More on the Unemployment Numbers

The Heathen Republican has published an interesting analysis in which he attempts to control for the declining labor force participation rate, and I think his post is definitely worth a look:

An “Inflation Adjustment” for Unemployment

As I mentioned in my last post, I can think of one non-economic issue that may be affecting labor force participation – “Baby Boomer” retirement – but I don’t have the knowledge (at the moment) to suss out whether that’s the whole story.

One thought on “More on the Unemployment Numbers

  1. You could fix this author's concern over “structural changes” that mess with the workforce participation by normalizing the workforce participation data for each quarter in the database locally. By that, I mean calculate rates of change in workforce participation relative to the immediately surrounding quarters, rather than quoting the raw numbers and then picking a baseline from the raw. One popular way to do this kind of thing is called “cluster analysis” and involves looking for clusters in a set of data and holding those clusters to different standards. Another method is better used in time series like this one and is called homogenization. This is used all ovber climate science (or…I should say misused, since they SPATIALLY homogenize when it's meant for time series data only). The idea is to look for sudden discontinuities in the data…periods where the rate of change of the moving average is statistically significantly larger than normal random drift.

    I think you would find if you did that kind of analysis that the drop in workforce participation is too local to be entirely a structural change, but that it is at least PARIALLY a structural change brought on by FORCED RETIREMENT.

    Here at Stony Brook, we have a union for just about every working group and the university is forcing mass layoffs that it couldn't possibly get away with if ti came right out and fired people by offering huge incentive packages for people to willingly retire. The same is happening all over the public AND private sector where unions have made firing difficult. People are being paid to get out of the work force because paying their pension a bit early (say you have 28 years in and your pension goes up in 2 more years…Stony Brook might offer you the 30-year pension rate to get out now and with a hiring freeze in place, you are not replaced in the workforce…it si thererfore cheaper to pay your 30-year pension rate than to pay you as a full time worker!) is cost effective in a bad economy.

    Therefore, even if homogenization would find fault with the recent trend and call it a structural shift…which I do believe it is…we need to understand what changed in the structure. It's not just baby boomers…it's people on early pension too.


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