Half Way Through 2013

We’ve reached the halfway point of 2013 while also nearing the five-year anniversary of the Great Recession, and the question on many minds around here is: how is the economy doing?

The broadest measure of how the economy is doing is gross domestic product, the value of all goods and services produced within U.S. borders in a given time period. And it has been rising only slowly: 1.8 percent in the first three months of 2013. The government’s first take on the second quarter number will be released on July 31. Here’s a better way to think of GDP, though: Not as a raw number or even a percent change, but how the U.S. economy is doing relative to its potential. That is, if everyone who wanted a job had one, if factories were running at their full capacity, if office buildings were full, how much more economic activity would we have. The answer is quite a bit! Here is actual GDP versus the Congressional Budget Office’s best estimate of potential GDP.

The biggest problem facing the U.S. economy since the end of the recession has been a very weak job market. Are we making any progress changing that?  Well, the most widely-watched measure of the job market is the unemployment rate, the percentage of people who want a job who can’t find one. And by that measure, the job market is making steady progress – from a recent national high of 10% in October 2009, to 7.8% the end of 2012, to 7.6% in May 2013. And in Texas, we’ve generally seen the numbers do the same, with the exception of a slight uptick recently; from a high of 8.3% in March 2010, to 6.2% the end of 2012, to 6.5% in May 2013.

But the unemployment rate alone doesn’t tell you everything you need to know about the job market: Part of the decline in the jobless rate has come not because of people finding jobs, but because of people dropping out of the labor force. A measure that adjusts for that phenomenon is the employment to population rate, the proportion of the total U.S. population that has a job. And by that measure as shown on this chart there seems to be little progress.

And, what really matters for people looking for work is how many jobs are out there. And in that area, there is more progress. This chart shows the national ratio of job openings to job seekers, and here less really is more.  And per WorkInTexas.com, Texas is seeing the same positive trend, from a high of 17:1 in February 2010 to 6:1 this month.

– Special thanks to Neil Irwin of Wonkblog for his contributions.

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