not seen since the late 1970's when women started entering the workforce in droves.  The Employment to Population Ratio has only recovered marginally from its recessionary low of 58.3% to just 58.9% in May 2014.  It is nowhere near its pre-recession average.  In other words, job growth has been growing only barely faster than the growth in the working age population.

Economists have attributed to this phenomenon to increased retirements among the elderly.  But the Bureau of Labor and Statistics itself  is projecting large increases in the Labor Force Participation Rate among people aged 65 and older. The reality is fewer people can afford to retire.

Regional Comparison

So how does the DELMARVA + DC Region stack up to the rest of the United States?

Delaware

The state of Delaware is in a funk, employment-wise.  Its Labor Force Participation Rate, at 60.8% as of May 2014, is even lower than the 62.7% Labor Force Participation Rate the state registered in 1976, the earliest available BLS.Gov data.  Although its Unemployment Rate has dropped from a peak of 8.0% in 2010, to just 5.9% as of May 2014, its Employment to Population Ratio, at 57.2% as of May 2014, is still hovering near the bottom at 56.7% in 2013.

Maryland

Like Delaware, Maryland's Labor Force Participation Rate continues to trend lower, hitting 66.7% as of May 2014 - levels not seen since the late 1970s.  Its Employment to Population Ratio has yet to bottom out. At 62.9% as of May 2014, it is reaching levels not seen since the early 1980s.  Its Unemployment Rate, however, has dropped sharply, from a peak of 7.9% as of 2010 to just 5.6% as of May 2014.  As the previous data indicates, much of the drop has come from people dropping out of the labor force altogether.

Virginia

Virginia has seen a sharp uptick in its labor force participation rate, from a post-recessionary bottom of 66.4% in 2013, to 67.4% as of May 2014.  Likewise, its Employment to Population Ratio has improved to 63.9% as of May 2014.  Unemployment Rate has dropped from its 2010 peak of 7.1% to just 5.1% as of May 2014.

District of Columbia

The District of Columbia's Labor Force Participation bottomed out at 67.8% in 2011, bounced up to the 69.3% level for 2012 and 2013 and is down again to 68.2% as of May 2014.  Its Employment to Population Ratio bounded up sharply from a low of 60.9% as of 2011 to 63.5% as of 2013 and now stands at 63.0% as of May 2014.  Its Unemployment Rate, which reached a peak of 10.2% as of 2011, now stands at 7.5% as of May 2014.

Charting the US Jobs Recovery - DelMarva + DC Edition

Most media discussions on the US Jobs Recovery focus on just one number - the headline Unemployment Rate.  To add color to the first number, financial pundits like to add a second number - the Labor Force Participation Rate.  Both are intertwined and affect each other.  But in the aftermath of the Great Recession, there is a third, much more meaningful number that is almost never discussed - the Employment to Population Ratio.

Definitions

Now, what are these numbers?  Many people will give you a technical description that can be hard to grasp and make your eyes glaze over the minute you hear them.  But the reality is simple.

The Unemployment Rate is the percentage of:

PEOPLE WHO WANT  A JOB BUT DON'T HAVE ONE (Unemployed)/
LABOR FORCE

The Labor Force is:

PEOPLE WHO WANT AND HAVE JOBS (Employed) + PEOPLE WHO WANT A JOB BUT DON'T HAVE ONE AND ARE LOOKING FOR ONE (Unemployed)

The Labor Force Participation Rate is percentage of:

[PEOPLE WHO WANT AND HAVE JOBS (Employed) + PEOPLE WHO WANT A JOB BUT DON'T HAVE ONE AND ARE LOOKING FOR ONE (Unemployed)]/
WORKING AGE PEOPLE

Working Age People are generally defined as PEOPLE WHO ARE 16 YEARS AND OLDER.  In reality, they are:

