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Aug 1, 2016 Here Comes the Debt
June 26, 2016 Moribund US Economy
June 16 2016 Labor Update
Mar 10, 2016 Spring Renewal for Labor Markets?
Feb 21, 2016 GDP Gap
Feb 16, 2016 FED and Monetary Policy
Jan 19, 2016 Employment Gap Age Groups LFPR
Jan 10, 2016 A look at the Employment Situation
Dec 30, 2015 Fed Funds Rate up 25 Basis points...so what?
Dec 15, 2015 Fed Funds on the rise? Has Yellen 'Fell-in'?
Oct 15, 2015 Labor Markets Seven years of misery
Oct 6, 2015 Sept: Horrible Month for Labor
Sept 30, 2015 The FED: Interest Rate Angst
Sept 11, 2015 FED on the Monetary Policy Front
July 31, 2015 Trade and Foreign Exchange Rates
July 20, 2015 Economic Growth?
July 10, 2015 Labor Picture by Age Group
July 2, 2015 Disastrous Month in Labor Rpt
June 19, 2015 Minimum Wage - Income Distribution
Jun 5, 2015 Encouraged Worker Effect
May 8, 2015 Updated Employment Situation for April
May 4, 2015 Languishing Labor Markets
Apr 7, 2015 LFPR Doldrums on the Labor Front
March 8, 2015 Less than Zero Interest Rates - Trade War
Nov 29, 2014 Good News October Jobs Report
Nov 6, 2014 LFPR by Age and Gender
Oct 18, 2014 Competition-Consumer Sovereignty
Oct 12, 2014 Labor Rpt
July 13, 2014 Jellin with Yellin
June 20, 2014 Labor Mkts by Age Groups
June 3, 2014 Mar and Apr Jobs Rpt
May 21, 2014 April Jobs Report
April 18, 2014 Economic Welfare
Mar 24, 2014 CBO Estimates and LFPR
Jan 12 2014 Deteriorating Labor Market
Jan 2, 2014 Is this the beginning of the end for QE?  (Quantitative Easing 1 through 3+)
2013 Articles
2012 Articles
2011 & 2010 Articles
Introduction
About us
Links of Interest
Straw Poll
Definitions & Miscellaneous
 

2014 Volume Issue 7

Economic Newsletter for the New Millennium

June 20, 2014

Editor
Donald R. Byrne, Ph.D.
dbyrne5628@aol.com


Associate Editor
Edward T. Derbin, MA, MBA
edtitan@aol.com

For a downloadable version, click here


2014 Volume Issue 7-2014 Jobs Rpt Age Group.pdf


...a bit more compressed version of same


2014 Volume Issue 7-2014 Jobs Rpt Age Group Compressed.pdf


Changes in the Employment Picture by Age Group: So much for the Assertion that the Fall-off was primarily due to the Baby-Boomers rolling past age 65

Austan Goolsbee, former Chair of Economic Advisers to the president, 2010-2011, on the Sean Hannity Show, April 9, 2013

http://nation.foxnews.com/austan-goolsbee/2013/04/10/hannity-blasts-ex-obama-economic-adviser-over-white-house-party-you-re-drugs-you-can-t-be-serious

“Well, the labor force participation rate has gone down about 55 to 60 percent of it from aging of the population, about 40 percent from discouraged workers.”


The Index of Missing Economic Indicators; The Unemployment Myth

By Austan Goolsbee

Published: November 30, 2003 NY Times Op-Ed

http://www.nytimes.com/2003/11/30/opinion/the-index-of-missing-economic-indicators-the-unemployment-myth.html


“But the unemployment rate has been low only because government programs, especially Social Security disability, have effectively been buying people off the unemployment rolls and reclassifying them as ''not in the labor force.''”


Yes, that was 2003, around the time when the media began referring to the recovery from the Recession of 2001 as a ‘Jobless Recovery’:

The Jobless Recovery

Suffering from the recession’s aftershocks, labor market conditions continue to worsen


“Though the recession that began in March 2001 has not yet been declared officially over, most economists believe it ended early in 2002. However, the labor market downturn is far from behind us. Today’s labor market is much weaker than it was one or even two years ago, and the “jobless recovery” grinds on.”

By Jared Bernstein
March 25, 2003…Economic Policy Institute


On the Causes of Declines in the Labor Force Participation Rate
Shigeru Fujita

Federal Reserve Bank of Philadelphia

Revised: February 6, 2014

http://www.philadelphiafed.org/research-and-data/publications/research-rap/2014/on-the-causes-of-declines-in-the-labor-force-participation-rate.pdf  

The main findings are summarized as follows.

