jeudi 23 janvier 2014

Unemployment, activity and employment in France and the US

Since the beginning of the crisis and after the fall of 2008-2009, employment rates - the share of 15 to 64-year-old having a job - in France and in the US have been stable, at 64% in France and 58% in the US. 

So why do we say that unemployment decreases in the US while increasing in France? Because unemployment does not include inactive people (students, retirees, people not looking for a job...). And the number of inactive people has considerably increased in the US while slightly decreasing in France.

On the graphs below, we see that the french unemployment rate increased in recent years but that that increase has been accompanied by a one for one increase in activity rate. This is mainly due to the age of retirement being pushed away by successive pension reforms, the activity rate of 15 to 55 year old being stable. The fact that people entering (or re-rentering) the workforce can't find a job is not a good sign for the french economy, operating below capacity, but the stability of employment rate since 2000 (except a jump in 2007-2008) allows us to see the half-full glass part of the story. 

In the US, the most probable story is that more and more unemployed people give up and stop looking for a job, thus leaving the active population. This is likely to reduce potential GDP, and reinforce the idea of an hysteresis effect of long-terme unemployment (see DeLong-Summers

Graph 1 : (see : OFCE)

Graph 2 : source INSEE

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