Prime-Age Employment-to-Population Ratio Remains Terribly Depressed
My former colleague, Heidi Shierholz, used to call the prime-age employment-to-population ratio (EPOP) her desert island measure, if she could only take one with her. Today, I decided to take a closer look. My crude drawings on an otherwise straightforward graph are my attempt to illustrate three important points about trends in the prime-age EPOP. (Side note: I use prime age here, i.e. 25–54 year olds, to remove structural trends like baby-boomer retirement. And, for those nerdy enough to want to know, my drawings eliminate the ability to see the data behind this chart. For the data series, please see here.)
The most obvious point is the huge nose dive prime-age EPOP took during the Great Recession. The green circle shows the slow climb as the recovery began to take hold. We had a couple years of solid job growth, and that’s a fairly decent pace for the EPOP recovery. Then, early this year, the EPOP stalled out (see the red circled region). The prime-age EPOP hit 77.3 percent in February, then stagnated for four months at 77.2 percent, and fell slightly to 77.1 in July. This would be a terrible new normal for the economy, for the American people.
To put this into further perspective, let’s zoom out. Check out the purple line in the chart below. That’s drawn at 78.1 percent, the lowest point of the last two business cycles. After years of climbing, July’s rate of 77.1 percent is still below the last two troughs. And that’s an awfully low bar. We should be aiming higher, at least to 2007 and there’s a good argument to be made that we should be aiming for 2000 levels. Hand-in-hand with continue sluggish nominal wage growth, this provides clear evidence that the economy is far from recovered and this is no time to raise interest rates.