Labor Force Participation Rate = Labor Force / Civilian Noninstitutional
Labor Force Participation Rate = 157,130 / 250,801
Labor Force Participation Rate = 62.7%
2000 through 2008, the Labor Force Participation Rate [Labor Force (Employed +
Unemployed actively seeking employment) divided by the Civilian
Noninstitutional Population) averaged 66.3%.
Again, the Labor Force Participation Rate for 2015 was 62.7%. By simply applying 66.0% to the 2015 Civilian
(Annual numbers in thousands (000)) at 66.0% Labor Force Participation Rate
Noninstitutional Population 250,801
Labor Force Participation Rate = 66.0%
Labor Force = (250,801 X 66.0%)
Labor Force = 165,529
Labor Force 165,529 = [(Employed 148,834) + (Unemployed 8,296 + Adjusted
Unemployed of 8,399)
this would equate to an additional 8.4 million unemployed, doubling the Unemployment
rate to 10%. That 8.4 million missing
from the labor force is what we refer to as the employment gap.
was covered in greater detail in the last newsletter…
Digging into the details behind the
Labor Force Participation Rate Deterioration
most recurring and somewhat dismissive explanation for the deteriorating Labor
Force Participation Rate has to do with the Baby-boomers entering their
retirement years (Baby-boom: born 1946-1964).
The expectation is that the older age groups will be moving to the
sidelines and into the ‘not in the labor force’ component of the Civilian Noninstitutional
Population. This is plausible of course,
but the reality is quite different.
Beginning with the 65+ year-olds…and the
there is a general notion that 65 is some sort of mandatory retirement age, the
truth is that many people work well past that age. What is somewhat surprising is that since
even before the recession, this age group has been remaining in the labor force
at increasing levels. Part of this has
to do with people in this age group remaining healthy enough to participate in
the labor force. Given the changing
nature of the workplace (less physically arduous in many cases), it only makes
sense that more experienced employees are an attractive option for employers. There are other considerations including cost
of employment (lower cost of health care) and many in this age group are not
seeking top wages or even full-time employment since they may already be
collecting pensions, Social Security, etc.
The following graphs have one thing in common: their Labor Force Participation
Rate’s for 2015 are lower than their rates in 2008. While the unemployment has fallen
significantly, from a peak of 10% in 2009 to 5% in 2015, 8.4 million people
remain on the sidelines – not in the labor force.
evidenced by the last three months of 2015, where the employment expanded by
987,000 and the unemployed fell by only 20,000, it’s apparent that there is
ample slack in the labor markets to close that ‘employment gap’ in relatively
short order, without much fear of inflation coming from increasing
employment. In addition to absorbing the
job growth across age cohorts (from 16-64 in particular), the Civilian
Noninstitutional Population (CNP) forecast is for continued expansion of around
200,000 per month. Since most of those
additions to the CNP typically are at the younger range of the age groups, this
will afford even more opportunity to grow jobs without much concern over inflationary
we’re really looking at here is an economy that has really failed to recover in
an adequate manner from the downturn referred to as the Great Recession.
will be looking at the economic growth and inflation picture in a subsequent
newsletter, but keep in mind as you go through the following graphs that
embedded therein are eight million plus individuals who should be in the labor