Monday, September 24, 2012

Employment-Population ratio, how useful is it?

Several authors, in particular Brad DeLong have correctly pointed out (here, for example) that the employment-population ratio provides a good picture of the problems in the labor market. Krugman and I (see here) also used the same measure to show why the improvements in the employment situation in the current recovery have been small so far. But recently I've been poking the data, and found that there is more to it than meets the eye. Below a longer series than often presented.
Note that there is an increasing trend from the 1970s to the 1980s, which seems to revert in the last decade. The ratio was about 56% before the mid-1970s, and about 61% ever since. Why is that so, you ask? The graph below shows the evolution of male and female employment to population ratios.
By disaggregating by gender, we find out that the constant trend from the 1950s to the 1970s was associated to a decline in male employment to population ratio from about 80% to around 70%, compensated by an increase in women's employment to population ratio from about 30% to 40%. The increase in the global ratio was caused by a stabilization of the male ratio around 70% and a further increase in the female one to more than 50%. The terrible conditions in the 2000s have been associated, not only with a significant decrease in the male rate since 2007 (it was still around 70% in 2006), but also by a negative trend in the female ratio that peaked at 57.5 in 2000. The fact that both ratios are falling is a new phenomenon.

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