06/22/2021

Unemployment is the lowest it’s been in almost 50 years, but the labor market still isn’t completely over the recession

Maybe the most obvious shortcoming is that there still aren’t as many people looking for work as there “should” be. In particular, the share of 25- to 54-year-olds — who you’d think would be in the prime of their careers and are in fact working — is still 0.4 percentage points below where it was in 2007, which itself was 1.6 percentage points below where it was in 2001. These are millions of missing workers who, considering that this number hasn’t improved at all in the past eight months, we’re still pretty far from finding.

But much more surprising is that even though there are more job openings than unemployed people for the first time on record, the labor market doesn’t seem to be working as well as it used to. How so? As you can see above, the odds that someone who lost their job six months ago, when the unemployment rate was a mere 4.1 percent, still wouldn’t have one today is 9.9 percent. That’s a full percentage point worse than it was from the middle of 2006 to the middle of 2007 — the high point of the housing boom — when joblessness had been between 4.4 percent and 4.7 percent. And it’s almost twice as bad as it was the late 1990s, despite the fact that unemployment was pretty much the same then as it is now.

It’s not entirely clear why, but it seems safe to say that the Great Recession is still casting enough of a shadow over the labor market that 4 percent unemployment isn’t quite what it used to be. Maybe 3.5 percent unemployment would do the trick. Maybe we should try to find out.

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