A Very Cool Labor Market Graphic

If it hasn’t become clear to you yet, let me tell you:   I’m a ‘graphics geek‘.  I really love a well designed, clearly articulated, data-rich economic graphic.   They say a picture is worth 1,000 words … well, to me, a great graphic is worth much more than that!

So I’m sure you can appreciate my excitement when I found this one from Fulcrum Asset Management!   Check it out (click to enlarge…it’s easier to see):

It takes a bit of time to grasp the image in its entirety, so let me help a bit.

First, notice there are five ‘groups’ of labor market indicators shown above.  These are:

• Job Loss
• Headline Figures
• Underutilization
• Job Availability
• Confidence

Notice the color of each group matches the color of the specific labor market health ‘indicators’ within that group?   For example, “Job Losses” – which is red – includes the red-colored:

• ‘Mass Layoffs’
• ‘Layoffs’
• ‘Initial Claims’

Each ‘spoke’ of the wheel is one of those 17  indicators.   The spot where they all meet – in the center of the circle – is a weak reading.   Follow a spoke away from the center … and where that line crosses either the red, blue or black line, that intersection marks the value of that indicator at that time.   Or in the case of the black line, the ‘Long Run‘ level for that specific indicator.  Which could be called the long-run equilibrium point.

QE3 was announced on September 13, 2012.   The red line indicates the value of each of the 17 metrics on that date.  The blue line is more current – April of 2016.  The area defined by the 17 data points is intended to indicate the overall health of the labor market.  The smaller the area (red) the weaker the market.   The larger (blue), the stronger.

It’s interesting to note the red, blue and black lines all intersect only once:  On the ‘Mass Layoffs’ spoke.    Notice the ‘Headline Figures (yellow) are all above equilibrium – with the sole exception being the ‘Employment to Population‘ ratio, which remains far below historic levels?

Over all, its clear to see the condition of the labor market has improved dramatically since 2012.    We still have a few ‘black eyes’, however, notably in:

• ‘Average Duration of Employment’
• ‘Part Time for Economic Reasons’
• ‘Discouraged Workers’
• ‘Employment to Population’

What do these metrics have in common?  They show the disruption created by the non-alignment between job skills and market demands.   They manifest the simple fact that many of the ‘old’ labor force skills do not translate well in the ‘new’ economy.   Lack of appropriate and necessary job skill is likely the primary cause for weakness in each of these metrics.

A very interesting graphic indeed!

• Terry Liebman