Labour force participation rates

Thanks to Eric Crampton for his coverage. Eric suggested that my slightly gloomy take on New Zealand’s 5.7% unemployment rate needs to be tempered by recognising that the labour force participation rate is rising.

Participation rates have been rising here, and in most of the OECD. New Zealand doesn’t really stand out (from memory, the increase in our unemployment rate is also middle of the pack).  One caveat is that the chart shows the 15-64 participation rate.  I couldn’t quickly find the quarterly OECD data for the whole 15+ population, but when I looked at it a few weeks ago New Zealand was a little further up the rankings.

participation rate

Two other things struck about the data in this chart:

  • the continuing very weak US participation rate.  It is just one among many indicators that makes me sceptical of the Fed’s case for seriously contemplating near-term increases in the Fed funds rate.
  • the participation rates for Spain and Greece.  Participation rates are usually cyclically weak when unemployment is particularly high.  Spain and Greece have had huge increases in their unemployment rates, so my hypothesis is that families are finding times so tough that every possible is searching for any job, however short-term or short hours, possible.

2 thoughts on “Labour force participation rates

  1. Thanks, Michael. Note that it isn’t just that LFPR has been rising, it’s that LFPR’s hitting all-time highs for NZ. 2014 was 69.2; there is not a higher value in the series going back to ’86. The last quarter was 69.7%.

    Consequently:
    1) It’s not surprising that LFPR hasn’t risen as much in NZ relative to other countries: we were already at 68.5 in 2008 and didn’t drop below 68 in any of the years since. We’re basically top-bound.
    2) It’s way more plausible that the 5.7% unemployment rate for the December quarter, which came with a increase in the employment rate as well, reflects workers being drawn into the market. The number of employed persons was up 1.2% in the quarter!

    Like

    • Yes, although across the OECD around half of all individual countries had participation rates (15-64) at series peaks in the most recent quarter (and, in addition, the aggregated EU and euro-area did too).

      But I take the point re the NZ Dec 2014 numbers. It certainly wouldn’t surprise me if our U rate were a bit lower in March, simply reversing some of the noise in the series. But, equally, a 5.5% unemployment rate – in a climate of very low wage and price inflation – should not be cause for complacency either.

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s