Thursday, May 8, 2014

The Relatively Jobless Recovery

Now that the unemployment rate in the United States has finally fallen below the Fed's formerly magic number of 6.5 percent, I thought that it would be prudent to look at the jobs picture from a different perspective and compare America's employment progress to those of its OECD peers.  The OECD's quarterly employment situation analysis for the fourth quarter of 2013 will provide us with the data for this posting.  Please note that employment data reflects the percentage of the total working age population, defined as those potential workers between the ages of 15 and 64 years, in each nation that is actually employed.

In the fourth quarter of 2013, the OECD area employment rate rose by 0.1 percentage point to 65.3 percent, the third quarter in a row with an increase.  While this is wonderful news, the employment rate is still 1.2 percentage points below the rate recorded in the second quarter of 2008, just as the Great Recession was entrenching itself in the world's economy.

Here is a graph showing the employment rates for four key regions/countries:

Compared to the fourth quarter of 2012, the highest annual increases in employment among OECD nations was observed in New Zealand which was up 2.6 percentage points to 73.8 percent followed by Ireland which was up 2.1 percentage points to 61.3 percent and Hungary which was up 1.9 percentage points to 59.4 percent.  The highest annual employment decreases were found in Greece which was down 1.3 percentage points to 49.1 percent and way down from 62 percent in Q2 2008, Italy which was down 0.9 percentage points to 55.5 percent, the Netherlands which was also down 0.9 percentage points to 74 percent and Slovenia which was also down 0.9 percentage points to 63.2 percent.

Let's look at a few nations where most of my readers reside, comparing the level in the fourth quarter of 2013 to the fourth quarter of 2012 and the second quarter of 2008:

Canada: 72.4%(Q4 2013) 72.5%(Q4 2012) 73.7%(Q2 2008)

U.S.: 67.4%(Q4 2013) 67.4%(Q4 2012) 71.2%(Q2 2008)

U.K.: 71.2%(Q4 2013) 70.6%(Q4 2012) 71.8%(Q2 2008)

Australia: 71.7%(Q4 2013) 72.3%(Q4 2012) 73.3%(Q2 2008)

Germany: 73.5%(Q4 2013) 73.1%(Q4 2012) 69.8%(Q2 2008)

Japan: 72.2%(Q4 2013) 70.8%(Q4 2012) 70.9%(Q2 2008)

Of the 34 nations in the OECD, the employment rate in the fourth quarter of 2013 was up compared to the second quarter of 2008 in 13 nations and down in 21 nations, hardly a stellar performance.  In the cases of the PIIGS nations, the employment rate was lower in 2013 than in 2008 in all five nations; down by 6.5 percentage points in Portugal, 7 percentage points in Ireland, 3.3 percentage points in Italy, 12.9 percentage points in Greece and 10.3 percentage points in Spain.  Again, while not surprising, hardly a stellar performance.

Let's look at the employment rate as a percentage of the working age population by age for Canada, the United States and the United Kingdom over the past year since the governments of each of these three countries love to brag about the performance of their economies.  Please note that young workers fall between the ages of 15 and 24, prime-age workers fall between the ages of 25 and 54 and older workers fall between the ages of 55 and 64:

1.) Canada: The employment rate for young workers has dropped over the year from 55.1 percent to 54.8 percent, the employment rate for prime-age workers has remained level over the year at 81.5 percent and the employment rate for older workers dropped from 60.8 percent to 60.2 percent.

2.) United States: The employment rate for young workers rose over the year from 45.9 percent to 47 percent, the employment rate for prime-age workers rose slightly from 75.8 percent to 76 percent and the employment rate for older workers fell from 61.2 percent to 60.6 percent.

3.) United Kingdom: The employment rate for young workers rose very slightly over the year from 46.8 percent to 46.9 percent, the employment rate for prime age workers rose slightly from 80.7 to 81.2 percent and the employment rate for older workers rose from 58.8 percent to 60.6 percent.

While the unemployment rate has improved in many of the more developed OECD nations, it is interesting to note that employment levels have not improved since the middle of the Great Recession in the majority of the 34 nations.  In 21 nations including Canada, the United States, Australia and the United Kingdom, the economies are simply not creating enough jobs to keep up with the growth in the working age population.  Despite the "heroic" attempts of the central bankers in each of these nations, the "recovery" has been relatively jobless and not much of a "recovery".

1 comment:

  1. The issue of creating jobs is now front and center in regard to setting monetary policy. Sadly the people in Washington remain clueless in understanding how "real" jobs are created; Creating jobs in a mature market should be required to pass a certain "taste" test. It should be pointed out that while America is creating jobs it is costing a huge amount. I'm referring to the massive government deficit which I feel is the fuel driving our still rather weak growth. Is it sustainable, and just as important are these the right kind of jobs and will they last? When a job that falls outside the description of government worker fails to make economic sense it becomes a form of working welfare with the taxpayer picking up the tab. We as a country and as a society have paid dearly for each unsustainable job created through government incentives and partnerships, because of the nature of many of these jobs we might even call them temporary. More on this important distinction in the article below.