Jobs

Room with a view: Employment continues to lag

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Although the unemployment rate fell modestly and the number of those employed rose slightly — notably in the leisure and hospitality sector — the June employment numbers from the Bureau of Labor Statistics again missed expectations.

Unemployment remains well above its level prior to February 2020, when COVID-19 restrictions began.

Here’s a money quote from the BLS report:

The labor force participation rate was little changed at 61.6 percent in May and has remained within a narrow range of 61.4 percent to 61.7 percent since June 2020. The participation rate is 1.7 percentage points lower than in February 2020. The employment-population ratio, at 58.0 percent, was also little changed in May but is up by 0.6 percentage point since December 2020. However, this measure is 3.1 percentage points below its February 2020 level.

(Emphasis added.)

A goodly chunk of the population is simply not working. Here’s a graph from Calculated Risk:

The Labor Force Participation Rate decreased to 61.6% in May, from 61.7% in April. This is the percentage of the working age population in the labor force. The Employment-Population ratio increased to 58.0% from 57.9% (black line). Grpahic courtesy of Calculated Risk.

Those drops at the far right side are unprecedented. Unlike the Coyote running off a cliff holding an anvil while the Roadrunner meep-meeps from safety, employment has not bounced back from the impact of COVID-19 restrictions.

A number of factors may be enabling or encouraging prime-age workers to continue to sit at home:

  • overly generous government unemployment benefits that make taking government money more sensible financially than working for low wages;
  • non-traditional living arrangements (younger workers moving back home with parents, for instance);
  • “side hustles” bringing in money but not being reported.

Some of these workers may not be idle but they aren’t showing in the employment numbers. For instance, they may be volunteering, hence working without pay.

Whatever the underlying reasons, workers need to return to productive and gainful employment to prevent a worse economic crash. Government needs to stop being “helpful” and just get out of the way.

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