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During periods of “low visibility,” confusion reigns: for every indication of one trend, there seems to be a countertrend. The key is to glean from the collective wisdom of reliable leading indicators a clear signal that the economy is headed for a turn.

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Aug 28 2017

Outsized Job Gains for Less Educated Depresses Wage Growth

That the headline Employment/Population (E/P) ratio can be deceiving is something we’ve detailed in earlier reports. Today, the E/P ratio, which had been near record lows in the fall of 2013, has topped the 60% mark for the first time since 2009 (not shown). Having made up less than half of the lost ground, it indicates a substantial but incomplete recovery in labor participation.

But the recent revival has been heavily skewed toward about a tenth of the population, namely those without high school diplomas. Specifically, the E/P ratio for women without high school diplomas is at its highest reading in over a decade, having regained 94% of its recessionary losses (chart, bottom line). Similarly, the E/P ratio for men without high school diplomas is near its highest reading in eight years, having recovered 83% of the lost ground (third line).
 
The situation is completely different for those with at least a high school diploma, although a larger proportion of them are employed to begin with. For women in this category, the E/P ratio has seen a modest uptick lately, but it has reversed only 23% of its recessionary decline (second line). Finally, with the E/P ratio for men with at least a high school diploma slipping a bit in recent months, just 9% of its recessionary plunge has been reversed (top line).

Said another way, for men and women without high school diplomas, this represents a noticeable improvement in the E/P ratios since the lows of late 2016, amounting to over 2½ percentage points in each case. But for those with at least a high school education, the E/P ratio has risen only one percentage point since its mid-2016 low in the case of women, whereas for men it has actually dropped more than half a percentage point since early 2017. In sum, the lion’s share of recessionary losses in the employment ratio has been reversed for those with less than a high school education, but not for those with at least a high school education.

In that sense, the fortunes of the less-educated have improved disproportionately this year, while the better educated have made modest gains, at best. One of the many consequences of this skewed recovery is the much-debated weakness in wage growth this year.

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