What labor statistics say about our economy

Most attuned to the mumbo jumbo disseminated from Washington will recognize the patent unreliability of statistics. And most will not take at face value reports on inflation, employment, or other political economic issues. Still, the government keeps churning them out and the press keeps touting them as if they proved their point by graphs alone.

While all statistics are to be taken with grains of salt, some might well convey more important issues than others. And, just as frequent as the government uses unemployment rates and CPI, other statistics help paint a fuller picture. As the Conversable Economist has pointed out, one such overlooked statistic is labor force participation:

(Conversable Economist) The percentage of the U.S. adult population that is either working or unemployed and looking for a job is called the labor force participation rate. From the early 1960s to the late 1990s, this percentage rose more-or-less steadily, from 59% to 67%. But since then, starting well before the Great Recession, the labor force participation rate has been falling. In my own Journal of Economic Perspectives, Chinhui Juhn and Simon Potter wrote about “Changes in Labor Force Participation inthe United States” back in the Summer 2006 issue.  Willem Van Zandweghe has a more recent take, with updated evidence, in “Interpreting the Recent Decline in Labor Force Participation” in the Economic Review of the Federal Reserve Bank of Kansas City.

Here’s the pattern of the labor force participation rate. The first figure shows the overall number. The second figure shows the breakdown by gender: that is, the declining labor force participation rate for men, and the women’s labor force participation rate that was rising until about 2000, but then flattened out and has now declined.

No statistics should be taken as the whole truth. And only when all statistics are accumulated into the aggrigate can they be truly useful. Of course, once they are, they cannot possibly be fathomable.  The difficulty is in the deed.
The Conversable Economist stats and graphs are interesting, however. One wonders what labor force participation would look like in relation to unemployment statistics (a task that I may endeavor in shortly). In the mean time, it is possible only to wonder. For instance, I find it very striking that labor force participation increased during the era of welfare, when Johnson’s Great Society increased the incentives to slough off. Whether this says more about the effect of the Great Society or about the labor force participation statistics is another question.
This entry was posted in 2007-08 Crisis, Autarchy, Capitalism, Competition, Complexity, Consumerism, Culture Divide, Division of Labor, Economic Policy, Economic Theory, Free Market, Inflation, Interdependency, Keynesianism, Motivation, Perpetuity, Political Theory, Poverty, Self-Reliance, Self-Sufficiency, Specialism, Systems Theory, Trade, Wealth, Welfare Statism. Bookmark the permalink.

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