The economy: A little graphic context
This chart will blow you away (via James Pethakoukis):
The NY Fed explains:
The first figure shows how these three labor market variables evolved over the four post-1973 business cycles (excluding the short 1980 cycle), along with developments in the Great Recession and current recovery. We start at the lowest level of the unemployment rate before the recession and then follow the changes for three years after the rate reaches its maximum level. For the current expansion, the maximum unemployment rate occurred in October 2009.
The employment-to-population ratio displays a classic V-shape recession and recovery pattern in the 1970s and 1980s. In the recession and recovery of the early 1990s, however, the employment-to-population ratio instead displays a U shape, only returning to its pre-recession level three years after the peak in the unemployment rate. In the recession and recovery of the early 2000s, neither the participation rate nor the employment-to-population ratio returns to its previous level, so we see an incomplete U-shape pattern.
In the most recent cycle, the employment-to-population ratio traces out an L shape, but the unemployment rate falls because the participation rate declines substantially (a much more gradual decline was expected by many given the aging of the baby boomers); in other words, a larger share of the population is out of the labor force rather than participating and being unemployed.
We’ve seen a lot of happy talk about how well the economy is doing now. Most of that comes from the media which has about as much of a grasp on the economy and how it works as does the current occupant of the White House.
A look at those four recessionary cycles gives context to the depth of the one we’re currently battling. If you look closely at the part of the chart depicting our current situation, you realize that while we’ve seemingly bottomed out, the employment-to-population ratio is not rising. And that, of course, is because of the horrendous drop in the labor force participation.
It points out two things – one that the “official” unemployment rate should be taken with a grain of salt. And two, that the stimulus had little apparent effect (sorry, but I don’t buy the “it could have been worse” argument. We have no way of knowing that) if the purpose was to shorten the recessionary cycle and keeping employment below 8%. It did neither of those things.
Finally, no matter what numbers and happy talk the media and administration throw out there, unemployment and the state of the economy are a very personal things to voters. Those who remain unemployed certainly aren’t seeing an “improvement” in the economy from where they sit. And it is from there they’ll make their decision as to who they’ll vote for in November. All the media smoke and mirrors about the improving economy aren’t likely to sway those who remain unemployed or are underemployed to see it their way. They’ll, instead, vote the reality of their situation and are unlikely to vote for the candidate who they feel has done little to ameliorate their situation.