The Department of Labor has issued its monthly employment report and the item that will attract the most attention is that the unemployment rate marginally increased to 7.3 percent.
That number is worthy of some attention, but I think it distracts attention from a far more important set of data. What we should be more worried about is the overall supply of employed workers.
I don’t want to sound like a boring economist (is there any other kind?), but our economic well being is a function of what we produce, and and what we produce is a function of the amount of labor and capital that is being productively utilized. We economists use jargon about “factors of production,” but what we’re really trying to say is that our living standards depend on good jobs and wise investment.
Which is why the most depressing bit of data from the Labor Department isn’t the unemployment rate. We should be far more worried about the employment-population ratio.
Here’s a chart based on DOL data showing the percent of the working-age population that is employed (click here to see the Labor Department’s explanation of this variable). As you can see, that key number used to be close to 63 percent. Now it’s down close to 58 percent.
To be fair, this isn’t all Obama’s fault. Not even close.
The big drop occurred at the end of the Bush years. Some of that drop was cyclical, caused by the recession. And some of it was presumably the cumulative impact of Bush’s big-government policies.
But what’s noteworthy is that the recession has been over since mid-2009 and the employment-population ratio hasn’t improved. And that’s something that we can blame in part on Obama.
It’s not just cranky libertarians who worry about this trend in the employment data.