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p looking they are no longer in the labor force so the labor force gets smaller then the number in the labor force who are not working becomes a smaller percentage of the total labor force so the unemployment number goes down the unemployment number goes down not because there are more jobs but because there are fewer people trying to get a job this is what john taylor and others have been pointing out taylor showed a graph comparing the official unemployment number and what unemployment would be if everyone who was in the labor force stayed in the labor force well i took an interest in that graph and decided i wanted to see if i could duplicate it the numbers i used on thursday i don t think were the right versions that s why i did all that double checking on friday and saturday finding number series where the ratio is a good match for the labor force participation rate and the number of persons unemployed and the number employed now that i have the right numbers maybe i can duplicate the worst case graph in his post of 23 november 2013 john taylor links to a paper by christopher erceg and andrew levin labor force participation and monetary policy in the wake of the great recession i couldn t get to that paper at ssrn but taylor has an older post that links to an earlier version of erceg and levin s paper pdf 50 pages erceg and levin refer to a bls forecast of the labor force participation rate from back in november 2007 just prior to the onset of the recession they note at bls i found labor force projections to 2016 more workers in their golden years pdf 20 pages from the monthly labor review of november 2007 table 3 in that pdf gives civilian labor force participation rates for 1986 1996 2006 and a 2016 projection the annual growth rate is projected to be 0 1 percent for the 2006 2016 period only a slight decline in the labor force participation rate was anticipated i m thinking that is where erceg and levin got the forecast they show on this graph graph 1 source john b taylor yes on page 49 of the erceg and levin pdf they plot several subsets of the labor force participation rate projection and refer to the november 2007 issue of the monthly labor review i see bill mitchell is on a related topic posted by the arthurian at 4 00 am 0 comments saturday december 14 2013 number of persons employed and unemployed part three in a series that starts here i m trying to back into numbers that other people calculate so i can know what numbers they use to get the numbers they get from yesterday i know the civilian labor force clf16ov is the number used to calculate the labor force participation rate so i know clf16ov is the right number to use to figure out how many people are working and how many are looking for work i thought i d use fred s unrate to figure the working and looking numbers when i saw the name of the series civilian unemployment rate my confidence improved because it s another civilian series probably in the right ballpark i thought so i multiplied the labor force by the unemployment rate and divided the hundred out of it that gave me a count of unemployed persons or actually thousands of unemployed persons but what to compare it to i searched fred a bit and found the bluntly named series unemployed unemploy i put it on the graph with my calculation another good match graph 1 calculating the number of people unemployed after that then i could subtract the number of people unemployed from the civilian labor force to get the number of people employed but again what to compare it to how about civilian employment graph 2 calculating the number of people employed nice posted by the arthurian at 4 00 am 0 comments friday december 13 2013 how to calculate labor force participation rate ask com had a good answer the labor force participation rate is the percentage of people who are 16 and older who are employed or looking for employment the lfp rate formula take the number of people employed and looking and divide it by the entire population that are not in institutions school prison or military multiply this number by 100 to get the percentage of people participating in the labor force and this note the labor force participation rate civilian labor force total non institutionalized civilian population i went right to fred found civilian labor force clf16ov and civilian noninstitutional population cnp16ov took the ratio multiplied by 100 and put civilian labor force participation rate civpart on the same graph good match graph 1 the calculation that gives the civilian labor force participation rate posted by the arthurian at 4 00 am 3 comments thursday december 12 2013 worst case unemployment from philip greenspun s weblog unemployment rate adjusted for labor force participation illustrating the magic of choosing one s statistic carefully today s new york times front page carries a story about how the jobless rate has fallen to a five year low of 7 investor s business daily however calculates unemployment at nearly a modern day high of roughly 12 by holding labor force participation constant at the 2007 level 66 of working age adults actually working see labor force exodus hides nearly 40 of hiring shortfall well i ran into this the other day at john taylor s and here it is again today i have to look at the numbers for myself what does the excerpt give me the labor force participation rate and working age adults from about com question what is the labor force participation rate answer the labor force participation rate is the percentage of working age persons in an economy who are employed or are unemployed but looking for a job typically working age persons is defined as people between the ages of 16 64 people in those age groups who are not counted as participating in the labor force are typically students homemakers and persons under the age of 64 who are retired in the united states the labor force participation rate is usually around 67 68 okay if we have the labor participation rate graph 1 labor force participation rate then we know for example that in 2007 about 66 of working age persons were either employed or looking for a job and today about 63 are either employed or looking and if we have working age population for the 2007 2013 period graph 2 working age population 2007 2013 then we can see the working age population increased from about 231 million to about 246 million during that period so we can estimate crudely that in 2007 about 66 of 231 million people were either working or looking for work that s about 152 5 million people working or looking and in 2013 about 63 of 246 million people were ditto that s 155 million people if the participation rate didn t fall from 66 to 63 in 2013 we d be looking at 66 of 246 million or about 162 4 million people if the labor force participation rate remained at 66 an unreasonable proposition i think if you judge by graph 1 we d be looking at 162 4 million instead of 155 million people in the labor force in 2013 the number of people working being what it is in 2013 the number not working would be several millions more if we use the 162 4 number so the unemployment rate would be higher that s the scam they re running with this line of argument now if we have the unemployment rate for 2007 2013 graph 3 the unemployment rate 2007 2013 we can say unemployment was about 4 5 in 2007 and is now about 7 if 4 5 of the labor force was unemployed in 2007 then 95 5 was employed the labor force in 2007 was 152 5 million 