Earlier this month, Mary Daly and Bart Hobijn of the Federal Reserve Bank of San Francisco published a paper examining the unemployment situation. It was not quite as gloomy as one might expect.
After looking at 30 economic indicators, they argue that six are most important to predicting whether the labor market is healing: The insured unemployment rate, initial claims for unemployment benefits, capacity utilization, the jobs gap, the Institute for Supply Management (ISM) manufacturing index, and private-payroll employment growth.
The “jobs gap” comes from the Conference Board and measures the percentage of households that say jobs are easy to get vs. those that say they are difficult to land.
In general, according to Daly and Hobijn, the six are doing well and might point to better conditions ahead.
The pace of labor market improvement has been modest since the end of the recession, and many indicators have not yet returned to their pre-recession levels. Still, the improvements are visible in a broad set of indicators. The question then is whether we can expect these improvements to continue and at what pace.
Now I will add the caveats. First, the research was done before the costly government shutdown forced by tea-party Republicans in the House of Representatives. This will be a malign gift that keeps on giving, until the next hostage-taking early in 2014.
Second, even if the “modest” jobs recovery were to continue, it would be years before it made up the gap caused by the Great Recession. Meanwhile, millions will be left behind. Millions more will be trapped in lower-paying jobs.
Finally, we’re down to 2.9 job-seekers chasing every available job — and this gap is true in every industry — and it is still a very sick labor market. I hope the cautious optimism in this paper proves true. I fear it will not.
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Today’s Econ Haiku:
The Palmetto State
Will wilt under climate change
Memo to Boeing