Jobs, jobs, jobs

A. Sinan Ünür
September 5, 2008

There are two main sources of employment data in the United States. One is the Current Employment Statistics (CES) based on payroll data from firms. The other is the Labor Force Statistics (LFS) based on household surveys from the Current Population Survey. Clearly, we do not expect these to agree with each other because not being on a payroll is not the same thing as being unemployed. Of course, there are also some people who are definitely on a payroll and are not employed in any ordinary sense of the word. (OK, I do not know if the workers on auto makers᾿ job banks are included in the CES, but I could not resist the temptation to link to this story).

For example, according to the CES, in 1960, there were about 54 million workers on non-farm payrolls where as, according to household surveys, there were about 60 million employed in nonagricultural industries. Similarly, in 2007, there were about 144 million employed in nonagricultural industries according to household surveys. On the other hand, about 137 million people were on payrolls.

So, today, I am going to look at labor force statistics from the CPS. The U.S. labor force consists of individuals willing and able to work. Economists do not consider a stay-at-home dad unemployed. For the task at hand, I obtained data on employment status by education level using the data extraction tools on the BLS. I cannot provide a direct link to the extracted data, but the last few years’ tables are provided here.

The figure below shows the number of employed individuals over 25 by completed education level:

On the chart, LTHS stands for “less than high school”, HSNC stands for “high school grad with no college” SC stands for “some college” and CG stands for “college graduate”.

The most striking feature of the data is the steady increase in the number of college graduates in the pool of the employed. Workers with some college education also increased in number, but that increase slowed down after 1995. In contrast, the employment level of high school graduates and workers without a high school degree is constant over the last 15 years.

Of course, this has a lot to do with the overall increase in the number of college graduates in the labor force. The following graph shows the size of the labor force (which includes both workers who are employed and workers who want to be employed):

Notice how it is virtually indistinguishable from the employment graph. Despite the increase in the labor force from 107 million to 131 million in the last 15 years, the size of the less than college educated labor force has remained constant. As a share of the total labor force, the share of workers without any college education in the labor force fell from 48% to 39% whereas the share of workers with at least some college education increased from 52% to 61%.

Now that we understand what is happening with both the composition of the labor force and employed workers, we can combine these two aspects in a single graph and look at the employment rate by education level. The following graph does just that:

Oh my! Things look remarkably stable. Even among workers without a high school degree, 93% of those who want to work were employed in 2007. For college graduates, the employment rate was 98%.

Now, of course, if I had wanted to, I could have charted these data the way they would have been presented in a newspaper: With a compressed vertical axis, so small changes appear to be much more drastic than they are. So, for the sake of completeness, here is the journalist’s version of the chart above (both charts were plotted using the exact same numbers):

What is immediately clear from this graph is the effect of September 11, 2001. The employment rate in all categories fell initially and began to rise again, all in tandem. These fluctuations are overstated because of the compressed range of the vertical axis. Suddenly, half a percentage point fall in the employment rate among college graduates between 2000 and 2001 looks much more drastic. In fact, between 2000 and 2001, the actual employment level of college graduates increased from 36 million to 36.5 million. The employment rate fell because the labor force with college degrees increased more, from 36.6 million to 37.4 million.

Of course, employment levels or rates convey no concrete information about income or quality of work environment or quality of life. Employment rates still haven’t exceeded the highes achieved in 2000. Labor force participation rates have fallen among all people other than those with no high school degree. With those caveats in mind, note that the employment rate figures show that the U.S. economy is fundamentally strong.

Contrast this observation with Professor Krugman’s sleight of hand. He compares average annual rate of growth in the level of employment among various presidents’ term and comes up with a graph that is very flattering to President Carter. According to his calculations, employment grew at an average rate of 3% during Carter’s term compared to a paltry 0.5% during President Bush’s term. I have no reason to doubt the accuracy of his calculations.

For an alternative perspective, however, consider the following graph of the unemployment rate in each year since 1950:

Whereas the number of employed might have grown faster on average during the Carter administration, the unemployment rate in 1980 was 7.1%, the same as the year President Carter’s term began. In fact, by the time Carter took office, the unemployment rate had begun to fall from a height of 8.5%. It looks like the trend was reversed during his term. Of course, there was an oil crisis during his term, but if September 11 is not going to count as an external shock to the U.S. economy, can we say that an oil crisis ought to count as one?

In contrast, the unemployment rate in 2007 was 4.8%. It did grow to 6% by July 2008 but that point is not included in the graph above because 2008 is not over yet.

Jobs, jobs, jobs

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