When confronted with evidence that the job market is red hot, naysayers often point to the employment-population ratio (E/P), which remains below pre-Covid levels:

How can this be?  After all, the US total population has risen by less than 1% over the past three years.  In contrast, payroll employment is up by 2%.  Shouldn’t the employment/population ratio now be about 1% above pre-Covid levels?

I found two explanations for this discrepancy.  First, the E/P ratio is calculated using the household survey of employment, which is up by only 1% over the past three years.  The household survey is widely viewed as being less accurate than the payroll survey, but I don’t have big problem with its use here.  Even a 1% rise in total employment slightly exceeds the rate of population growth.  So why is the E/P ratio lower than pre-Covid?

It turns out that the E/P ratio is calculated by dividing household survey employment by not the total population, rather by the non-institutionalized population age 16 and over.  That seems reasonable, so what’s the problem?

It turns out that the BLS has a very weird estimate of the over-16 non-institutionalized population.  They claim it rose by 2.5%, from 259.502 million to 265.962 million over the past three years.  In contrast, the BEA says that the total population rose by 0.9%%, from 331.345 million to 334.420 million (which is what basically what the Census Bureau says.)  By implication, the relatively small number of children and institutionalized must have plunged by 3.4 million, or nearly 5%.  That seems implausible for such a short time.  (I couldn’t find precise data, but it looks like the number of American children declined by about 1.6 million over the past three years, and the institutionalized population is quite small.)

I suspect that the BLS estimates of total population over age 16 failed to account for the sharp slowdown in adult population growth due to Covid deaths and a dramatic fall in immigration.  And I also suspect that payroll employment is more accurate than the household survey.  Put the two together, and it’s reasonable to assume that employment has now exceeded the pre-Covid peak of early 2020, even accounting for population growth.  This is especially the case when one considers that the elderly population is the fastest growing part of the total US population, as baby boomers like me retire in large numbers.  There is no “hidden unemployment”.


1. We are booming; there was no recession in 2022.

2. When strong employment growth is combined with rapid nominal wage gains, there’s no evidence for the claim that the Fed adopted a tight money policy in 2022.  It didn’t happen.  At best, they adopted a slightly less expansionary policy than in late 2021.  But if a driver slows down from 120 to 110 mph, would you describing his driving policy as “slow”?  So why describe monetary policy as “tight”?

3.  Economists should not be in the business of predicting business cycles.  We’ve never been able to do it, and it just makes us look foolish.  We look like a bunch of astrologers.