2 Graphs on the Economy

Libby has a very good post from a couple of days ago that looks into the the variance between good news pronouncements on the economy, and some of the top line numbers such as the stock market and the most recent unemployment rates to support these pronouncements, and the general feel that the economy is only good at producing more debt and more uncertainty. I know that I am getting into this conversation a little bit late, but I just want to throw two graphs up for consideration.

The first was made by Pro-Growth Liberal over at Angry Bear and it maps out the workforce participation ratio for the past twenty years or so:



As you can see, the peak Bush 1 and Bush 2 ratio are both significantly beneath the employment to population ratio for the time period between mid 1996 and mid 2001. Some proportion of the labor market that was working in the mid-90s is no longer working today AND they are not even looking for work, and therefore they are excluded from the labor force. These marginal members of the labor force were in the labor market and working when real wages were actually increasing, and now they are surplus reserves of labor to keep wages flat.


The second graph has been thrown about the blogosphere already, but it is always worth touting the good work of the Economic Policy Institute as they look at how this recovery cycle compares to past cycles on several metrics:



As you can see, this recovery cycle has been fairly mediocre compared to both recent performance of the mid to late 90s AND historical experience. What growth is being generated is not being distributed towards most Americans, instead the growth is going toward corporate profits. These profits are not even being recycled into the larger economy by being reinvested, instead they are being kept as cash for payouts and buy-outs.

These two charts do not have complete explanatory power, but I think that they hint in the general direction as to why the US economy despite solid topline numbers on unemployment does not feel like it is delivering the goods that we typically expect at this stage of a recovery/boom cycle.