1. Between the first quarter of 2000 and the final quarter of 2013, the participation rate declined more than 4 percentage points. Roughly 65 percent of the decline is accounted for by retirement and disability. The increase in nonparticipation due to retirement has occurred only after around 2010, while nonparticipation due to disability has been steadily increasing over the past 13 years. Similarly, nonparticipation due to schooling has been steadily increasing and has been another major contributor to the secular decline in the participation rate since 2000.

2. The number of those who did not look for a job (thus being out of the labor force) even though they wanted a job increased significantly between the fourth quarter of 2007 and the end of 2011. This group of “discouraged workers” explains roughly 30 percent of the total decline (around 2 percentage points) in the participation rate over the same period. Between the first quarter of 2012 and the fourth quarter of 2013, the participation rate of this group has been roughly flat.

3. Almost all of the decline (80 percent) in the participation rate since the first quarter of 2012 is accounted for by the increase in nonparticipation due to retirement. This implies that the decline in the unemployment rate since 2012 is not due to more discouraged workers dropping out of the labor force.

4. The likelihood of those who left the labor force due to retirement or disability rejoining the labor force is small and has been largely insensitive to business cycle conditions in the past, suggesting that the decision to leave the labor force for those two reasons is more or less permanent.
 

As we’ve noted in numerous articles, there has been a ‘disconnect’ in terms of employment characteristics or behavior when comparing the various age groups or cohorts over the last several years.  We first noticed that while the 65+ age group had a low Labor Force Participation Rate relative to the younger cohorts, coming in at 18.9% in April 2014, that rate was 17.3% in January 2009 and 14.1% in January 2004.  Unlike any of the other age groups, the 65+ set has grown in terms of the size of the Labor Force, Labor Force Participation Rate, and Employment Population Ratio.

Just the same, as the Baby-Boomers (born 1946-1964) continue to swell the ranks of the 65+ age group, the ‘not in the Labor Force’ portion is also growing rapidly, increasing by 5 million from January 2009 to April 2014.  The significant thing to note is that the conventional wisdom seems to point to the aging population as the major cause of the fall-off in the Labor Force Participation Rate [Labor Force (employed + those unemployed actively seeking employment) divided by Population (Civilian Noninstitutional Population: those 16+ who are not in the military, in prison, or otherwise institutionalized)].  It’s difficult to understand how it is that the Labor Force Participation Rate, among other measures of the employment, points to a continued and growing presence for the 65+ segment while the rest of the groups continue to underperform. 






1-Since 2009 the LFPR in every age group has deteriorated with the exception of the 65+ year olds.jpg



While we’re focusing on the youngest group (16 – 24) and the oldest at 65+, it’s important to understand that ages 16 through 64 experienced a decline in the Labor Force Participation Rate since 2009.  This means that we continue to underutilize people who are in their prime earning years.  It’s clear that as the Baby-Boomers move into their retirement years, you would expect the earlier age groups to pick up any slack in the labor markets.  This is clearly not the case at the moment and it has actually been worsened since 2009.  Without wading into the political morass, it’s clear that the disability rolls are elevated today, in much the same way that Austan Goolsbee declared was the case in 2003.  It’s also clear that while the older set (65+ years old) are retiring; they are doing so at a slower rate, a much slower rate.

 





2-the 16 to 64 age groups have shown significant problems with the the Labor Force Participation Rate since January 2009.jpg


It makes sense on one hand for people to keep working beyond age 65, especially considering increased life spans and the pervasiveness of less physically demanding jobs.  Where once a person would die within a relatively short period after they retired, today, it’s increasingly likely that they will outlive their retirement savings.  When you couple that with the fact that it has been a tough sledding in the labor markets as well as the financial markets over the past several years, it is no wonder that you see people working well beyond the 65 year mark.

It’s also evident that such things as efforts to raise the minimum wage can be fraught with peril and unintended consequences.  Since most of those affected by an increase in the minimum wage are in the ‘under 25 years of age’ category, it makes sense that any reduction in employment related to an inability of employers to maintain their workforce at the higher minimum wage will impact the younger workers more severely.  Unfortunately, the 16-24 year old labor force is already stressed in the labor markets.  This will only serve to compound the problem as reflected in the falling Labor Force Participation Rate. 

Characteristics of Minimum Wage Workers: 2012
http://www.bls.gov/cps/minwage2012.htm

US Dept of Labor, Bureau of Labor Statistics

“Minimum wage workers tend to be young. Although workers under age 25 represented only about one-fifth of hourly paid workers, they made up about half of those paid the Federal minimum wage or less. Among employed teenagers paid by the hour, about 21 percent earned the minimum wage or less, compared with about 3 percent of workers age 25 and over.”  

