Recent Unemployment Numbers May Not Tell the Whole Story

December 10, 2018

While the most recent job creation numbers were a bit of a disappointment, one cause for celebration was the overall unemployment rate holding steady. Many headlines have noted that, at 3.7 percent, we currently have the lowest unemployment since 1969. However, comparing the unemployment rate today to one 50 years ago is a bit of an “apples and oranges” situation.

The cause of this disconnect comes down to demographics. In 1969, nearly half the workforce lacked a high school diploma, and only about 10 percent had a college degree. The composition of the workforce has changed massively since then. The percentage of college graduates has more than tripled to 34 percent, and the portion without a high school diploma has plummeted to about 10 percent. While the unemployment rate for non-high school graduates is indeed the lowest it has been in decades, the unemployment rate for college graduates was lower as recently as 2006.

While looking at the educational makeup of the workforce, and their associated unemployment rates, it is important to also look at their wage share. Though the unemployment rate for those without a high school has plummeted in recent years, they account for only 4 percent of total wages. This means that their low unemployment does not impact consumer spending very much. On the other hand, college graduates account for more than half of the total wages, which translates into a massive impact on consumer spending.

What this all means is that having a 3.7 percent unemployment rate in 2018 does not mean the same thing for the overall economy that it did in 1969.

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