Home > XE Currency Blog > The Atypical Structure of the Current US Employment Situation

AD

XE Currency Blog

Topics7265 Posts7310
By HaleStewart July 2, 2014 12:29 pm
  • XE Contributor
HaleStewart's picture
HaleStewart Posts: 792
The Atypical Structure of the Current US Employment Situation

     Tomorrow we'll have the latest in our monthly installment of, "let's get realy excited about an economic statistic that will go through so many revisions as to make the initial release more or less meaningless."  That being said, lt's take a look at the current US employment situation by looking at various statistical points.

Let's start by looking at the U3 unemployment rate, which is the measure most people think of when they think about unemployment, and U6, which includes those who are maginally attached to the labor force and those who are working part-time for economic reasons.  The U3 rate rose to the second highest level in the post WWII era at the end of the "great recession."  While U6 has not been kept for nearly as long, it too rose to its highest level since the early 1990s.  While the U3 rate has declined to levels that are appoaching more "normal" levels, the U6 number tells us that unemployment is still very high.

Let's look at both of these data sets frequency distribution.

A frequency distribution chart simply shows how many times specific data points have been observed over a period of time.  Here, we're looking at the number of times certain levels of unemployment have been reported since 1948.  This graph skews right, meaning that unlike a bell curve where most of the readings occur in the middle of the graph, here most of the readings occur to the left.  That means our current level of unemployment is more abnormal.  In addition, the average unemployment rate since 1948 is 5.8% while the median rate is 5.6%.

     Above is the frequency distribution chart for the U6 rate since 1994.  Again, it skews right meaning the current reading of 12.6 is atypical.  However, the average data point is higher coming in at 10.7 while the median reading is 9.6.  But, again, the current reading is still far higher than both.

While it is perhaps a fairly obvious point to make, the above data tell us the current situation is atypical by historical standards.

     The chart above shows the percentage of the total unemployed according to the amount of time they've been unemployed.  This is a really interesting chart, because it shows that for most of the time since WWII, the unemployed were mostly comprised of those unemployed up to 14 weeks (the red and green lines).  In contrast, the current employment situation is characterized by people who have been unemployed for more than 27 weeks.  This number is very high by historical standards, and while it is decreasing, it really hasn't decreased that much.  It's almost as though a certain percentage of the labor force were simply cut out of the employment picture.

Along the same vein is the chart above, which shows the average (blue line) and median (red line) length of unemployment.  Both of these numbers simply confirm that a very large number of people have been unemployed for a long time. 

     All of the above graphs make a remarkably unsurprising point: the US employment situation is currently very abnormal by historical standards.

Hale Stewart is a former bond broker who has been writing about economics and financial markets since 2006 on the Bonddad Blog.  He is also a tax attorney with a domestic and international practice while also forming and managing captive insurance companies for US companies.   You can follow him on twitter at:@captivelawyer 

 

 

Paste link in email or IM