December 18, 2014

Chart of the Week: The Health of the Jobs Market

The unemployment rate is a much watched, reported, and discussed measure of what’s happening to the jobs market. Last month, many pundits noted, the unemployment rate went back up to 9.1 percent.

Despite the attention it is given, the unemployment rate is not a very good measure of the employment situation. That’s because it depends a lot on what’s going on with labor force participation. If those out of a job give up looking for work because the economic situation is poor, the unemployment rate declines. And if the economy improves and those people re-enter the labor force, the unemployment rate rises.

A better measure of what’s going on in the jobs market is the share of the population that is employed. As the figure below indicates, that measure continues to look horrible. Back in November of 2007, the month before the Great Recession began, 62.9 percent of the U.S. population was employed. In May of 2011, that share was down to 58.4 percent.

To have the same fraction of Americans working as we had before the recession, 10.8 million more Americans would need to be employed. That’s an enormous number of people we have to put to work.

Source: Created from Bureau of Labor Statistics data (http://data.bls.gov/cgi-bin/surveymost?ln)

6 Comments ▼

Scott Shane


Scott Shane Scott Shane is A. Malachi Mixon III, Professor of Entrepreneurial Studies at Case Western Reserve University. He is the author of nine books, including Fool's Gold: The Truth Behind Angel Investing in America ; Illusions of Entrepreneurship: and The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By.

6 Reactions

  1. Putting another 10 million people to work will take a lot of new SMBs and quite a bit of hiring by existing companies. And I don’t think it’s going to happen quickly. Getting out of this downturn is going to be more tortoise and less hare.

  2. Not a pretty graph and when you take into account a lot of those jobs are supported by the tax payer then it looks even more grim. The tipping point is approaching. I agree with Robert’s point and if we could make it easier and cut a lot of red tape so it is not a headache to employ new people that would help.

  3. Thanks for this MUCH NEEDED perspective.

    I’d actually love it if a percentage of those 10 million people looked at the possibility of creating their own jobs instead of looking to someone to create a job for them.

    Back in 1996, our MBA class was actually predicting that we’d go into an evolved “cottage industry” phase. And when you look at what technology makes available – that’s actually more of a possibility now than ever. I just heard about an iphone app that allows people to rent out their own cars! It’s a sort of peer-to-peer business. AMAZING!

  4. Thank you, Scott, for your timely post. I work with the Campaign for Free Enterprise, a project of the U.S. Chamber of Commerce, and we provide advice to small business owners and entrepreneurs to help their businesses thrive. As we seek to encourage job creation, your article deepens our understanding and gives unemployment rates a helpful context. It is our hope that entrepreneurship and innovation will help create jobs and restore our economy. Thanks again for your perceptive post.

    – Hilary

  5. When 90%+ of the businesses in the US are small businesses, it’s charts like this that tell you more than just the unemployment rate. They tell you the “State of small businesses,” and it’s not looking good. I’ve always said if you want to turn the economy around, you have to start with the small businesses. An environment needs to be created where small businesses can thrive and be innovative without having to worry about increasing tax implications. Give small businesses an incentive to grow, and we will, hiring more people, and lowering unemployment. Until our government understands this, we’re going to be stuck in this state or worse.

  6. Well done. This is an extremely significant article. I wonder what that graph would look like, state by state?

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