As I thought about this post on real wages, it struck me that I have not been providing my usual graphs of BLS data when discussing the labor market. So my first graph shows a real wage series from January 2002 to May 2008 indicating that the real wages of nonsupervisory workers was the same during May 2008 as it was during January 2002 – something that Donald Luskin seems to not know even if Paul Krugman and Brad DeLong do. I would hope by now that most of our readers also know how to check BLS data.
Last Thursday, I noted that the employment-population (EP) ratio:
was 63.0% as of June 2007, was 62.6% as of May 2008, and now stands at 62.4%. So why didn’t the unemployment rate rise? It seems the labor force participation rate fell from 66.2% as of May 2008 to 66.1% as of June 2008. Then again – it was 66.1% as of June 2007. The unemployment rate last June 2007 was only 4.6%. With the labor force participation rate over the past year being unchanged, the rise in the unemployment rates just happens to track the drop in the employment-population rate quite well. And the news is really bad indeed. In fact, when we compare the employment-population ratio as of December 2006, which was 63.4%, to the 62.4% as of last month – things look dreadful.
Our second graph takes the EP ratio and the labor force participation rate (LFP) back to January 2001. Notice that the EP ratio is currently a lot lower than it was back in January 2001 and that LFP is also lower. One could (or was that should) complain that our current 5.5 percent unemployment rate is higher than it was when George W. Bush took office but even that masks the dramatic decline in the percent of adults who are employed.