Over the past several years, the unemployment rate (currently at 6.3%) has been the key statistic to the health of the labor market. However, there are several other statistics measured by the government and maintained by the Federal Reserve that are more beneficial.
While the unemployment rate is popular, I find the U-6 rate to be more helpful when determining the health of the job market. The U-6 includes unemployed persons who have stopped looking for work and part-time workers who want to be full time employed. This is important to investors because the U-6 also represents a group who are likely under consuming in the economy. At some point, when the headline unemployment rate nears its long term potential (5 to 5.5%), I expect the U-6 rate to begin falling at an accelerated pace.
Despite an improving labor market, fewer people are participating. The labor force participation rate has picked up some mainstream coverage of the past few years, yet it still gets overlooked.
To illustrate this changing demographic, we should examine the number of adults no longer in the labor force.
To put the labor force participation problem into perspective, I wanted to take the year over year increase in number of jobs (non farm payrolls) and compare it to the year over year growth in adults not in the labor force.
This is particularly concerning to me. In the current era, an individual not working is in some way shape or form dependent on an individual that is employed. Whether it is a retiree on Social Security and Medicare or a college student living off of their parents, there are varying degrees of dependents among the adults not in the labor force. If this trend continues, the imbalances it creates could cause some difficulties in our economy.
When it comes to education, the gap between those with high school educations and some college has nearly closed. In short, those who have high school degrees are almost equally as employable as someone who starts college, but does not finish. This changes drastically among those who have bachelor's degrees. In short, it pay to finish college.
Another way to illustrate this is to chart the differences between each level of education. I did this for no high school to high school, high school to some college, and some college to college. Additionally, the purple line represents the difference in unemployment between those with high school and college educations.
Finally, I wanted to look at how my generation, the Millennials were performing in the job market thus far. Millennials continue to suffer the highest levels of unemployment as rates among ages 20 to 34 are much higher than those ages 35 and over (which in this case, have flattened to nearly identical).
I also wanted to include additional charts of statistics I've been following, but am offering no commentary of. I am more than happy to discuss these in the comments.
NOTE: All statistics for this article were retrieved by the Federal Reserve's Economic database and are seasonally adjusted statistics.