– by New Deal democrat
In my dialogue yesterday of why the Sahm Rule may be giving a false sign at current, I famous that “in addition to the 1980-81 double-dip period, significantly the only other time [a big increase in new entrants into the labor force leading up to a recession] even came close was 1968-69, when the Baby Boom was entering the labor force in droves.”
Let’s discover that extra in the present day, and why it’s related to our present state of affairs.
Between 1946 and 1963, 76 million Boomers had been born to a inhabitants of 190 million on the finish of the interval. Against this, for instance, 73 million Millennials had been born between 1981 and 1996 to a inhabitants that ended the interval at 270 million. In different phrases, Millennials solely accounted for 27% of the overall inhabitants at the moment, whereas on the finish of 1963 Boomers accounted for a full 40% of the whole US inhabitants!
Right here’s what occurred when that massive era entered the labor drive, together with for the primary time most younger ladies.
Most notably, because the prime age inhabitants surged, so on a secular foundation did the unemployment fee. Because the surge ended, the unemployment fee declined on a long run foundation as nicely:
With so many new entrants to the labor drive, plenty of strain was place on wages as nicely. When the surge subsided, actual wages started to extend once more:
Together with the surge in inhabitants, the labor drive participation stage surged as nicely, and the 2 step by step abated collectively additionally:
Over the long run, the civilian labor drive has elevated by a median of roughly 1% yearly. So beneath let’s examine the YoY% enhance within the civilian labor drive minus 1%, with the unemployment fee:
Even there, with appreciable noise, we will see that the outsized enhance within the labor drive that started because the Boomers entered it within the Nineteen Sixties and ended within the late Nineties corresponded to a secular enhance after which lower within the unemployment fee with a delay of a number of years.
I wish to emphasize that I’m hardly advocating for a monocausal view of the economic system or unemployment fee. Commerce, tax, and enterprise insurance policies mattered, as most definitely did the OPEC oil shocks of the Seventies and their collapse in 1986. However the correlation is clearly there.
Now let’s take this identical graph and apply it to the post-pandemic period. Observe that that is utilizing the Census Bureau’s inhabitants numbers, moderately than the CBO’s a lot bigger numbers:
Even utilizing the Census Bureau’s numbers, the rise within the labor drive has equaled that of the Nineteen Sixties and Nineteen Eighties. If we had been to make use of the CBO’s numbers as a substitute, it will look far more just like the Seventies.
In brief, the one different time prior to now 75 years after we had a significant surge in progress within the labor drive, we additionally had a normal uptrend within the unemployment fee on a secular foundation.
Lastly, this secular uptrend within the unemployment fee included durations of very strong actual GDP progress, often over 5% YoY:
So historical past does assist the speculation that we will have an increasing economic system even with a gradual uptrend within the unemployment fee attributable to labor drive will increase.
“One more time: bifurcation in the jobs report, as Establishment Survey shows continued jobs growth, while Household Survey comes close to triggering the ‘Sahm Rule’” Indignant Bear by New Deal democrat
“Just Some Census Stats,” Indignant Bear
