Greg Mankiw’s Sunday New York Times oped is critically reviewed by Brad DeLong here.
Mankiw tries to convince his readers that the unemployment rate is a better measure of the labor market than the payroll employment figure (interestingly both show we are worse off than when Bush took office). In a rather long disagreement with Mankiw’s oped, DeLong asks the right questions:
So are there reasons to think that the unemployment rate is a better measure of the state of the job market than the payroll employment count? The answer to this question hinges on what has happened to the 3.5 million extra people who–surprisingly, given what the unemployment rate has been doing – don’t have jobs. Do they lack jobs because they would not want jobs even if the labor market were in its normal full-employment configuration – because they would rather be raising children or going to school or traveling around the world or living the life of Reilly in some manner? Or are they people who would want jobs if the labor market were in its normal full-employment configuration, but who don’t have jobs because the labor market is depressed and have decided to try to do something else with their time–in which case they are raising children or going to school or traveling around the world not as a free choice but as a second-best.
Of course, there is another measure of the labor market, which Brad DeLong often discusses, that being the civilian-employment population ratio, which stood at 64.4% as of January 2001, but fell to 62.2% by August 2003 where it basically stayed until May 2004. As of July 2004, it was reported at 62.5%.
Interestingly, Mankiw may have anticipated this as he wrote:
Now the economy is heading in the right direction. Over the past year, the gross domestic product has grown by 4.8 percent, among the fastest rates in 20 years, and the economy has shown a net gain of about 1.5 million jobs.
Among the fastest rates in 20 years? Clever way of not saying “fastest growth rate since Bush took office”?