Tuesday, January 24, 2017

Dynamic equilibrium: employment population ratio

Part of doing research is just trying things. So I tried looking at the prime age employment-population ratio in terms of the dynamic information equilibrium model. It works a bit, but also fails a bit. And the failure might be interesting. It works well from the 1990s to the present:



However, before that time it's much more complex (I didn't even bother fitting the shocks, just extended the the fit to 1987-2017 back to the 1950s):


The interesting thing is that this was a period when many more people were entering the workforce in the US, especially women. In fact, if we look at men alone the dynamic equilibrium works great from the 1960s to the present:



Women entering the workforce is a strong non-equilibrium effect on the employment population ratio [see below], just like how women (potentially) impacted inflation (the high inflation in the 1970s was caused by demographics, not monetary policy).

...

Update 29 January 2017

John Handley thinks the projected increase in EMPOP is unlikely due to an aging population/demographic trend:

Update 30 January 2017

Here is the view of women entering the workforce and reaching the dynamic equilibrium in the 1990s:


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