Comparing Half-time in America to Morning in America

The Bureau of Labor Statistics just released another solid jobs report, for February.  The labor market is recovering from the recession, but payroll employment is growing much more slowly than it was in early 1984.  Moreover, the unemployment rate remains stubbornly high relative to 1984 and previous recoveries.

Payroll employment grew by:

  • 926,000 jobs in the first two months of 1984 or about 1.0 percent
  • 511,000 jobs in the first two months of 2012 or about 0.4 percent

Employment grew 2.5 times faster in early 1984 than in early 2011.  Payroll employment needed to increase by 1.33 million jobs rather than 511,000 jobs in the first two months of 2012 to be comparable to 1984.

The current unemployment rate of 8.3% is slightly higher than the unemployment rate of 7.8% in February, 1984.  The natural unemployment rate in 1984 was higher because the workforce was less mature.  Younger and less experienced workers tend to have higher unemployment rates because they are often switching jobs.  It is therefore more accurate to compare unemployment rates by age group.

The table below shows that, age-group by age-group, the unemployment rate in 2012 is 0.7% to 4.4% higher than in 1984.

Age Group

Unemployment Rate February 2012

Unemployment Rate February 1984






























*Not Seasonally Adjusted for these Age Groups

 The unemployment rates of young workers and seniors are much higher today than in 1984.  The unemployment rate of prime working age adults, age 35-54, is about 1.5% higher than in 1984.

Despite a few solid jobs reports, the labor market recovery remains weak by historical standards.  Employment growth is not as robust, unemployment rates are higher, and a higher fraction of the unemployed have been out of work for at least six months compared to earlier recoveries

Steve Rattner is no Clint Eastwood

Clint Eastwood’s compelling halftime in America commercial has generated a lot of buzz.  Regardless of one’s political views about the precedent set by government bailouts of America’s largest corporations, the ad reminds us that we want cities like Detroit to recover.  Ironically the Eastwood commercial was produced in Los Angeles, where the problems of joblessness and depressed real estate values are comparable to Detroit’s.

Today on morning on Morning Joe Steve Rattner, MSNBC economics analyst and former Obama Administration car czar, presented a defense of the automaker bailouts that he helped design.  Steve Rattner’s charts purport to show that the bailouts saved Detroit.  Rattner focused on the unemployment rate rather than job creation or the size of the labor force.  Labor economists know that Detroit’s unemployment rate can fall if enough people either stop searching for work or leave town.  It appears that a shrinking labor force is a big part of Rattner’s story of a Motor City Miracle.

First here is the key chart presented by Rattner that caught my eye:

Here is a chart that I wish Rattner had presented:

Employment in Michigan and Detroit has grown at about the same rate as the rest of the U.S. over the past two years.  A noticeable difference between Michigan and the rest of the U.S. is that the labor force is shrinking in the Detroit metro area and in Michigan.  Whether this is because jobless workers have given up looking for work, older workers have retired, or people have left the state would require further study.

Detroit is healing, but not in a way that is noticeably different than the rest of the country.  Steve Rattner wants to give credit to the automaker bailout for the large decline in Detroit’s unemployment rate over the past two years.  At the same time, he would not conclude that the bailout caused Detroit’s labor force to shrink faster than elsewhere in the U.S.  It is still unclear what precedent the Federal government has set by intervening in the auto industry rather than just letting large corporations file for bankruptcy.  It is also unclear, at this point, how many jobs were “saved” in Michigan and Detroit by this policy.

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