America’s Finest Economists Have Been Needlessly Undermining Growth, Study Confirms — Eric Levitz

A few lonely voices disputed this consensus. In their view, these two distinct mysteries weren’t actually distinct — or all that mysterious. The reason wage growth wasn’t rising as one would expect with the economy near full employment was that the economy wasn’t near full employment. And the reason the economy wasn’t near full employment was that all those prime-age workers who’d supposedly exited the labor force for reasons totally unrelated to the strength of the economy hadn’t actually exited the labor force for reasons totally unrelated to the strength of the economy.

In this view, both of the supposed mysteries stemmed from the same mistake: Economists had too much faith in the official unemployment rate. That rate counts only those who say they’re actively seeking employment as available workers. And yet many Americans who say they aren’t looking for a job (and are, therefore, classified as nonparticipants in the labor force) also say that they would like a job if one presented itself. Meanwhile, survey data show that even those Americans who say they aren’t looking for a job – anddon’t want one – can abruptly change their minds. Such workers often go from being “outside the labor force” to being employed without ever registering as “unemployed” in the government’s data.

This reality has a major implication: The pool of surplus labor that employers have at their disposal at any given time is much larger than the unemployment rate lets on.…

New York Magazine — Intelligencer
America’s Finest Economists Have Been Needlessly Undermining Growth, Study Confirms

Eric Levitz