Another issue that under performing labor markets are bringing to the surface is that if in fact the Baby-boomers are exiting the labor force en masse to enjoy their golden years, you would think that in an even somewhat healthy labor market, there would be increasing levels of employment as the younger workers are back-filling those left by the retirees.  The result of course would be higher Labor Force Participation in the younger age groups.  This is clearly not happening.

With that in mind, again, keeping away from the political aspects of this, how does this lower Labor Force Participation Rate lend any support to the conventional wisdom that the US needs to swing wide the doors for amnesty?  This is not to say that immigration is not an important aspect of our current population – it certainly is.

Employment outlook: 2010–2020
http://www.bls.gov/opub/mlr/2012/01/art3full.pdf

US Dept of Labor, Bureau of Labor Statistics
February 21, 2012

“According to the Census Bureau’s population projections used in the 2010–2020 projections of the labor force, net immigration to the United States is expected to add 1.4 million people annually to the U.S. resident population. This figure is a sharp increase over the roughly 800,000 immigrants per year projected in 2004 by the Census Bureau’s previous long-term projections of the resident population.”

Keep in mind that the overall Civilian Noninstitutional Population is currently growing at around 2.0 to 2.5 million per year.  It stands to reason that a large portion of the additions to the working age population are coming from the ranks of the foreign born.

To reiterate the obvious, the labor markets are currently underperforming as has been revealed by the Labor Force Participation Rate and the Employment-Population Ratio.  As we’ve noted before, the only solution to this problem is via policies promoting economic growth.    






3-The 65+ year old age group is the largest of all cohorts and will continue to grow as Baby-Boomers age.jpg



Those 65 and older represent the largest cohort of all the age groups and will maintain that position for some time to come as the Baby Boomers continue to roll past age 65.  As we’ve already noted and as can be seen in the following graphs, the employment picture for the various age groups has proven to be disastrous for all age groups aside from the 65+ cohort.  Let’s begin by taking a look at the oldest cohort (65+ years of age) and the youngest cohort (16-24 years of age).  

It’s easy to see how many people have arrived at the conclusion that the decline in the Labor Force Participation Rate (LFPR) is primarily an issue associated with an aging population.  In fact, there were about 5 million people added to the roles of the ‘not in the labor force’ for this age group.  If you simply added 5 million back into the current labor force, this would raise the Labor Force Participation Rate up to 64.8% a full two percentage points higher than where it is currently at (62.8% in April and May 2014).  So the question becomes this: since so many people are leaving the labor force in the oldest age group, why haven’t the other cohorts picked up the slack?  If the 16 through 64 age groups had merely returned to the January 2009 levels, this would have bumped up the labor force by nearly 4.2 million people and moving the LFPR to the 64.5% level.   

In the following graphs we have laid out the employment situation statistics for the 65+ age cohort, followed by the 16 – 24 year old age group.  







4-the population in the 65+ Age Group expanded by nearly 7 million from Jan 2009 through April 2014.jpg






5-The Labor Force in the 65+ age group grew by 1.9 million from January 2009 - April 2014.jpg






6-The Not in the Labor Force in the 65+ age group grew by 5 million from January 2009 - April 2014.jpg






7-The Labor Force Participation Rate in the 65+ age group improved by 1.6 percent from January 2009 - April 2014.jpg






8-The Employment-Population Ratio in the 65+ age group improved by 1.7 percent from January 2009 - April 2014.jpg






9-The 16 - 24 year old age group expanded by 1.3 million from Janurary 2009 through April 2014.jpg






10-The 16 - 24 year old age group Labor Force shrank by nearly half a million from Janurary 2009 through April 2014.jpg






11-The 16 - 24 year old age group 'not in the labor force component expanded by 1.8 million from Janurary 2009 through April 2014.jpg






12-The Labor Force Participation Rate in the 16 -24 year old age group fell by 3.1 percent from January 2009 - April 2014.jpg






13-The Employment-Population Ratio in the 16 - 24 year old age group fell by 1.5 percent from January 2009 - April 2014.jpg




In this last series of graphs we present employment statistics’ time series for the various age groups from 16 year of age and up (see how your age group has fared):  

The Civilian Labor Force: Employed plus those Unemployed (actively seeking employment)

As the phrase implies, the ‘Not in the Labor Force’ measures the difference between the Labor Force and the Civilian Noninstitutional Population.  This group includes (among others) retirees and those who have given up seeking employment altogether. 

The Labor Force Participation Rate or LFPR is the Labor Force divided by the Civilian Noninstitutional Population. 

