Thursday , September 23 2021
Home / Jason Furman, Wilson Powell III

Jason Furman, Wilson Powell III



Articles by Jason Furman, Wilson Powell III

Delta slows US labor market recovery in August but effect is much smaller than first wave

20 days ago

US labor markets continued to make progress in August, but the pace of the progress was slower than in recent months, and the state of the labor market remains uncertain because of conflicting signals from different measures. The generally more reliable employer survey showed that the US economy added 235,000 jobs in August, considerably slower than the 1,008,000 average pace in June and July and well below the 487,000 average pace in the first five months of the year. Job growth at this pace continued to narrow the jobs shortfall but still leaves the economy 7.2 million jobs short of pre-pandemic projections. At the same time, the unemployment rate fell by 0.2 percentage point, the same pace of reduction as in the first seven months of the year, while labor force participation was flat,

Read More »

Strong growth in US jobs, but labor market remains well short of normal

August 6, 2021

The US economy added 943,000 jobs in July, a noticeable pickup from the average of 563,000 jobs over the previous six months. This still leaves the economy 7.6 million jobs short of pre-pandemic projections. At the same time the unemployment rate fell to 5.4 percent (with even larger reductions in the Black and Hispanic/Latino unemployment rates) while labor force participation also improved. A range of other indicators also improved sharply including reductions in long-term unemployment and broader measures of labor underutilization such as the “realistic” unemployment rate (which adjusts for the unusually large reduction in labor force participation).
While the economy is still missing millions of jobs, the overall data is more consistent with a tight labor market in which demand for

Read More »

US workers are getting large raises, but not enough to keep up with higher inflation

July 30, 2021

Over the last three months nominal compensation for all civilian workers rose at a 2.8 percent annual rate—leaving it at its pre-pandemic trend according to newly released Employment Cost Index (ECI) data from the Bureau of Labor Statistics (BLS). This is notable because the very high unemployment rate over the last year would have been expected to exert downward pressure on nominal compensation, as it did during the financial crisis. Instead, the rapid pace of compensation growth is consistent with other indicators, especially job openings and quits, which suggest the labor market is considerably tighter than it would seem given the high unemployment rate and low labor force participation rate.
Prices, however, have risen even more rapidly than wages, and so inflation-adjusted

Read More »

Pace of US job growth picks up as signs point to tight labor market

July 2, 2021

The US economy added 850,000 jobs in June, a noticeable pickup from the average of 546,000 jobs over the previous three months and much faster than the pace in the three months before that. This still leaves the economy 9 million jobs short of its trend. At the same time the unemployment rate rose to 5.9 percent while labor force participation was unchanged. The “realistic” unemployment rate (which adjusts for the unusually large reduction in labor force participation) was flat.
While the economy is still missing millions of jobs, numerous other signs were more characteristic of a very tight labor market in which demand for jobs was plentiful but supply remained constrained. Job openings and quits have both been at record levels, and in June there were 0.9 job seekers for every job

Read More »

US workers are quitting jobs at historic rates, and many unemployed are not coming back despite record job openings

June 28, 2021

The US labor market has added an average of 541,000 jobs per month over the last three months, a pace that would be rapid in normal times but is slower than expected given the 10 million jobs shortfall from the pre-pandemic trend and the record number of job openings. The main reason for the lack of much faster job growth has been the unusually low number of people transitioning from unemployment to employment—a flow that should be at or near record levels given the overall labor market. Workers are also quitting jobs at record rates—but, as explained below, this is almost exactly what one would have predicted given the large number of job openings.
Transitions from unemployment to employment have likely been reduced by several factors, many of which interact with each other, including

Read More »

US labor market heated up in May as jobs grew and wages soared

June 4, 2021

The US economy added 559,000 jobs in May, similar to the average of 533,000 jobs over the previous three months and much faster than the pace in the three months before that. This still leaves the economy 10 million jobs short of its trend. At the same time the unemployment rate fell to 5.8 percent, but labor force participation also fell slightly and is lower than it was last summer. The “realistic” unemployment rate (which adjusts for the unusually large reduction in labor force participation) also improved.
Although employment remained well short of normal, numerous other signs were more characteristic of a very tight labor market. Job openings are at record levels and in March the quits rate was at a historic high. There were 1.0 job seekers for every vacancy, still somewhat less tight

Read More »

Follow the trend: US demand is back, supply is lagging, but both are likely to grow in coming months

June 2, 2021

By April 2021 robust consumer spending and strong investment by businesses and homebuilders in the United States had driven total demand nearly back to its pre-pandemic trend. At the same time, employment was about 7 percent below its trend (or 10 million workers short). Even though hours and productivity of employed workers were up, that was still not enough to enable the United States to produce as much as the economy was demanding, with the difference made up by increases in net imports and reductions in inventories.
April 2021 was an eternity ago in COVID-19 time: Cases were rising in the United States through mid-April and deaths were plateauing. Since their April highs, cases have fallen by 70 percent and deaths by 40 percent.
Since April, both demand and supply have likely increased

Read More »

The US labor market is running hot…or not?

