Non-Employment Index: An Alternative Employment Stat

April 26th, 2017

I recently encountered a Federal Reserve Bank of San Francisco article titled “Measuring Labor Utilization: The Non-Employment Index”, which briefly summarized the non-employment index (NEI) created by various economists: Richmond Fed’s Andreas Hornstein, San Francisco Fed’s Marianna Kudlyak, and McGill University’s Fabian Lange. The NEI attempts to quantify and calculate a “truer” level of non-employment (key distinction between unemployment and non-employment), which is often overlooked by the media and various think tanks, and, more generally, in everyday discussions. The NEI assigns weights to various types of non-employment (e.g., unemployed for fewer than 27 weeks or non-employed simply because one is retired) based on the likelihood that the individual would return to full-time employment. Based on these calculations, the NEI is better able to approximate the non-employment level, providing us with a better realization of the U.S. employment climate. This proves vital to ARM industry participants, business owners and workers alike, since it provides a relatively objective method to quantify and speak to a major aspect of the economy.

The graph below compares the standard NEI (gray line) and the NEI when including part-time workers who seek but can’t find full-time employment (black line) to the often-referenced official unemployment rate (purple line). As we can see, both NEIs are relatively higher than the unemployment rate, ranging from 8.31% to 9.45% in January 2017. Quantitatively speaking, both of these most recently observed levels are better than each measurement’s respective mean and median since January 1994. The NEI averaged 8.93% and maintained an 8.76% median over the nearly 25-year period, whereas the NEI including part-time workers amounted to 9.82% and 10.13% among the two statistics, respectively. Broadly speaking, we can objectively state that the employment climate is better now than the “average” historical measurements over the past two decades or so.

Despite the optimistic view that these data present, there’s still much work to be done regarding the U.S. employment climate, most notably dealing with wages, salaries, and benefits. Despite sheer employment levels approaching and, at some points, improving upon those preceding the Great Recession, wage increases have grown much more slowly, suggesting that many of the recently-filled jobs are low-paying positions that aren’t as beneficial to workers’ well-being. Perhaps this should be the focus going forward for policymakers: stop simply creating jobs and focus more heavily on generating well-paying positions.

In all, the employment climate is pretty healthy right now, which bodes well, to an extent, for the ARM industry. As always, when the economy is healthier and employment is more robust, individuals will be much more willing to consume goods and services, spending extra money and accumulating debt. Additionally, during a healthier economy, borrowers are generally better able to repay existing debts. If these assumptions hold true, then we should expect a higher level of delinquencies and bad debt as consumers borrow beyond their means, leading to higher potential for outsourced ARM services into the future.

Comments are closed.

LATEST BLOGS

The Fed Unwinding the Balance Sheet: Effects on the ARM Industry

November 21, 2017

Is the unwinding of the Federal Reserve balance sheet a huge risk to the economy and markets? If the economy doesn't withstand the unwinding properly and borrowing stagnates too dramatically or declines, we may see a slow down in consumer expenditures. So, what are the effects on the ARM industry?....

» see this post    » all posts


Corporate Tax Reform: Winners and Losers

November 16, 2017

With the House and Senate announcing the major structures of their respective tax reform bills, what are the major impacts on the U.S. economy and the accounts receivable management industry? Both bills wish to eliminate loopholes, reduce corporate taxes and create jobs. This sounds great in theory, but does theory align with reality?....

» see this post    » all posts


The State of the Economy and its Impact on the ARM Industry

November 14, 2017

As we prepare to enter 2018, it's not uncommon to question the current state of the economy. Is the economy improving, and how do these economic conditions impact the ARM industry? This two part podcast series can answer those questions.....

» see this post    » all posts


RECENT ANNOUNCEMENTS

Kaulkin Ginsberg Company Teams up with Topline Valuation Group to Offer a New Valuation Service

November 21, 2017

Kaulkin Ginsberg, in conjunction with its sister company Topline Valuation Group, announces the release of a product that provides ARM company owners with an in-depth assessment of their company's strategic opportunities.....

» see more




Kaulkin Ginsberg Company Releases Middle Market ARM Benchmarking Report

October 12, 2017

Kaulkin Ginsberg Company announced it's release of the middle-market ARM Benchmarking Report available to KG Prime Universal members.....

» see more




Kaulkin Ginsberg Company to Release Exclusive and Comprehensive Index

September 13, 2017

Kaulkin Ginsberg Company will release an exclusive and comprehensive index detailing the economy's effect on the ARM industry. ....

» see more