The Recovery Is Not Yet Complete
Although the unemployment rate is at record lows, other measures of worker well-being have not recovered as strongly. Hourly earnings are not yet showing strong pick-up, and with inflation picking up that means that workers have seen no real growth in their wages over the last year.
Other measures of worker well-being in the jobs day numbers continue to remind us that for many workers, this recovery is not yet complete. While many have focused on the prime-age employment-population ratio as a measure of slack in the economy, there are two other measures that capture worker well-being: the long-term unemployment rate and the part time for economic reasons rate. Of course, these measures have improved substantially from their elevated levels during the recession, but while the long-term unemployment rate has reached its pre-recession low, the part time for economic reasons rate has still not fully recovered (despite making much progress during the recovery).
The long-term unemployment rate finally hit its pre-recession low of 0.7% last month after remaining elevated throughout the recovery (it peaked at 4.4% in 2010 – meaning that almost one in 20 people in the labor force were long-term unemployed). But, although the overall unemployment rate is back to its recent series low achieved in 2000, the long-term unemployment rate is almost double what it was back then. Another way to look at this: the long-term unemployed were 19% of all unemployed in May 2018. This group was only 11% of the unemployed, on average, in 2000.
The part-time for economic reasons rate also remains elevated – not just above its 2000 rate but also almost 20% above its pre-recession low. Even worse, while the long-term unemployment rate has been declining, the part-time for economic reasons rate has functionally levelled off over the last eight months at around 3.1%. (It should be noted that the prime-age employment-population ratio has also levelled off over the last four months). It could be that employers have had a structural shift in how much part-time work that they would like to hire, but one would expect a tightening labor market to put pressure on employers to hire workers on full-time. One of the fastest-growing job search terms on Indeed.com is for full-time work, showing that even with the unemployment rate this low, workers are still struggling to find the hours they want.
While many economists have been asking when wage growth will pick up, another question is when will these other measures of labor market well-being finish recovering? On Friday, we’ll be looking to see whether the long-term unemployment rate continues improving, and whether the part time for economic reasons rate and the prime-age employment population ratio start moving in a positive direction after a few months of stalling out.