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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
2014 Articles
2013 Articles
2012 Articles
Dec 31, 2012 Fiscal Cliff --- Increased Spending
Dec 24, 2012 Fiscal Cliff---Rising Revenues with current tax cuts?
Dec 13, 2012 November Jobs Report
Nov 28, 2012 Regulation and the Financial System
Nov 17, 2012 Employment Escarpment - Moving the Jobs Needle
Oct 31, 2012 Update on Shale Gas and Tight Oil
Oct 11, 2012 Restructuring of an Industry: US Light Vehicles
Sep 4, 2012 Resuscitating the Moribund US Economy
August 4, 2012 Unemployment Rises Again
July 21, 2012 Misguided Fiscal Policy: Is it a case of fool’s gold, or the Consequences of Economic Ignorance?
July 6, 2012 Let Freedom  Ring!!! The Shale Gale
June 26 Productivity Macro
June 11, 2012 Painted into Corner
June 4, 2012 Encouraged Worker Effect
May 28, 2012 European Honeymoon Over
May 14, 2012 Back to Basics
May 4, 2012 Labor Force Participation Rate Shrinking
Apr 26, 2012 Income Distribution
Apr 15, 2012 Energy Independence
Apr 6, 2012 Jobs Jobs Jobs
Mar 27, 2012 Gas Prices Killing Economic Growth
Mar 15, 2012 Rough Road or Smooth Sailing?
March 9, 2012 Employment Challenges Ahead
Mar 6, 2012 Stalled US Economy?
Mar 1, 2012 FED Profitabiility
Feb 22, 2012 Population Changes
Feb 13, 2012 Bernanke on Unemployment
Feb 8, 2012 Lower Unemployment - Bad News?
Feb 3, 2012 Chinese Miracle???
Jan 12, 2012 Low Interest Rates - Why so low?
Jan 9, 2012 Labor Force Participation Rate
2011 & 2010 Articles
Introduction
About us
Links of Interest
Straw Poll
Definitions & Miscellaneous
 

2012 Volume Issue 3

Economic Newsletter for the New Millennium

February 22, 2012

 

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


Putting Employment into Perspective by Age 2-22-12.pdf



...a bit more compressed version of same


Putting Employment into Perspective by Age Compressed.pdf



What’s going on with the Civilian Noninstitutional Population?


January 2009 to January 2012


Falling Labor Force Participation Rate (LFPR)

As we have noted in previous newsletter articles, a huge economic challenge facing the U.S. economy is the fall-off in the Labor Force Participation Rate.  From January 2009 through January 2012, the LFPR has gone from 65.7% down to 63.7%. 

What does this really mean?






LFPR 16andOver.jpg



The Civilian Labor Force includes those people who are working (employed) and those who are not working, but are seeking employment (unemployed) as defined by the U.S. Department of Labor Bureau of Labor Statistics.  The Civilian Labor Force is a subset of the Civilian Noninstitutional Population, which also includes those individuals (16 years and older) who are NOT either employed or unemployed – in short, these are people who are retired, homemakers, students and others who are not part of the Labor Force for a variety of reasons. 

 

Civilian Noninstitutional Population: Changes from January 2009- January 2012

When we drill down on the difference in the Civilian Noninstitutional Population from January 2009 through January 2012 we can see the reasons for the fall-off in the Labor Force Participation Rate.  First, while the Civilian Noninstitutional Population expanded by 7.5 million, 7.3 million opted out of the Labor Force.  Secondly, the Labor Force itself actually shrank the result of lower number of employed individuals, 564,000, and an increase in those unemployed by 774,000.









Pop Change 16 and Over 2009-2012.jpg




Moving from December 2011 to January 2012 – just one month

http://www.bls.gov/news.release/pdf/empsit.pdf

In the January 2012 Employment Situation (released February 3, 2012), published by the U.S. Department of Labor, Bureau of Labor Statistics seemed to present a glowing picture:

“Total nonfarm payroll employment rose by 243,000 in January, and the unemployment rate decreased to 8.3 percent, the U.S. Bureau of Labor Statistics reported today. Job growth was widespread in the private sector, with large employment gains in professional and business services, leisure and hospitality, and manufacturing.”
 

On the surface, it appeared to be filled with promise for the long-awaited economic rebound.  The truth is that while those employed actually did expand by 847,000 (the focus here is on the Current Population Survey or Household Survey as opposed to the Establishment or Payroll Survey which revealed 243,000 jobs added) and the Unemployed fell by 339,000 – so where’s the bad news, what’s the downside? 

