WASHINGTON (Reuters) – The U.S. unemployment rate hit a record low of 3.5% a year ago, but that bit of history comes with a footnote.
It arguably was not the best overall time for workers in recent decades. That honor goes to the final months of 2000. Even though unemployment rates were a bit higher, wage growth was stronger and a significantly larger share of the population was either in a job or looking for one.
Graphics: Jobs: Nov. 2000 vs. Jan. 2020 –
It was a particular moment, with a younger population and women still ramping up their engagement in the U.S. job market, and it is unlikely to be repeated in a country that is graying by the year.
As the effort gets underway to repair the hole carved in the job market by the coronavirus pandemic, understanding the differences between those two eras – one good, one even better – may be key to choosing the best policies to fix the damage and then judging when the task is complete.
“It is going to take a long time to get back to 2000, to the absolute best situation, if ever,” said Roberto Perli, an economist with consulting firm Cornerstone Macro. “It might be impossible,” thanks to a population skewing older and thus towards a lower share of people wanting to work.
Graphics: Labor by the numbers –
To gauge how U.S. Federal Reserve officials might define their goal of “maximum employment” and assess how fast the economy might reach it, Perli recently constructed an overarching view of the job market combining 22 different statistics into a single index. It pinpoints the late 1990s through 2000 as the high mark for U.S. workers since 1990.
Fed officials say they want a “broad and inclusive” job recovery, noting that before the pandemic unemployment rates for Blacks and Latinos had set record lows along with the economy as a whole.
Graphics: Unemployment by race: distance from “best” –
‘MAXIMUM EMPLOYMENT’
If the aim is to return a broad set of labor metrics to their previous best outcomes, it won’t happen soon. Judging on how the index has behaved in the aftermath of other recessions, Perli said the process could take six to nine years. That’s a long runway for the Fed to keep interest rates low in hopes of encouraging hiring and wage growth.
Graphics: The jobs hole facing the U.S. –
But the data highlight another challenge the Fed and other officials will have as they debate what the country needs. Is it, for example, more immediate support for people waiting on a former job to return? Or more retraining and relocation assistance to encourage people to move on?
“Maximum employment” may mean one thing if restaurants and movie theaters are on the verge of a vaccine-driven rebound. It means a less lofty endpoint and longer to get there…
Read More: Maximum employment? What it means post-pandemic may have changed already