FED | Does This Look Like Recovery?

Civilian employment/population ratio, 2003-2013

Paul Krugman in his NY Times blog today has a terrific chart from the FRED database at the St. Louis Fed website.

It shows that the key ratio of employment to population is still depressed–more than four percentage points below the level in 2007. Mr. Bernanke: Does this look like recovery?

Why is the employment-population ratio the best indicator to look at? Because, compared with the unemployment rate, it has:

• A more reliable numerator (number of employed civilians in the USA) and 
• A more reliable denominator (U.S. civilian population). 

You can take this number to the bank. The unemployment rate, by contrast, is based on a small 70,000-or-so monthly sample of U.S. households and depends on someone knowing and saying whether someone else in the household has been looking for work or not.

Krugman notes that there may be a downward bias from the aging of the population, but that could be exaggerated. People are also working to a later age, because (1) as younger people remain unemployed, older people in their family feel they must keep working to keep up the family income, (2) Social Security eligibility is being delayed, (3) 401k expectations are way down because of the financial meltdown and continuing low interest rates on bonds, and (4) people are living longer and lot of them like to keep working.