Written by Constantin Gurdgiev, TrueEconomics.Blogspot.in
It’s time for another update of America’s scariest charts, all dealing with the historic damage done to the US labor market by the pandemic recession. In many respects this is the worst labor market recession since World War II.
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1. Continued Unemployment Claims
In absolute terms, official continued unemployment claims stood at 4,592,000 during the week of January 23, 2021, 193,000 down on week prior and 935,000 down on the month prior. The four weeks-average rate of decline in continued claims is at 120,000 per week, an improvement on 4-weeks average of 103,250 weekly rate of decline a week ago, but weaker than 177,250 average rate of decline recorded a month ago.
Mapping the same series in comparison to other recessions:
The log scale ameliorates, visually, the extreme nature of unemployment dynamics during the current recession, which is now into its 46th week running. Compared to all prior recessionary episodes, current week 46 reading is still the worst of all post-WW2 recessions.
Some recent research suggests that U.S. policy errors in dealing with pandemic could have increased infection rates by 8.7-14.2 percent. Translating these potential effects into unemployment suggests that more robust public policy interventions at the Federal level could have, potentially, reduced current unemployment rolls by some 425,000-693,000.
2. Labor force participation rate and Employment-to-Population ratio
Now, let’s take a look at Labor Force Participation rate and Employment to Population ratio:
The chart and the table above highlight continued serious problems in the structure of the U.S. labor markets. While official continued unemployment claims are inching back toward some sort of a ‘norm’, much of so-called improvement in unemployment dynamics is actually accounted for by the dire state of labor force participation which is still trending below anything one might consider reasonable. Current labor force participation rate is 61.5 which is well below anything seen before the onset of the pandemic in March 2020. By a mile below. And in terms of historical perspectives, we have no modern recession (from 1980 onwards) that matches these lows of labor force participation. Structurally, this means that instead of gaining jobs, the unemployed simply roll off the cliff of unemployment assistance and drop out of the labor force, discouraged by the lack of meaningful decent jobs in the market.
Employment to population ratio is a little better, but it is still stuck below pre-pandemic levels and is low compared to prior recessions’ troughs.
The conditions in the U.S. labor markets might be improving somewhat off the pandemic lows, but the situation overall remains dire.
3. Non-farms payrolls
In December 2020, employment growth stalled. In fact, non-farm payrolls fell 328,000 in the last month of 2020 to 143,777,000, or 9,400,000 below pre-pandemic peak. December was the first month of declines in employment since April 2020, but employment growth was relatively slow already in November when the U.S. economy added 603,000 jobs, the slowest pace of recovery after July for the entire period of recovery of May-November 2020.
This evidence further reinforces the argument that labor markets conditions in the U.S. remain abysmal, prompting American workers to slip out of the labor force.
4. New (initial) unemployment claims data through January 30, 2021
The data confirms the worrying trends cited in reference to continued unemployment claims. In the last week of January 2021, based on preliminary estimates published today, initial unemployment claims stood at 816,247 – a decline of just 23,525 on prior week reading. The 4-weeks cumulative initial unemployment claims are at 3,744,581, which only 103.433 down on prior 4 weeks period. Net, over the last 5 weeks, the reduction in initial unemployment claims stands at a miserly 19,725.
Despite little media coverage, the U.S. labor markets remain stricken by the pandemic effects on economic activity. If we strip out data for the pandemic period-to-date, the latest weekly reading for initial unemployment claim ranks as the 10th highest in the history of the series.
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5. Average duration of unemployment
As the chart above clearly shows, current average duration of unemployment spell is already higher than the peak of any prior recession other than the Great Recession. However, the duration remains relatively benign when we control for the business cycle (red line and the chart next).
Dynamically, it is hard to imagine average duration of unemployment to be staying around its current levels. Something to watch in months to come as an indicator of the direction of structural (as opposed to cyclical) unemployment.
6. Employment Index
Currently, into month 10 data of the recession (December 2020), and employment index is reading close to the conditions in the recession of 1945, but better than the recession of 1953. We are still trending worse than any recession in modern period (post-Gold Standard), and that is quite an achievement (in negative terms). Dynamically, improvements in employment conditions have been flattening out from month 5 of the recession through month 8 and index improvements have slowed down to almost nil in months 9 and 10. Unless there is a significant reversal in this trend, by the end of 2021 we are likely to be around the same labor markets conditions as at the same time during the Great Recession.
Source articles
This article was compiled by the following source articles at True Economics:
1. 4/2/21: U.S. Labor Markets: America’s Scariest Charts, Part 1
2. 4/2/21: U.S. Labor Markets: America’s Scariest Charts, Part 2
3. 4/2/21: U.S. Labor Markets: America’s Scariest Charts, Part 3
4. 4/2/21: U.S. Labor Markets: America’s Scariest Charts, Part 4
5. 4/2/21: U.S. Labor Markets: America’s Scariest Charts, Part 5
6. 4/2/21: U.S. Labor Markets: America’s Scariest Charts, Part 6
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