Friday, February 9, 2018

Fraying at the edges? *relative* underemployment increases

 - by New Deal democrat

This is a post I've been meaning to put up all week (after all, this week was going to be very slow on data and news, right?).

As the expansion gets more and more mature, the *relative* performance of certain measures of improvement become more interesting.  One of those is the comparison between U3 unemployment, and the broader U6 underemployment measure.

While we only have about 25 years of data, so caution is warranted, generally speaking, during that time as the expansion has improved, an increasing number of the more marginally employable find jobs. As a result, U6 declines faster than U3. Later on, as the expansion begins to wane, U6 underemployment has weakened first:

Another way of looking at this is to subtract the U3 unemployment figure from that of the broader U6 measure:

Note that in both the 1990s and 2000s, this remainder started to rise before U3 itself bottomed.

More important for the present, note that this remainder of U6-U3 has risen slightly in the last 2 months, as the unemployment rate has held steady and the underemployment rate has risen by 0.2%.

Yet another way to look at this is to chart the YoY change in this remainder:

Note the slight weakening in this metric as well.

It might just be noise, but on the other hand it could be an early sign of weakness starting in the job market. If so, that doesn't mean a recession is near, as in the next 3 to 6 months. But it bears continued watching.