Employment: 5, 10, and 20 Years Ago

Posted by Brad McMillan, CFA, CAIA, MAI

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This entry was posted on Apr 15, 2015 2:43:00 PM

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employmentGiven some of the comparisons I’ve made lately between the 1990s, 2000s, and today, I thought it would be enlightening to look at various data points from different time periods to see how they stack up. After starting to compile the information, though, I realized that there are a lot of interesting comparisons to be drawn, enough to make this a series.

For this first installment, let’s take a look at employment stats, which I pulled from Haver Analytics.

March/Q1

2015

2010

2005

2000

1995

1990

Monthly job gains (3-month moving average)

197

42

193

276

250

266

Annual job gains

3,169

−3,508

2,069

3,216

3,826

2,017

Average weekly hours

33.7

33.2

33.7

34.4

34.4

34.4

Unemployment rate

5.5

9.9

5.2

4.0

5.4

5.2

Underemployment rate

10.9

17.1

9.1

7.1

9.9

N/A

Median duration of unemployment

12.2

20.04

9.3

6.0

8.3

5.1

Real hourly earnings

9.05

8.87

8.47

8.25

7.77

7.96

Job openings (%)

3.5

2.0

2.8

3.6 (Dec.)

 

 

Voluntary quits

1.9

1.4

2.1

2.3 (Dec.)

 

 

Available labor supply as % of labor force

9.5

13.8

8.6

7.3

9.8

 

Looking at today’s employment data in the context of the past 25 years, a couple of points stand out.

Many current stats are comparable to those we saw in the good times. For example:

  • Annual job gains are at one of their highest levels ever, comparable with the levels of 2000.
  • The unemployment rate is comparable to that of 1995 and 2005.
  • Job openings as a percentage are also comparable with 2000, and higher than any point since.
  • Available labor as a percentage of the labor force is in line with 1995.

On the other hand, this kind of comparison clearly shows the many ways in which the current recovery is falling short. For instance:

  • The unemployment rate, despite all the good news just mentioned, remains well above any level in the past 25 years, with the exception of the immediate aftermath of the last crisis.
  • The median duration of unemployment has exactly the same problem.
  • Voluntary quits, which are a strong indicator of worker confidence, have improved substantially but are still below typical healthy levels.

All in all, these figures suggest a rapidly normalizing—but not yet normal—labor market. The problems lie with the large numbers of both long-term unemployed and people who are not fully employed. The gap between these indicators and the high level of job openings suggests the issue is not mainly one of no jobs—the jobs are there—but of matching workers with those jobs.

What does this mean for the future?

Probably relatively slow gains. As workers with job-matched skills are absorbed, the remaining unemployed workers will become even more mismatched—and less likely to get a job. The fact that we’re seeing healthy numbers for many metrics suggests that point is approaching.

Although the economy is regaining its health, the problem will continue to get worse for a large subset of workers. This is the major employment challenge we face right now.

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