[PEOPLE WHO WANT AND HAVE JOBS (Employed) + PEOPLE WHO WANT A JOB BUT DON'T HAVE ONE AND ARE LOOKING FOR ONE (Unemployed) + PEOPLE WHO ARE NOT IN THE LABOR FORCE (Not in Labor Force)]

The category PEOPLE WHO ARE NOT IN THE LABOR FORCE includes:

1. PEOPLE WHO ARE IN THE MILITARY
2. PEOPLE WHO ARE INSTITUTIONALIZED
3. PEOPLE WHO ARE STUDENTS
4. PEOPLE WHO ARE HOMEMAKERS
5. PEOPLE WHO ARE RETIRED
6. PEOPLE WHO ARE MARGINALLY ATTACHED TO LABOR FORCE (INCLUDING DISCOURAGED WORKERS)

The Employment to Population Ratio is the percentage of:

PEOPLE WHO WANT AND HAVE JOBS/
WORKING AGE PEOPLE

In other words, PEOPLE WHO WANT AND HAVE JOBS/
[PEOPLE WHO WANT AND HAVE JOBS + PEOPLE WHO WANT A JOB BUT DON'T HAVE ONE AND ARE LOOKING FOR ONE + PEOPLE WHO ARE NOT IN THE LABOR FORCE


How does this work out?

According to this chart from the popular financial blog, Calculated Risk, the US, in April 2014, is very close to gaining back all the jobs lost since the Great Recession started in November 2007.  By this Friday's Jobs Report from the Bureau of Labor Statistics (BLS), we might have gained back all the jobs lost by May 2014.

But this is deceptive.  For one, the working age population of the US grew by 15.572 million people or 6.72% from 2007 to April 2014, while the labor force grew by 1.721 people or only 1.12% during the same period.   The number of employed persons actually shrank by 280,000 people and unemployed people grew by 2.001 million people or 28.27% during the same period. People Not in the Labor Force grew by 13.581 million or 17.59% during the same period.

United States
Employment Situation
In Thousand Persons
									2007 to April 2014
	2007	2008	2009	2010	2011	2012	2013	April 2014	Variance	% Variance
Civilian Non Institutional Population	231,867	233,788	235,801	237,830	239,618	243,284	245,679	247,439	15,572	6.72%
Labor Force	153,124	154,287	154,142	153,889	153,617	154,975	155,389	154,845	1,721	1.12%
Employed	146,047	145,362	139,877	139,064	139,869	142,469	143,929	145,767	-280	-0.19%
Unemployed	7,078	8,924	14,265	14,825	13,747	12,506	11,460	9,079	2,001	28.27%
Not in Labor Force	78,743	79,501	81,659	83,941	86,001	88,310	90,290	92,594	13,851	17.59%

Source: BLS.gov


For the United States, the headline Unemployment Rate has dropped down significantly, from a peak of 9.9% in 2009 to just 6.3%.  The Labor Force Participation Rate continues to drop and is now at 62.8% - levels not seen since the late 1970's when women started entering the workforce in droves.  The Employment to Population Ratio has only recovered marginally from its recessionary low of 58.3% to just 58.9% in April 2014.  It is nowhere near its pre-recession average.  In other words, job growth has been growing only barely faster than the growth in the working age population.

Economists have attributed to this phenomenon to increased retirements among the elderly.  But the Bureau of Labor and Statistics itself  is projecting large increases in the Labor Force Participation Rate among people aged 65 and older. The reality is fewer people can afford to retire.

Regional Comparison

So how does the DELMARVA + DC Region stack up to the rest of the United States?

Delaware

The state of Delaware is in a funk, employment-wise.  Its Labor Force Participation Rate, at 60.6% as of April 2014, is even lower than the 62.7% Labor Force Participation Rate the state registered in 1976, the earliest available BLS.Gov data.  Although its Unemployment Rate has dropped from a peak of 8.0% in 2010, to just 5.8% as of April 2014, its Employment to Population Ratio, at 57.1% as of April 2014, is still hovering near the bottom at 56.7% in 2013.

