Tuesday, November 06, 2007

Why A Recession is Not Pending: Jobless Rates for Educated Workers Remain Low and Stable

Unemployment facts based on October BLS data:

1. For workers with some college (but no degree), the unemployment rate in October 2007 was 3.5%, almost the same as October 2006 (3.4%), and about the same as the average rate of 3.6% over the last three years (see chart above, click to enlarge).

2. For college graduates, the October unemployment rate was 2.1%, exactly matching the average unemployment rate for that group of workers during the last three years (see chart above). The jobless rate for college grads has moved in a tight range between 1.8% and 2.5% for the last 24 months, with a slight downward trend.

Bottom Line: As long as unemployment rates remain stable for workers with: a) some college or b) a bachelor's degree or higher, there is no indication of a pending recession. Unless and until we see an upward trend in the unemployment rates for these two groups, the economy will continue on its expansionary path.

For example, in the last recession of 2001, the jobless rate for college grads increased in almost every month during the year, hitting 3% by December 2001; and the jobless rate for workers with some college increased from 2.7% to 4.2% during 2001.

The continued stability of unemployment rates for the most educated American workers, those whose role is most important in a knowledge-based, intensively-competitive, global economy, suggest that the Goldilocks economy will continue its healthy expansion into 2008.


4 Comments:

At 11/06/2007 4:41 PM, Anonymous Anonymous said...

This is not a good indicator of a pending recession. As we all know, the unemployment rate is a lagging indicator. As you correctly point out, in 2001, the u-rate for college graduates increased from 1.6% to 3%. But you fail to point out that it hovered at 1.5% in hte latter months of 2000. In Jan, 2001, the u-rate for college grads ticked up to a whopping 1.6%. By this time, the Fed had eased 100 bps and according to the NBER, the recession had already started in Nov, 2000.

 
At 11/06/2007 5:14 PM, Blogger Mark J. Perry said...

According to the NBER (www.nber.org), the recession started in March 2001 and ended in November 2001.

 
At 11/06/2007 6:08 PM, Anonymous Anonymous said...

You are correct. Thank you. Interestingly, March is also the month that saw the biggest increase in the unemployment rate for college grades (from 1.6% to 2%)

 
At 11/09/2007 10:20 AM, Blogger juandos said...

"The continued stability of unemployment rates for the most educated American workers, those whose role is most important in a knowledge-based, intensively-competitive, global economy, suggest that the Goldilocks economy will continue its healthy expansion into 2008"...

Interesting comment there and if CNN Money knows what its talking about, that comment seems insightful...

 

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