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June 26, 2017 Why's the FED Panicking?
May 25, 2017 LFPR anyone?
Apr 26, 2017 What's up with the FED?
March 10, 2017 Feb Employment Situation
Oct 10, 2016 Tax Burden
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
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2016 Volume Issue 2


Economic Newsletter for the New Millennium
January 19, 2016

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


NewsletterJanuary192016.pdf



...a bit more compressed version of same


NewsletterJanuary192016 Compressed.pdf



Audio Version of Newsletter --- to follow


The Employment Gap of 8.4 Million: the Labor Force Participation Rate (LFPR); breaking it down by Age Group


In our last article we noted that while the unemployment rate was 5.0% in December 2015, but there were at least 8 million ‘missing’ from the Labor Force








1-AE Neuman - what me worry about Gaps - nice smile.jpg




Employment Gap?  What – me, worry?


As we’ve noted on several occasions, going back to May 2010, the Labor Force Participation Rate has been a recurring issue in the employment picture. 

May 12, 2010 High/Sticky Unemployment for Years to Come?
http://blogs.udmercy.edu/newparadigm/tag/debt-to-gdp/

Here is the break down for the Employment picture for 2015

2015 (Annual numbers in thousands (000))

Civilian Noninstitutional Population 250,801  

Labor Force 157,130 = [(Employed 148,834) + (Unemployed 8,296 ---- actively seeking employment)

The Labor Force Participation Rate = Labor Force / Civilian Noninstitutional Population
The Labor Force Participation Rate = 157,130 / 250,801
The Labor Force Participation Rate = 62.7%  


From 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 Noninstititutional Population:


2015 (Annual numbers in thousands (000)) at 66.0% Labor Force Participation Rate

Civilian Noninstitutional Population 250,801
Using Labor Force Participation Rate = 66.0%

Adjusted Labor Force = (250,801 X 66.0%)
Adjusted Labor Force = 165,529  

Adjusted Labor Force 165,529 = [(Employed 148,834) + (Unemployed 8,296 + Adjusted Unemployed of 8,399)

Again, 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.

This was covered in greater detail in the last newsletter…

Reviewing the Macroeconomic Indicators through 2015: first up –Labor Markets
http://econnewsletter.com/232101.html

Digging into the details behind the Labor Force Participation Rate Deterioration  

The 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 75+ year-olds  

While 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.
    









2-Labor Force Participation Rate 65+ year olds - staying in the labor force in record numbers.jpg












3- 75+ year olds also remaining in the Labor Force-in record numbers.jpg




16 - 64 year-olds…

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. 

As 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 pressure. 

What 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.

We 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 force…   









4-rather than hang in there until 65 many from the 55-64 year old age group are opting out.jpg











5-younger cohorts like the 45 to 54 year olds should be back at pre-recession levels in terms of the LFPR - their lack of income-wealth will harm them as they grow older.jpg











6-again this age group 35-44 should be at least at pre-recession levels to make up for those leaving the labor force due to retirement.jpg











7-again the 25-34 year old group should have a labor force participation rate at least as high as pre-recession levels assuming the economy really is in recovery.jpg











8-yes this youngest age group is in school but wasn't that the case before the recession - again, should be at much higher levels.jpg











9-the overall LFPR should have reached pre-recession levels if there was a reasonbly healthy recovery.jpg











10-if the Labor Force Participation Rate was in the 66 percent range there would be an additional 8.4 million people unemployed.jpg











11-again, if the LFPR was at 66 percent the unemployment rate would be double from 5 percenet up to 10 percent.jpg