Maryland

Like Delaware, Maryland's Labor Force Participation Rate continues to trend lower, hitting 66.6% as of April 2014 - levels not seen since the late 1970s.  Its Employment to Population Ratio has yet to bottom out. At 62.9% as of April 2014, it is reaching levels not seen since the early 1980s.  Its Unemployment Rate, however, has dropped sharply, from a peak of 7.9% as of 2010 to just 5.5% as of April 2014.  As the previous data indicates, much of the drop has come from people dropping out of the labor force altogether.

Virginia

Virginia has seen a sharp uptick in its labor force participation rate, from a post-recessionary bottom of 66.4% in 2013, to 67.2% as of April 2014.  Likewise, its Employment to Population Ratio has improved to 63.9% as of April 2014.  Unemployment Rate has dropped from its 2010 peak of 7.1% to just 4.9% as of April 2014.

District of Columbia

The District of Columbia's Labor Force Participation bottomed out at 67.8% in 2011, bounced up to the 69.3% level for 2012 and 2013 and is down again to 68.1% as of April 2014.  Its Employment to Population Ratio bounded up sharply from a low of 60.9% as of 2011 to 63.5% as of 2013 and now stands at 63.0% as of April 2014.  Its Unemployment Rate, which reached a peak of 10.2% as of 2011, now stands at 7.5% as of April 2014.

On the Sudden Rise of Joblessness in the Philippines

Yesterday, President Aquino sounded positively clueless regarding the sudden rise of joblessness in the last quarter of 2013 when the economy itself grew at a blistering pace of 7.2%.  The incident that sparked his supposed cluelessness was a finding from a Social Weather Stations (SWS) survey that the unemployment rose to 27.5%, or six percentage points higher than the 21.7% unemployment rate SWS reported in the previous quarter.

For the uninitiated, SWS  is a Philippine-based private non-profit social research institution which conducts period statistical surveys on Philippine economics, politics, and other matters.  It sometimes functions like a shadow statistical agency, similar to but not quite like John Williams' Shadowstats.com in that it tries to uncover problems in government statistical reporting that can come across as biased, self-serving, and often manipulated.  The key difference is that SWS conducts its own statistical surveys, while Shadowstats works with and recomputes US government data using alternative methodologies.  SWS' own report, as reported in Businessworld, can be found here.

Meanwhile the government's own report shows similar, but not quite as steep, declines in employment. Although the potential labor force (population 15 years and older) grew by 862K people or 1.37% from 2012 to 2013, the economy only added 317K jobs during this period, leaving an additional 475K out of the labor force.  As a result, the Labor Force Participation Rate dropped 0.3% from 64.2% in 2012 to 63.9% in 2013.  According to the Bureau of Labor and Employment Statistics (BLES), the drop was most pronounced among the male workforce (-0.4%) and among the youth (-0.8%).

As a result, the nation's Employment to Population Ratio, which measures the proportion of the country's working age population that is employed and that is often cited as the best measure of labor market conditions, decreased from 60.7% in 2012 to 59.4% in 2013.  Because so many people dropped out of the labor force, Unemployment only increased by 70K people in 2013 and the Unemployment rate marginally inched up from 7.00% in 2012 to 7.1% in 2013.

Historically, the Labor Force Participation Rate of 63.9% is back near the lows of the last decade (2006 to 2008).  The same holds true for the Employment to Population Ratio, which at 59.4% is back to the levels of 2006 to 2009.  Unemployment wise, we are still hovering at historic lows.

Have we slipped back in time employment wise?  Maybe not yet.  Generally, employment is usually a lagging economic indicator, meaning employment falls generally after other economic or market conditions have deteriorated.  Given the robust economic performance of the country in 2013, that hasn't happened yet.  But in an era of weak labor markets worldwide, particularly in US and Europe, maybe employment has become a leading indicator and has become a harbinger of things yet to come.  That is up for the experts to decide.