The June employment report brings some OMG, jaw dropping, are you kidding me numbers. Over 640,000 dropped out of the labor force. As a result, the unemployment rate drops two tenths of a percentage point to 5.3%. The labor participation rate dropped by -0.3 percentage points to 62.6%. This new low of a labor participation rate has not seen since October 1977 when women and minorities were still were not in the workforce extensively. While the United States does have baby boomers entering retirement, these figures are horrific...The Economic Populist
Another 640,000 Drop Out of the Labor Force Causing Unemployment Rate Decline
Robert Oak
I have a middle-aged friend with PhD in chemistry who was laid off from the Hanford DOE lab several years back due to budget cuts. He's still unemployed, and due to his age and long-term unemployment, he'll probably never work again.
ReplyDeleteThe system is broken (for the 99%).
Tom is probably right to say “these figures are horrific”. But just to be sure, we need evidence as to exactly why people are dropping out. It’s just possible that people are actually choosing leisure over work. Certainly the participation rate started to decline BEFORE the 2007/8 crisis.
ReplyDeleteBut Ralph, do you think the drop-outs won the lottery? How does one "choose leisure" when one is broke, unless it's the type of leisure that involves sleeping under a bridge, sleeping in your parent's basement, or being a stay-at-home mom when you'd rather be working?
ReplyDeleteThe decline began in the 2000 recession, which also coincides with Clinton admitting China to the WTO.
If you break down the participation decline by age group, it's mostly young people who have dropped out of the labor force, while the allegedly retiring baby boomers are working until they keel over.
These aren't seasonally adjusted data and if you read the methodology, when people go on summer vacation or something in a household selected for sampling and aren't available, the data sampling crews estimate instead and most of the people in 25-54 age range that dropped out were in the "not available to work" category where summer vacationers are placed. But that is only for this seasonality in the data. The longer term trend is that people in the 16-24 age cohort aren't participating in the labor force at the same rates that they used to. The fall has largely correlated with rising levels of education. The numbers are volatile with the school year. Around the start of semesters when student aid disbursements go out, fewer tend to say they are available for work and toward end of quarter/semesters (june) more need work.
ReplyDelete25-54s participation at over 77.2% is a HUGE improvement because it had fallen to 75% though it is needs to get back to about 79% to achieve pre-crisis levels. On an annual basis this year we continue to have a record flow of people from not in labor force to labor force. And even better black employment in particular is improving rapidly where they had been left mostly behind before this year.
After many years of hearing it would happen, large numbers of over 55s are leaving the workforce too and Do not want work. That, I'd say is a good thing, people can finally afford to retire!
And before I get chastised for saying labor markets are good, I'm NOT. There are many problems still, I'm just pointing out something that the media never states, in absolute number terms, most of the problems in participation aren't due to slack in the labor force of real working age adults (25-54) but in generational changes where people in the 16-24 category tend to go to school at higher rates and for longer than they used to. If I had to hazard a guess, if this survey was designed today, rather than decades ago, it wouldn't even begin until 18. And it would make a category for higher education to make the pattern understandable.
Racial disparity across all age groups can only be described as a crisis. Asians are outpacing everyone and leaving especially black men behind.
@Ryan, the participation rate for 55+ years old went up beginning in the 2000 recession and is still stuck at very high levels, as people cannot afford to retire.
ReplyDeleteUS. Bureau of Labor Statistics, Civilian Labor Force Participation Rate: 55 years and over [LNS11324230], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/LNS11324230/, July 2, 2015.
Why do suppose that, beginning in the 2000 recession, record numbers of young people suddenly decided to take on heavy debts to go to college rather than say, flipping burgers?
A quick glance at the charts show that the changes in participation rates were triggered by the recessions of 2000 and 2007, and that it's never recovered. This is not about people randomly deciding to go to school or randomly deciding to enjoy more leisure time, it's about permanent recession.
US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate: 16 to 19 years [LNS11300012], retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/LNS11300012/, July 2, 2015.
Besides the 2000 recession, let's recall what else happened in 2000 when the labor participation rates suddenly changed course -- Bill Clinton rammed through a free trade deal with China.
ReplyDeletePresident Clinton claimed at the time: "China will open its markets to American products from wheat to cars to consulting services, and our companies will be far more able to sell goods without moving facilities or investments there.”
Politicians wouldn't lie to us about free trade, would they?
All excellent points. I don't think getting an education is ever the first choice for kids! But as The POTUS always points out, if you don't want to be a pauper, it is the only choice! That's how we've designed our society, for better or worse. Recessions tend to focus the mind on that reality and since money is available for tuition, food, housing and books, it is an attractive option when people can not find work. There were lots of changes in labor markets since the 80s, not the least of which was raising the retirement age, increasing levels of foreign trade, size of global labor force skyrocketed, lots of women joined the work force in the early 80s, demise of unions and pensions... lots of important changes, all of which probably contributed.
ReplyDeleteI don't like the fact that media presents these changes to employment as an independent variable that can't be controlled. "The economy improved and more jobless found jobs" -- or a recession hit and millions were laid off. Well yes, but there is policy at work that drives recessions and industry and government to make staffing changes. It isn't market "forces", this isn't star wars. We designed this system with a series policy choices and these are the labor markets that resulted from those decisions. If we want different labor markets, we make different policy choices in government. If media presented it that way, politicians would have their phones ringing and email boxes filled.
Dan,
ReplyDeleteIn addition to the Clinton issues you mention, Clinton's "Welfare Reform" also had a very deleterious effect - it likely also contributed to the downturn, as well as increased poverty and homelessness, also likely had a negative impact on employment.