May 7, 2021

The United States added 266,000 jobs in April while the unemployment rate rose slightly to 6.1 percent with the realistic unemployment rate, which adjusts for misclassification and the unusual decline in labor force participation, falling to 7.6 percent as more people entered the labor market.
The economy was still 10 million jobs short of its pre-pandemic trend in April with the employment rate down 3.2 percentage points since February 2020. Even though the pace of hiring was disappointing in April, the labor market has still been behaving as if there was relatively little or even no slack left: Openings were at record levels, quits were near record levels in February, composition-adjusted wages were growing at the same pace they did in the relatively tight 2019 labor market with the

Read More »

Rapid progress in US labor market but still a long way to go

April 2, 2021

The labor market improvement accelerated in March 2021 as employers added 916,000 jobs, a very rapid pace but one that will need to be sustained in order to repair the economy. Overall the economy was 10 million jobs below its pre-pandemic trend, and if the March pace of jobs gains is sustained, it will take another 14 months to close the jobs gap.
At the same time the official unemployment rate fell to 6.0 percent while the participation rate edged up by 0.1 percentage point. The unemployment rate has been falling steadily, even while the labor force participation has remained at a relatively stable, but low, level since last summer.
Our estimate of the realistic unemployment rate, which adjusts for a misclassification error and the unusually large withdrawal of millions of people from

Read More »

US unemployment remains worse than it seems as millions still out of the labor force

March 5, 2021

The labor market improved in February 2021 as employers added 379,000 jobs, leaving the economy at 11.9 million jobs below its pre-pandemic trend. At the same time the unemployment rate fell to 6.2 percent. Throughout the pandemic the official unemployment rate has been kept down by a misclassification error and the unusually large withdrawal of millions of people from the workforce. Our estimate of the realistic unemployment rate for February was 8.2 percent, a concept that adjusts for the unusually large decline in participation as well as changes in demography and is designed to be historically comparable to the official unemployment rate, which reached a maximum of 10.0 percent in the 2007–09 financial crisis. Another concept, the fixed participation rate unemployment rate, cited by

Read More »

Unemployment continues to fall but workers still not returning to the labor force

February 5, 2021

The labor market was essentially unchanged at the start of 2021 as employers added 49,000 jobs in January. Overall, the economy is 11.6 million jobs below its pre-pandemic trend with the unemployment rate elevated and the employment rate having fallen even more as millions of people have left the labor force. Unusually, while the unemployment rate has fallen steadily from 11.1 percent in June 2020 to 6.3 percent this past month, this has not been accompanied by a return of people to the workforce—as the labor force participation rate has been essentially unchanged at 61.4 percent for the last seven months. As a result the realistic unemployment rate, which is more comparable to historical numbers for the unemployment rate, stood at a very high 8.3 percent in January.
The realistic and full

Read More »

What the US GDP data tell us about 2020

January 28, 2021

The US economy contracted 3.5 percent on an annual basis in 2020, the largest contraction for any full year since the demobilization from World War II in 1946. The large decline in annual GDP reflects the very low amount of economic activity that took place in the second quarter. With the relatively rapid rebound in the second half of the year, the economy was down 2.5 percent from the fourth quarter of 2019 to the fourth quarter of 2020, among the worst four-quarter contractions in the postwar period but somewhat smaller than the worst period in the global financial crisis.
In contrast, disposable personal income (which subtracts taxes paid and adds government benefits received), experienced the fastest annual growth since 1984, fueled by supplements to unemployment insurance, stimulus

Read More »

Progress on US jobs reverses in December as labor market remains in bad shape

January 8, 2021

The US economy lost 9 million jobs in 2020, the second worst year since 1940 for job loss on a percentage basis. Overall, the unemployment rate averaged 8.1 percent, the seventh worst year since 1948. That the coronavirus pandemic resulted in merely a bad recession instead of an unprecedented depression, as many feared in the spring, is in large part due to the massive fiscal and monetary policy response to the crisis.
As 2020 ended, continued progress on jobs reversed as the economy lost 140,000 jobs in December—even as the economy remains 11.5 million jobs short of its prepandemic trend. More concerning, some of the underlying aspects of the labor market remained bad:
The full recall unemployment rate has risen since the summer and was 7.0 percent in December. This is a construct that

Read More »

US unemployment situation worsens in November

December 4, 2020

The US economy added 245,000 jobs in November, continuing the slower pace seen in recent months—even as the economy remains 10 million jobs short of its February peak and 11 million short of trend. And while the official unemployment fell from 6.9 percent in October to 6.7 percent in November, the underlying employment situation deteriorated as the labor force participation rate and employment-population ratio both fell.
As in prior months of the pandemic, the official unemployment rate continues to understate the unemployment rate from a historically-comparable perspective because it counts an extra 629,000 people who were “not at work for other reasons” as employed (the so-called “misclassification error”) and also because 4.1 million workers have left the labor force since February, 2.5

