Bill Glasheen wrote:
You can't come into one of these discussions with a drive-by line like that and not support it with data and/or references.
The jobless rate was 8.1% in April, mostly because many frustrated job seekers dropped out of the labor force and thus are no longer considered unemployed.
The economy turned in another lackluster month for job creation in April, with 115,000 net new jobs, 130,000 in private business (less 15,000 fewer in government). The unemployment rate fell a tick to 8.1%, albeit mainly because the labor force shrank by 342,000. This relates to what is arguably the most troubling trend in the April jobs report, which is the continuing decline in the share of working-age Americans who are in the labor force.
The civilian labor participation rate, as it's known, fell again in April to 63.6%. That's the second decline in a row and the lowest rate since December 1981. That's right—more than 30 years ago, longer than Mark Zuckerberg has been alive. The nearby chart shows the disturbing round trip the workforce participation rate has taken since 1980 and the precipitous drop in the last three years.
Not a drive by Bill, I was just considering the past three years rather than than past month. According to the BEA, unemployment is down 1.9% since its peak in 2009, and that overall trend is not just job seekers dropping out. Meanwhile change in GDP went from -2.5% in 2009 to +4.2% in 2010 and +3.9% in 2011, and that was while conditions have been worsening in Europe, although as the data you present suggests that may be catching up to us.
By the way, there are two important contributing factors to the decreasing labor participation rate that will make it difficult for any president to reverse it:
1) rampant offshoring of services jobs to other countries (which will not come back under any president even if all taxes in the US were completely eliminated because the wage differential is so great); if anything is leading to discouraged workers dropping out of the labor force, this is it
2) but more important at the moment is retiring baby boomers (baby boomers entering the workforce in the 1980s is also a contributing factor to the sharp growth in labor force participation that Bill commented on)
From the March 2
Forbes Magazine Baby Boomers, Not Recession, Behind Drop In WorkforceQuote:
To hear most economists tell it, the prolonged recession has caused millions of Americans to leave the labor force.
Perhaps though there’s another story there. Maybe it’s just the baby boomers.
Baby boomers, the generation born between 1946 and 1964, started reaching the conventional retirement age, 65, last year. That would certainly have many of them leaving their jobs and heading toward the doors. It’s their exit from the labor force that could explain why the labor-force participation rate has fallen from 66% at the end of 2007 to near 63.9% today, a group of Barclays Capital economists argue in a new report.
According to the report, just a third of the drop in labor force participation came from those who still wanted a job—and only 15% of those folks are of prime working age, 25 to 54. So, the economists see “the possibility of a large and sudden return of previously discouraged job seekers to the labor force as remote.”
This would be good for the bearish holdouts on the economic recovery.
Those skeptics say the dropping unemployment rate mostly is from a drop in able-bodied people quitting the job search (and lowering labor force participation). And, they say, when the economy does pick back up, those folks will want back in. So, when they re-enter, the falling unemployment becomes the rising unemployment rate.
But if the Barclays economists are right, and the labor-force participation decrease is from baby boomers retiring, then we won’t see a large increase in labor force participation later. Or a rise in the unemployment rate.
To make up for this trend as it runs its inevitable course we will need to either bring in workers from other countries or export even more work to other countries, or accept shrinking productivity.
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