95 5 of 152 5 million is 145 6 million so in 2007 145 6 million people were working if we have 7 unemployment today then we have 93 employment the labor force now is 155 million people 93 of 155 million is 144 15 so today we would say 144 15 million people are working now if the labor force participation rate had stayed at the 66 level the labor force would be 162 4 million people if 144 15 million are working then the employment rate is 88 76 and the unemployment rate is 11 24 off topic but this is the second weak spot in the unemployment is worse than we think argument they do all the calculations that i m doing and i m sure they do them better this is my first look at these figures after all but they justify all their hard work on the assumption that if all the people who left the workforce in the last five years started looking for work again nothing else would change you know ceteris paribus oh no i have no idea what would change but then it is not my assumption okay investor s business daily came up with 12 i got eleven and a quarter that s close considering how crude my estimate is but wait what did john taylor have graph 4 actual and hypothetical unemployment eleven eleven and a half right in there posted by the arthurian at 4 00 am 4 comments wednesday december 11 2013 the least we can do graph 1 the federal minimum wage rate since 1955 the google drive spreadsheet posted by the arthurian at 4 00 am 0 comments tuesday december 10 2013 supply and demand imagine that from a recent post graph 1 treasuries held by the fed black and the fed funds rate inverted the graph compares the rate of change in us treasury securities held by the fed to the effective fed funds rate with the fed funds rate inverted on the graph the two series seem to show a lot of similarity enough to draw me back for another look graph 1 starts in january 2009 not long after the federal reserve announced its intent to start paying interest on reserves essentially the graph shows the time that the fed has been paying interest on reserves makes me wonder how these series compare in the time before interest on reserves graph 2 the black line from graph 1 and the historical record the two peaks that begin during the great recession visible in black on graph 1 are also clearly visible on graph 2 number 2 shows in blue the same series we see in black on graph 1 but the full extent of it back to 2002 in red the graph shows a similar series that goes back to 1970 and which as it happens we looked at before i will use the red line federal debt held by federal reserve banks in a new graph that extends the graph 1 comparison back in time to 1970 or before i show the red line as a percent change from year ago number and i extend it to the years before 1970 by using the older discontinued version of the same debt held data also shown in red graph 3 debt held by the fed red and the fed funds rate this graph extends graph 1 back to the 1950s on graph 1 the two lines follow a similar path on graph 3 for the same period since 2009 they do not that is because the numbers shown here in red are massively larger than those shown in blue that size difference is masked on graph 1 by putting the interest rate on the right hand scale it is important to observe the similarity of pattern that graph 1 shows it is also important to realize that we are comparing very large and very small numbers now i will take graph 3 and cut off the years we saw on graph 1 at the end where the red line goes wacky that way we can begin to look at the years ignored on graph 1 numbers that are comparable in size graph 4 debt held and fed funds before the crisis now i need to flip the fed funds rate upside down like it is on graph 1 i m doing this because on graph 1 the flipping let us more easily see the similarity of pattern for the record i don t see anything in graph 4 but a jumble graph 5 same as 4 with the interest rate inverted can you see any similarity there maybe the low point of the blue line really the high point of interest rates in the early 1980s might correspond to three lows in succession in the red line the three lows i m looking at the middle one lines up with the low point of the blue between the 1980 and 82 recessions again on the blue line working both ways from the low point there are some humps in the blue line that may match up to humps in the red line two humps before the 1980 recession punctuated by the 1970 and 74 recessions and two or three humps after the 1982 recession with echoes in the red line but this is all rather vague and seems to depend on me pointing out humps and emphasizing them so i wouldn t say there is any strong relation visible on graph 5 still looking let me tweak the blue line to show percent change from a year ago as the red line shows i have high hopes graph 6 same as 5 except percent change for the blue line ha well what can we do with this maybe move the red line to the right hand scale nah i won t waste your time with that one i m gonna crop off early years of the blue line to get rid of those high points and zoom in on where the red and blue are closer together graph 7 zooming in on graph 6 for graph 7 i cut off all the years before 1970 also i had to leave the red line on the right scale to make it big enough to see anything okay maybe this is our first result i had to enlarge the red line in order to see it the red line here is the debt held line federal debt held by federal reserve banks on graph 1 i had to enlarge the fed funds line to see anything on graph 7 i enlarged not the fed funds but the other line it is as if on graph 1 since 2009 the interest rate is the smaller number you know down near the zero bound but on 7 before the crisis the debt held number was the smaller number changes in debt held that s true too the changes in debt held only got big since the crisis as graph 2 shows okay this is a good result it tells us that interest rates are low since the crisis and debt held is high this isn t news these are things we already know but at least our graph agrees with what we know on graph 7 low points in the blue that occur at the same time as the high points or high periods in the red line i want the take the interest rate the blue line and take the minus sign out of it i want to un invert the line no i switched the blue line back to percent rather than percent change of percent the next graph compares debt held red to the fed funds interest rate since 1970 the interest rate is still inverted graph 8 debt held red and the inverted fed funds rate there seems to be some correspondence here red and blue both bottom out between the 1980 and 82 recessions and it seems in general that high goes with high and low goes with low this is the same result we got from graph 1 with the interest rate inverted we see pattern similarity after the mid 1990s the red and blue seem to pull away from each other interest rates were falling but on this graph rising because they are inverted and debt held while still spiking up seems to be drifting down oddly though the lines drift apart those late spikes in the red line seem to match up with high spots in the blue line and finally let me take the minus sign off the interest rate graph 9 debt held and the fed funds rate red lows match blue highs in 1981 and 1984 and 1989 and 1996 and 2000 red highs match blue lows in 1971 and 1976 and 1987 and 1994 and 1997 and 1999 and 2003 the opposites thing isn t perfect red highs match blue highs ...
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