Economy: The hole in US employment

By Colin Twiggs
February 11th, 2014 10:30 p.m. ET (2:30 p:m AEDT)

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US employment is topical after two months of poor jobs figures. Employers added 113,000 new jobs, against an expected 185,000, last month and a low 75,000 in December. Rather than focus on monthly data, let's take a long-term view.

The number of full-time employed as a percentage of total population [red line below] fell dramatically during the GFC, with about 1 in 10 employees losing their jobs. Since then, roughly 1 out of 4 full-time jobs lost has been restored, while the other 3 are still missing (population growth fell from 1.0% to around 0.7% post-GFC, limiting the distortion).

Comparing employment levels to the 1980s is little consolation because this is skewed by the rising participation rate of women in the work-force. The pink line below shows how the number of women employed grew from under 14% of total population in the late 1960s to more than 22% prior to the GFC. The effect on total employment [green line] was dramatic, while employment of men [blue line] oscillated between 24% and 26%.

Part-time employment — the difference between total employment [green] and full-time employed [red] below — has leveled off since 2000 at roughly 6% of the total population. So loss of full-time positions has not been compensated by a rise in casual work. Both have been affected.

The "good news" is that a soft labor market will lead to low wages growth for a considerable period, boosting corporate profits.

The bad news is that low employment levels will depress sales growth [green line]....

And discourage new investment.....

Which would harm GDP growth.

Whether the succeeding generation is to be more virtuous than their predecessors, I cannot say ; but I am sure they will have more worldly wisdom, and enough, I hope, to know that honesty is the first chapter in the book of wisdom.

~ Thomas Jefferson: Letter to Nathaniel Macon January 12th, 1819.