More on the Cost of Moderate Payroll Growth

May 3rd, 2013 at 2:20 pm

In my last post I told you how a) payroll growth is just moderate, not fast, and b) that means the unemployment rate comes down a lot slower than many of us would like.  I noted that if we look at the relationship between the annual change in payrolls and that of unemployment, and plug in the faster growth of payrolls in the 1990s, the jobless rate would be more than a point lower than it is right now.

Here’s the figure behind that.  To make it, I just plugged in the coefficients from a regression of yearly unemployment on yearly payrolls and simulated the path of unemployment had payrolls grew at the same rate as in the 1990s expansion.

Not rocket science at all, and, as mentioned before, there are lots of moving parts left out of this, most notably the Federal Reserve, which has already told us they’re going to start at least thinking about unwinding when the jobless rate goes below 6.5%.

But the analysis provides a simple picture of one the costs of living with this pace of moderate payroll growth.

 

payroll_un_sim

Source: BLS, my calculations

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One comment in reply to "More on the Cost of Moderate Payroll Growth"

  1. Perplexed says:

    -“…that means the unemployment rate comes down a lot slower than many of us would like.”

    So what’s the “bottom line” then for the under & unemployed? How much longer do they have to continue footing the bill for this so everyone else can be spared any costs at the present rates?


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