The Employment-Population Ratio is the relationship between those Employed and the Civilian Noninstitutional Population.  This ratio is on the radar of Federal Open Market Committee or FOMC in their policy making deliberations about every six weeks as seems to be a significant factor in determining when the FED will decide to act on raising the targeted Federal Funds Rate. 

In the months ahead, keep an eye on the employment reports – they are published on the first Friday of the month by the Bureau of Labor Statistics.  

May 2014
http://www.bls.gov/news.release/archives/empsit_06062014.pdf  

Current Employment Summary
http://www.bls.gov/news.release/empsit.nr0.htm





14-Since January 2009, the population (CNP) has grow by 12.7 milllion, or around 190,000 per month. This monthly rate (200k+, actually according to the CBO.jpg






15-While the Labor Force has grown by 1.2 million since January 2009, the population ( has grown by 12.7 milllion.jpg






16-The 'Not in the Labor Force' component of the population has grown by 11.5 million since January 2009, the population (CNP) has grow by 12.7 milllion..jpg






17-The Labor Force Participation Rate has been hovering at 36 year lows for the last few months. The LFPR was averaging 66% from 1981 through 2008.jpg






18-The marginal Employment-Population Ratio from January 2009 through April 2014 was 27.7% Employment was 3.5 million Population CNP of 12.7 million.jpg






19-The Labor Force (those employed and those unemployed seeking employment) fell by 461,000 since January 2009 while the populationCNP grew by 1.3 million.jpg






20-Not in the Labor Force increased by 1.8 million since January 2009 while the population CNP grew by 1.3 million.jpg






21-The marginal Labor Force Participation Rate from January 2009 through April 2014 was -35.7%; the Labor Force fell by 461,000 the populatio grew by 1.3 mil.jpg






22-From June 2009 through Apr 2014, employment grew by 70,000, while the population CNP expanded by 1.3 million.jpg






23-The Labor Force-those employed and those unemployed seeking employment-increased by 785,000 since Jan 2009 while the population CNP grew by 2 million.jpg






24-Good news-the not in the Labor Force component decreased by 2.1 million since January 2009 while the population (CNP) grew by 2.0 million.jpg






25-While the Labor Force increased by 785,000 since January 2009 the population grew by 2 million.jpg





26-The marginal Employment-Population Ratio from January 2009 through April 2014 was 63.4% [Employment = 1.3 million Population (CNP) 2.0 million].jpg






27-The Labor Force (those employed and those unemployed seeking employment) shrank by more than 2 million since January 2009.jpg






28-The 'Not in the Labor Force' segment grew by nearly 500,000, while the population (CNP) fell by 1.6 million.jpg






29-The Labor Force shrank by 2.1 million and the population also fell by 1.6 million.jpg






30-Employment fell by 1.4 million and the population (CNP) dropped by 1.6 million from Jan 2009 - Apr 2014.jpg






31-The Labor Force (those employed and those unemployed seeking employment) shrank by more than 2 million since January 2009.jpg






32-The Labor Force shrank by 2 million since January 2009, while the population only fell by 1.4 million --- the net effect on the 'Not in the Labor Force' wa.jpg






33-The Labor Force fell by 2.0 million and the population fell by 1.6 million....the fall-off in the Labor Force overwhelmed the shrinking population.jpg







34-Again, employment and the population both fell by 1.4 million --- the net result was that the Employment-Population Ratio dropped by 0.9%.jpg






35-The Labor Force (those employed and those unemployed seeking employment) grew by 3.1 million since January 2009.jpg






36-The 'Not in the Labor Force' component of the population (CNP) grew by 2.3 million since January 2009, driven primarily by an expanding population.jpg






37-The Labor Force grew by 3.1 million and the population also grew by 5.5 million....the 1.1% drop driven by marginal LFPR of 57.3% from Jan 2009-Apr 2014.jpg






38-Employed expanded by 3.4 million and the population also grew by 5.5 million leaving the Employment-Population Ratio unchanged at 61.3%.jpg






39-Here come(s) the boom(ers)...The Labor Force (those employed and those unemployed seeking employment) grew by 1.9 million since January 2009.jpg







40-The Not in the Labor Force grew by 5 million since January 2009. The higher marginal LFPR at 27.3% signaled that a larger portion remained active.jpg








41-The Labor Force grew by 1.9 million and the population also grew by 7.0 million....the rise in the Labor Forceresulted in a 1.6% increase in the LFPR.jpg






42-Employment grew by 1.9 million and the population also grew by 7.0 million-.the rise in employed result in a 1.7% increase in the ratio.jpg