Read More »

US labor market improves, but further progress will be harder

November 6, 2020

The US economy added 638,000 jobs in October, a substantial increase but continuing the slower pace seen in recent months—even as the economy remains 10 million jobs short of its February peak. At the same time, the number of workers who reported being on temporary layoff fell by another 1.4 million, but with only 2.4 million excess temporarily laid-off workers, there is little additional room for progress here. At the same time the number of workers who were unemployed for other reasons was essentially flat, suggesting a substantial acceleration of labor market progress could be more challenging.
These job gains led the official unemployment rate to fall from 7.9 percent in September to 6.9 percent in October, faster than the decline in September. As in prior months of the pandemic, the

Read More »

Challenge facing US labor market worsened in September even as the headline numbers improved

October 2, 2020

The US economy added 661,000 jobs in September, a substantial increase but much slower than the increases in recent months. At the same time, the number of workers who reported being on temporary layoff fell by 1.5 million, while the number of workers who were unemployed for other reasons rose. This will increase the challenge of future labor market recovery.
These job gains led the official unemployment rate to fall from 8.4 percent in August to 7.9 percent in September. As in prior months of the pandemic, the official unemployment rate continues to understate the unemployment rate from a historically-comparable perspective because it counts an extra 773,000 people who were “not at work for other reasons” as employed (the so-called “misclassification error”) and also because 4.4 million

Read More »

US unemployment rate falls in August as many workers on temporary layoffs return to work

September 4, 2020

The official unemployment rate fell to 8.4 percent in August from 10.2 in July, marking the first time the unemployment rate has been below 10 percent since March. As in prior months of the pandemic, the official unemployment rate continues to understate the unemployment rate from a historically-comparable perspective because it counts an extra 1.1 million people who were "not at work for other reasons" as employed (the so-called "misclassification error") and also because 3.7 million people have left the labor force since February, more than would be expected even given this large increase in unemployment. Adjusting for these factors our "realistic unemployment rate" was 9.9 percent in August, falling faster than the official unemployment rate as the misclassification error continued to

Read More »

US unemployment rate falls again but still little progress for people who have not been temporarily furloughed from their jobs

August 7, 2020

The official unemployment rate continued to fall in July from 11.1 in June to 10.2, a slowdown from the improvement in May and June. As in prior months of the pandemic, the official unemployment rate continues to understate the unemployment rate from a historically-comparable perspective because it counts an extra 1.4 million people who were "not at work for other reasons" as employed (the so-called "misclassification error") and also because 4.7 million people have left the labor force since February, more than would be expected even given this large increase in unemployment. Adjusting for these factors our "realistic unemployment rate" was 12.0 percent in July, falling slightly faster than the official unemployment rate. The small reduction in this gap reflects continued improvement in

Read More »

US unemployment rate falls again but little progress after accounting for recalls from temporary layoffs

July 2, 2020

The official unemployment rate continued to fall in June from 13.3 in May to 11.1. As in prior months of the pandemic, the official unemployment rate continues to understate the unemployment rate from a historically-comparable perspective because it counts an extra 2.0 million people who were "not at work for other reasons" as employed (the so-called "misclassification error") and also because 4.6 million people have left the labor force since February, more than would be expected even conditional on this large increase in unemployment. Adjusting for these factors our "realistic unemployment rate" was 13.0 percent in June, falling almost twice as fast as the official unemployment rate. As some states slow or partially reverse their reopening plans as virus cases rise, the ability to

Read More »

The US unemployment rate is higher than it looks—and is still high if all furloughed workers returned

June 5, 2020

The official unemployment rate rose from 3.5 percent in February 2020 to 13.3 percent in May (down from its value in April). Even this very large official increase understates the increase in the unemployment rate from a historically-comparable perspective because it counts an extra 4.9 million people who were "not at work for other reasons" as employed and also because 6.3 million people have left the labor force since February, more than would be expected even conditional on this large increase in unemployment. Adjusting for these factors our "realistic unemployment rate" was 17.1 percent in May, down from the April value but still higher than any other unemployment rate in over 70 years.
In total, an additional 14.5 million of the unemployed reported being on temporary layoff, many of

Read More »

Why Have Employment Rates in the United States Lagged Other Countries?

June 6, 2018

From 2007 to 2017 the fraction of Americans employed fell by 2.9 percentage points. As we discussed in a previous blog post coauthored with Harris Eppsteiner, the aging population has been driving the decline in the US employment-population ratio, or employment rate. (The employment-population ratio, or the employment rate, is the fraction of the overall population working, and as such it reflects a combination of the labor force participation rate and the unemployment rate.)
In contrast, employment rates actually rose in 13 of 29 advanced economies from 2007 to 2017, even though they also faced a similar headwind of an aging population. Moreover, after adjusting for changes in the age-sex structure within each country, employment rates rose in 21 of 29 advanced economies during this

Read More »