My Favorite Measure of Labor Market Health is Looking a Little Better
"Given that declines in the unemployment rate are providing a murky picture of trends in labor market health in this recovery, I think a much more useful indicator is the employment-to-population ratio of “prime-age” workers (workers age 25–54). (In fact, I’ve sometimes referred to this as my “desert island” measure—i.e. if I were headed to a desert island and could only take one measure with me to judge current trends in labor market conditions, this would be it.) The employment-to-population ratio (or EPOP) is simply the share of the population with a job, so this measure entirely sidesteps the issue of whether potential workers are in the labor force. Restricting our attention to prime-age workers serves the important purpose of avoiding confounding changes in employment that are not due to labor market conditions but are instead due to longer-run structural factors, such as baby boomers hitting retirement age and declining employment of young adults due to increased college enrollment."
