The U.S. Job Recovery Is a Global Laggard: Narayana Kocherlakota
Tuesday, 25 October 2016 09:30 AM EDT
(Bloomberg View) -- It’s often said that the U.S. has recovered more strongly from the last recession than most other developed nations. Data on jobs, though, suggest that’s not quite true.
One simple measure of labor market performance is the fraction of people in their prime working years (ages 25 to 54) who have a job. Focusing on this age group helps strip out the varying effects of aging populations and retirement trends in different countries.
In late 2007, before the recession started, the prime-age employment-to-population ratio in the U.S. was about the same as in other Group of Seven developed nations (which also include Canada, France, Germany, Italy, Japan and the U.K.). The U.S., however, experienced a much larger decline during the recession, and remains much farther from undoing the damage. As of June, the G-7 as a whole had recovered almost completely, while the U.S. was only 60 percent back from its lowest point:
Of course, the G-7 includes seven countries with different experiences. Here’s how the U.S. ranks within the group:
Only in France and Italy has the prime-age employment rate fallen by as much as in the United States. And these are two countries where, thanks to the common euro currency, central banks cannot conduct independent monetary policy aimed at addressing unemployment.
Some have attributed the poor U.S. job-market performance to the relatively high cost of higher education, including college and community college. Yet if one looks at people with at least some college education, the comparison to other G7 countries makes the U.S. look even worse. As of 2015 -- and excluding Japan, for which data were not available -- the employment rate for those with a post-high-school degree was lower than in any other G-7 country except Italy, and the decline since the beginning of the recession was the largest of all (note that the data in this case are for people aged 25 to 64):
These cross-country comparisons can help us understand why U.S. employment remains low. For example, many say that government-provided health care and a heavy tax burden have held the U.S. back. Yet Canada has a higher employment rate, even though it has both higher taxes and more government involvement in health care. This can’t be explained away by saying that Canadians are harder-working: Back in 2000, the employment rate in Canada was lower than in the U.S.
These comparisons have policy implications. The U.S. Federal Reserve is supposed to conduct monetary policy so as to promote maximum employment. Fed officials often say that the U.S. is close to achieving this goal. How can that possibly be true if the U.S. labor market is doing so poorly compared to its G-7 counterparts?
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
To contact the author of this story: Narayana Kocherlakota at [email protected]
To contact the editor responsible for this story: Mark Whitehouse at [email protected]
For more columns from Bloomberg View, visit http://www.bloomberg.com/view.
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Tuesday, 25 October 2016 09:30 AM
Tuesday, 25 October 2016 09:30 AM