3 Problems with the NY Times's Take on Americans Without Jobs

by: Mark J. Perry

[Update below] Paul Krugman in Monday's NY Times:

The official unemployment rate of 5.1%, though rising, is still fairly low by historical standards. Yet economic attitudes are worse now than they were in 1992, when the average unemployment rate was 7.5%. Why are we feeling so down?
Our bleakness partly reflects the fact that most Americans are doing considerably worse than the usual economic measures let on. The official unemployment rate may be relatively low — but the percentage of prime-working-age Americans without jobs, which isn’t the same thing, is historically high.

Don Boudreaux responds:

Krugman is simply wrong to assert that the percentage of Americans of prime-working-age without jobs is "historically high" -- and misleading to suggest that, whatever this percentage might be today, that it is evidence of some major economy malady.

Comment: The labor-force participation rate for prime-working-age Americans has been relatively flat at about 83% for the last 20 years (see chart above, data available here), and is actually slightly higher so far this year at 83.10% (average from Jan-March 2008) than in any full year since 2002 (83.3%).

Don is correct - what is Krugman talking about? The percentage of prime-working-age Americans without jobs is close to an historical low, not an historical high!

Update:

According to a comment on this earlier CD post (above) about Krugman and Don Boudreaux's response, Krugman was referring to the top chart above in the April 12 NY Times article by Floyd Norris, "Many More Are Jobless Than Are Unemployed," which claims that "Men in the prime of their working lives are now less likely to have jobs than they were during all but one recession of the last 60 years. Most of them do not qualify as unemployed, but they are nonetheless without jobs."

Norris uses a "jobless rate, or "proportion of people without jobs," calculated as: 1 - Employment/Population Ratio. Using BLS data for men, women and all workers aged 25-54, the jobless rates are calculated and displayed in the bottom chart above.

If Krugman did refer to that article as his source, there are a few problems with both NY Times articles:

1. Krugman says "the percentage of prime-working-age Americans without jobs is historically high," which is clearly not accurate. It would be more accurate to say that it is close to being historically low (see middle brown line above for "All Workers"). Krugman may have used Norris' data, but then mistakenly discussed the jobless rate for all workers aged 25-54 being high, when he should have been discussing men only.

2. When the data are displayed over a range from 0% to 70% (bottom graph) instead of a more narrow range from 2-16%, it's much clearer that the jobless rate for men aged 25-54 has been relatively stable at about 12% for the last 25 years. Further, the jobless rate for all workers aged 25-54 has been relatively stable at about 20% for the last 25 years, and the jobless rate for women has been stable at about 28% for the last 20 years, and is close to an historical low.

3. The employment/population can be decreasing (and the jobless rate increasing) for demographic reasons like rising life expectancy that are completely unrelated to labor market conditions, or the state of the economy. For example, the employment/population peaked at 96.4% in 1953 (jobless rate of 3.6%) and is now 86.2% (jobless rate of 13.8%), mainly because life expectancy has increased by almost ten years since 1953 (68.8 years to about 78.2 years). The increase in life expectancy means that there are now millions more Americans in retirement than ever before, which decreases the employment/population ratio and increases the jobless rate for demographic reasons, NOT job market weakness.

In other words, the "jobless rate" used by Norris in the NY Times includes retired Americans, who are NOT looking for employment. Likewise, Krugman's "percentage of prime-working-age Americans without jobs" includes millions and millions of retired Americans who do NOT want a job!