Remember now that the Civilian Noninstitutional Population includes Employed (up 847,000 – good news), Unemployed (down 339,000 – good news) and those NOT in the Labor Force (up 1,177,000 BAD news).  The large numbers reflected in the monthly change from December 2011 to January 2012 (1,685,000 added to the Civilian Noninstitutional Population) were the result of population updates from the Census Bureau, but the net effect was that Labor Force Participation Rate went from 64.0% down to 63.7% and as we indicated in a previous newsletter, if the LFPR had not changed, the unemployment rate would have actually risen from 8.5% to 8.6%


Labor Force Participation Rate by Age Group

http://econnewsletter.com/112801.html

“If January 2012 LABOR FORCE PARTICIPATION RATE (63.73%) had been the same as December (63.96%)

UNEMPLOYMENT RATE = Unemployed divided by the Labor Force

In December 2011 UNEMPLOYMENT RATE was 13,097,000 / 153,887,000, or 8.5%


Adjusting January 2012 total at the 63.96% December Labor Force Participation Rate UNEMPLOYMENT RATE was 13,327,792 / 154,964,792, or 8.6%


The UNEMPLOYMENT RATE would have risen by 0.1%!  This is why the focus has to be on metrics other than the just unemployment.”









Pop Change 16 and Over Dec 2011-Jan 2012.jpg



In the balance of this presentation, we have included charts, breaking out the data according to various age groupings (cohorts) in the Current Population Survey.  It’s interesting to see the changes over time with the Civilian Noninstitutional Population in general, while the various cohorts expand and contract as the Greatest Generation (1901 – 1924), Silent Generation (1925–1945), Baby-Boomers (born 1946–1964), Generation X (1965–1981), and Generation Y (1982–2000) make the way through the system. 

There are two major points to keep in mind as you review the charts:

1) The current fall-off in the Labor Force Participation Rate has to be reversed quickly across the board; this is the key to reviving the economy and bringing it back to pre-recessionary levels.








LFPR and Real GDP.jpg


2) The current and ongoing trend will be for older workers to remain attached to the Labor Force; this is necessitated by shortfalls in their own income levels, and the need for their marginal productivity in the economy at large.  The good news is that technological advances (i.e., medical improvements, less physically demanding jobs, etc.) have paved the way to enable many more people to participate in the labor markets to a much greater degree and with greater longevity than has ever been the case in the past.  The new reality is that experienced and educated workers can, should and will be able to contribute and be productive for as long as they are physically able.  

In upcoming articles, we will be exploring pension funds issues and the potential [if not impending] crisis for defined benefit funds on the private side with a nearly bankrupt Pension Benefit Guaranty Corporation and in the public sector with the increasing demands on limited tax dollars.    

http://www.econnewsletter.com/73901.html

The Pension Benefit Guaranty Corporation (PBGC) http://www.pbgc.gov/news/other/res/financial-condition.html is another example. It can only withstand one more large hit or so before it becomes bankrupt.


With regard to funding pensions in both the private and public sector, keep your eyes on the Labor Force Participation Rate (LFPR); the baby-boomers will have to maintain much higher rates going forward:

The current LFPR for 55 and over is around 40%; in 1995, the number was 30% 

The LFPR for 65+ is 18% and in 1995 it was 12%

For 75+ it is 7.5%; 1995 it was around 4.5%

To paraphrase the fellow in the Dos Equis beer commercials:

Stay healthy my friends http://www.youtube.com/watch?v=U18VkI0uDxE






Change in LFPR 2002-2011.jpg



Be sure to take a look at your population segment...








LFPR 16-24.jpg













Pop Change 16-24 2009-2012.jpg














Pop Change 16-24 Dec 2011- Jan 2012.jpg











LFPR 25-34.jpg














Pop Change 25-34 2009-2012.jpg











 

Pop Change 25-34 Dec 2011-Jan 2012.jpg









LFPR 35-44.jpg














Pop Change 35-44 2009-2012.jpg















Pop Change 35-44 Dec 2011- Jan 2012.jpg











LFPR 45-54.jpg













Pop Change 45-54 2009-2012.jpg















Pop Change 45-54 Dec 2011-Jan 2012.jpg










LFPR 55 and Over.jpg












Pop Change 55 and Over 2009-2012.jpg











Pop Change 55 and Over Dec 2011-Jan 2012.jpg