Sunday, March 11, 2012

Walker's Job Creation & Population Growth

The employment population ratio measures "the economy's ability to provide jobs for a growing population; its consistent cyclical properties and the relative accuracy of its seasonal adjustment make the ratio especially useful for evaluating demographic employment trends. It answers the question, 'What proportion of the working-age population is employed?'"

In Wisconsin, the ratio for 2011 was 63.5, in 2010 it was 63.6. A .1 percent difference.

The Wisconsin governor draws attention to a declining unemployment rate. Which, in itself, is good. The problem it that the unemployment rate hasn't declined because of the policies of the governor. It has declined in spite of his policies. The unemployment figures of Wisconsin appear better due to slow population growth (16% in Wisconsin versus 24% nationwide, since 1990), more so than any significant job creation.

As the employment population ratio illuminates, job growth has been insignificant in relation to population growth (and population growth was low!). But such unimpressive information isn't good fodder for campaign commercials attempting to convince voters why they should not vote against Walker in a recall election. Regardless of what Governor Walker would like, the employment population ratio illustrates the governor's ineffectiveness at creating jobs.

As Marc Levine describes, in a recent report, "..The unemployment rate is a less telling measure than it once was. It’s simply no longer the best barometer of the country’s economic health...' Others recommend looking to the 'employment-population' ratio for a 'truer picture' of labor market conditions ... Put simply, the employment-population ratio measures the percentage of the working-age population (or a subset of that population) that is employed. Its particular value as a labor market indicator is that it tells us, much better than the flawed, narrower unemployment rate, the extent to which the working age population in a community or among certain racial or ethnic groups is, in fact, working – which is, in the end, what we really want to know about the health of a labor market."

Or, as Paul Krugman states, "My current favorite measure of the labor market, the employment-population ratio of prime-age Americans — employment rather than unemployment so as to avoid distortion by people dropping out, prime-age to avoid demographic issues as the population ages."

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