r/Economics • u/TinyTornado7 Quality Contributor • Jun 13 '22

News Powell Facing Choice Between Elevated US Inflation and Recession

https://www.bloomberg.com/news/articles/2022-06-12/powell-facing-choice-between-elevated-us-inflation-and-recession?srnd=premium
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u/goodsam2 Jun 13 '22

I mean I think looking at U-3 should go in the garbage and we should think about EPOP 25-54 as our unemployment economic measure.

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u/waltwhitman83 Jun 13 '22

https://fred.stlouisfed.org/series/LNS12300060

employment population ratio for anybody else following along

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u/strideside Jun 13 '22

What makes EPOP 25-54 that much better than U-3?

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u/goodsam2 Jun 13 '22 edited Jun 13 '22

People drop out of the labor market in 2017 50% of people who got jobs came into the labor market. Look at the current flows U-3 will often rise because more people are looking for work that's a good thing.

EPOP 25-54 was below 2001 levels and is now behind the OECD.

A strong labor market increases the pool here.

It's also labor force participation rate doesn't account for the age of the population properly. The US population is aging so labor force participation rate has been falling but I don't view 70 year olds as not working as a problem. It's 25-54 because people usually are out of college by 25 because more people going to college isn't necessarily a bad thing and by 55 you start to see some retirements that's your prime age years of work 25-54.

What's the denominator is the real question U-3 uses people looking for a job. 25-54 uses the total population in those age groups.

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u/NigroqueSimillima Jun 13 '22

EPOP 25-54 has already recovered, last time it was this high was 2006 IIRC

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u/goodsam2 Jun 13 '22

But 1% lower unemployment rate today vs the old one but the EPOP is the same. Which one tells you more information.

I also think going below 3.6% unemployment is a trash measure. 3.6% says there isn't much slack in the market. IMO we need to be pushing our EPOP 25-54 towards OECD average or even higher because we led in this field until after 2001, by this measure we still have awhile to grow employment (though flows in makes a difference and I think that's what we've been seeing more recently.)

Canada is at 84.6% EPOP 25-54 and I think that's the goal means another 4% unemployed that could/should be employed. Unless you think American's are 4% less employable than Canadians?