Wednesday, October 10, 2012

Scott Sumner carries his penchant for single numbers that will tell you everything without any interpretive effort out of NGDP and into labor market indicators.

He claims that the employment to population ratio is "nearly meaningless".


Because it was higher in the 70s than in the 60s and we all know the labor market was stronger in the 60s.


I'm not sure why a statistic becomes "nearly meaningless" just because it requires a modicum of interpretation and comparison with other statistics before drawing a conclusion. Maybe we might want to talk about female labor force participation?

He prefers the unemployment rate, which is also a good indicator and especially good in comparing the 60s and 70s because the denominator is the labor force itself so it's not going to rise simply as a result of secular changes in female participation. Fine. But it's hardly ideal for thinking about problems today since the unemployed also have this tendency to stop looking for work after a while.

You know what would be a good indicator...

...the employment to population ratio.


  1. One difference between the 1960s and the 1970s was demographics. In the 1960s there were a lot of extra children (us Boomers). In the 1970s, the Boomers moved into the workforce.

  2. In fairness, what do you expect, Daniel? Scott Sumner is a monetary economist, not a labour economist. Obviously, you win this argument over him due to your better knowledge of your own field.

    1. I would not claim to know labor economics better than Scott. He's done quite a bit of work, particularly with macro labor economics like this statistic.

      He seems to just like these sorts of statistics that can do everything. I think that's naive.


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