US participation rate - Response to comments
Once again many thanks for all the comments. I set out below my response to comments posted, that I have understood and seem to require more than thank you!|
The criticism that I compared employment rates in chart two and compared them with the BLS’s participation rate is fair. I apologise. I have uploaded a revised chart, which can be downloaded via the "downloaded" link at the bottom, in which I estimate the participation rates by adding the number of unemployed to the number employed.It would have demonstrated that the argument remains, but the comparison is clearly a better one. I don’t at the moment think that I can post a chart here but, if I could, it would show that the participation rates have risen if comparison is made with the 15 to 65 age group and fallen on the BLS definition.
Japanese labour participation rates are much higher, at least for men, than they are in Europe and the US. This clearly provides scope for unemployment to stop falling at current growth rates; but, what is possible is not necessarily likely. Social attitudes and education levels differ. I see no reason to assume that it is any more likely that participation rates worldwide will move up to Japanese levels than that Japanese levels will fall. Over the long-term we will probably see significant changes, but I doubt whether these changes will happen quickly enough to affect unemployment levels over the next two or three years.
Many thanks for the elucidation of how the household survey is conducted. One of the benefits of this blog is that I am becoming better informed – though there is no doubt plenty of room for improvement.
My understanding is that the Bureau of the Census makes assumptions about immigration in their population estimates for the future. Immigrants are for the most part of working age. If the recent clampdown on illegal immigrants has reduced their numbers, as articles, for example in The Economist, have suggested, then the growth of the US’s population aged 15 to 65 may be slower than the Bureau’s estimates.
A possible reason for the participation rate to rise is the recent bankruptcy of Detroit and the likely reduction of pension payments. I assume that this will lead to a rise in household savings – both through greater pressure on state and local governments to close the deficits, and through additional precautionary savings. It may also encourage later retirements.
As I sought to explain in my blog on inflation and deflation, I am not claiming that inflation is more likely than deflation, just more dangerous. I suspect that the most likely cause of deflation is a rise in inflationary expectations and the tough monetary policy needed to deflate such expectations.
If the economy is growing at its trend rate, then it will be growing in line with the growth of the labour force. As a first approximation therefore unemployment will be stable if the economy is growing at its trend rate.