[lbo-talk] Roubini

[SA]

Doug Henwood wrote:
>
> On Dec 12, 2008, at 5:20 PM, SA wrote:
>
>> Doug, at the late-1982 peak, 85.2% of prime-age men (25-54) had jobs. 
>> In November 2008, only 84.9% had jobs. If we lose another 2.5% of 
>> employment, obviously that rate will go down even further. It will 
>> probably be the lowest since the Depression.
>
> The EPR of prime-age men has been in decline for over 50 years. A 
> trendline regression on the monthly series provided by Excel is:
>
> y = -0.0121x + 94.971
> R2 = 0.7641
>
> where x = the number of the month since January 1948 (1/48 = 1, 2/48 = 
> 2, etc.). That works out to a decline of about 0.14 point a year.
>
> Late 1982 was, of course, a trough, not a peak. The low in the EPR 
> came a few months after the cycle trough, in February 1983. Since 
> then, the EPR for prime age women is up 10.7 points; for both sexes, 
> it's up 5.4. The overall EPR is up 4.3 points. So we've got a way to 
> go to Depression levels.

I don't think this means very much. First of all, the entire EPR decline 
for men is concentrated in the post-1973 period - coincidentally just as 
macro policy started changing to provide less support for employment. So 
the EPR for prime-age men has been falling for 35 years, not 50. And 
those 35 years have also seen a long-term deterioration in wages, which 
can be an indicator of labor-market slack.

You cite the EPR for women as a counterexample. But that's an even worse 
labor-market indicator: It's been *rising* for 50 years. For example, 
the EPR for prime-age women was more than 10 points *higher* at the 
trough of the 1982 recession than at the 1969 peak of the late-sixties 
boom. Are you saying the labor market was stronger in 1982 than in 1969? 
At least looking at prime-age men strips out changes in gender norms 
about working, since the expectation that men should work is 
(presumably) just as strong now as it was 40 years ago.

But let's say you don't buy that. Let's say all E/Pop ratios are 
unreliable labor-market indicators for making long-run comparisons 
because it's impossible to strip out cultural or social developments 
that cause participation rates to change. But if that's true then the 
unemployment rate is also meaningless (which is how this thread started, 
with your post on Roubini's 9% call and 1982 vs. 2009). Unemployment 
rates depend on labor-force participation rates, but if those have been 
shifting around over the long run for poorly understood reasons then the 
U rate is useless too.

The chances are fairly strong that this recession will be worse than 
1980/1982. Which would make it the worst since the GD.

SA