Page 94 - Fortune-November 01, 2018

All of which leads to 54, some 29 million the workforce, like that like San Francisco.
to a large question that aren’t working or look- of the overall popula- The biggest worry
turns out to be profound: ing for work, but many tion, is rising, and older arising from 3.7%
Why is neither the good of them are waiting people are more likely unemployment is that it
stuff nor the bad stuff just offstage. “The labor than younger ones to may signal an immi-
happening? Pay isn’t force participation rate have jobs. The popula- nent recession. The last
rocketing; the economy of prime-age workers is tion is also better edu- time the rate was this
is booming, with no in- still way below its peak cated—34% of Ameri- low—October 1969—a
cipient recession appar- in the last expansion,” cans over age 25 have recession started two
ent in at least the next says Mickey Levy, an completed four years of months later, and every
few quarters; inflation economist at Berenberg college or more vs. just recession since has
remains subdued. Capital Markets and 28% before the last re- been preceded by an
The explanation is an adviser to several cession—and the highly unemployment trough.
that an unemployment Federal Reserve banks. educated are more likely To economic historians,
rate of 3.7%, which long That means the labor to be employed. Lower this moment looks scary.
signaled a job market market holds more slack unemployment is be- But history isn’t an
as tight as a drumhead, than it seems to. One coming a new normal. oracle. Given the evolv-
just isn’t as low as it result: Upward pressure So it’s clear why infla- ing makeup of today’s
used to be. “The 3.7% on wages isn’t as strong tion isn’t accelerating the labor force, unem-
rate overstates the true as we’d expect. way previous economic ployment rates aren’t
strength of the labor Plus, “an unemploy- models would have comparable with those
market,” says Peter Ire- ment level consistent predicted: The hidden of past decades. They
land, a Boston College with a healthy, fully slack in the labor market could go even lower; the
economics professor and recovered economy is is moderating upward Congressional Budget
former Fed researcher. lower than it used to be pressure on wages and Office forecasts that by
“Things are good but because of demographic thus prices—consumer next year’s fourth quar-
not that good.” The changes,” says Adam prices rose a measly ter, unemployment will
reasons for this shift will Ozimek, a senior econo- 0.1% in September— be just 3.3% with the
have implications for the mist at Moody’s Analyt- even as the economy ex- economy still growing.
economy in several ways ics. The average age of pands at the fastest pace “We’re at the top of
for years to come. in years. That’s not great the cycle,” Fed chairman
Pay is supposed to be news, of course, if you Jerome Powell acknowl-
rising smartly because, BUILD-UP: 278,000 manu- hold a middle-income edged recently, and the
facturing jobs have been
at 3.7% unemployment, filled in the past 12 months. job in a pricey market next recession is lurking
practically everyone out there, maybe nearby.
who wants a job has got External shocks—a
one, with the few job- worsening trade war,
less workers reflecting regional conflict, some
mainly the “frictional” type of corporate debt
unemployment of those crisis—could always
briefly between jobs. But stop growth in its tracks.
this time another factor Yet there’s a plausible
is in the mix: an unusu- argument for substan-
ally large number of tially more growth.
people who aren’t work- Levy agrees: “There are
ing or looking for work, several million more
so they aren’t counted jobs we can add before
as unemployed, but hitting the upper limit.”
who could rejoin the Unemployment at
labor force if they saw 3.7% is less exciting BRYA N ANSELM—THE REDUX
the right opportunity. than it used to be. On
Among Americans of the whole, that’s a good
prime working age, 25 thing.

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