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Fire the BLS’s Unemployment Rate
It should be replaced with a metric that reflects population growth and job creation.

Job fair in El Monte, Calif.

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So what measurements should we use to determine the health of the labor market?

A more realistic and informative metric would be what we call the “growth ratio” — the year-over-year growth in the number of jobs (measured through the BLS’s household survey) divided by the year-over-year growth in the civilian non-institutional population (the number of people who could be in the labor force). This fraction tells us whether job creation is keeping pace with, running ahead of, or falling behind population growth.

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A growth ratio equal to one indicates that employment grew as fast as the population, indicating that the labor market, and the real unemployment rate, remain unchanged. A growth ratio above one indicates job growth in excess of population growth, which should reduce the number of unemployed people and result in a lower unemployment rate. A ratio between zero and one indicates that, while employment grew, it did not keep up with population growth. A negative ratio indicates that employment fell.

In April, the growth ratio clocked in at 1.18, indicating that employment growth over the previous twelve months was slightly greater than population growth. The average for the recovery to date is a dismal 0.96 — indicating that employment growth has, on average, failed to beat population growth, supporting the conclusion that the real unemployment rate has not declined. Over the last year or so, the growth ratio has clocked in around 1.20 — better, but still only slightly ahead of population growth.

Compare these ratios with the negative ratios during the Great Recession, when the growth ratio averaged -2.34. April’s growth ratio of 1.18 is about half that rate. Considering the growth ratio’s massive decline during the recession, the ratio now should be consistently hitting 1.5 or higher, as it has in prior recoveries.

It isn’t. This reveals a stagnant jobs market and a weak economy ill-prepared for any future economic distress.

In a real recovery, the economy creates enough jobs to repair the damage done and keep up with population growth; it does not just shed workers. In this respect, the current recovery has been an unequivocal failure. The numbers should reflect that.

— Andrew Puzder is CEO of CKE Restaurants, Inc., which employs about 21,000 people at Carl’s Jr. and Hardee’s restaurants. He is co-author of Job Creation: How It Really Works and Why the Government Doesn’t Understand It. Michael Talent is a recent economics graduate from the University of Chicago and was an economic-policy analyst for the Mitt Romney campaign.



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