The shrinking labor force participation rate

posted at 7:11 pm on November 12, 2013 by Steve Eggleston

One of the biggest takeaways from the October jobs report was that, on a seasonally-adjusted basis, 720,000 people left the labor force, driving the labor force participation rate down to 63.8%, the lowest level since early 1978. Back in that era, far more men than women were active in the workforce as the one-worker/two-adult family was the norm.

Back in early June, I noted that the bulk of the drop in the LFPR was among those under the age of 55, while those 55 and older were participating at historically-high levels. There’s bad news and there’s ugly news on that front.

The bad news is the senior citizens and near-seniors are starting to retire at an accelerated rate. While they are still participating and working at levels higher than they were before the Great Recession, they are no longer setting LFPR records for each month.

The ugly news is those under 55 are continuing to set, for the most part, fresh “modern-era” monthly LFPR lows. Even in the few cases where there have not been October record lows set, each major age group under the age of 55 participated in noticeably lower percentages than they did before the Great Recession and every other year between gender “parity” (ranging from the 1970s for the younger cohorts to 1986 for the 45-49 year olds and 1992 for the 50-54 year olds) and the Great Recession.

LFPR by age Oct 2007-2013

Even so, changing demographics, specifically the large and aging Baby Boom generation, the relatively-small Generation X, and the moderately-large Millenial generation do dictate that the overall LFPR necessarily drop. Much as I did for May, I “froze” each major age group’s participation rate and number of employed at the October 2007 level, and recalculated what the number of unemployed in each age group, and thus the unemployment rate for each group, would be.

Oct unemployment by age actual vs 2007 LFRP

The reason I limited that chart to those under the age of 55 is because there are more older people participating in the workforce than the projections of extending the 2007 LFPRs. In fact, there are more elderly working than the entire projected workforce, both employed and unemployed.

Taken in the aggregate, I could, and did, effectively “reassign” some jobs worked by the elderly to the younger so that I wouldn’t have to deal with negative unemployment among the elderly. That yields a “baseline” LFPR graph:

LFPR actual vs 2007 extended

When all is recalculated, instead of a 7.0% unseasoned unemployment rate and a 7.3% seasoned unemployment rate for October, adding the under-55 group who dropped out of the workforce back in would result in a 9.3% unseasoned unemployment rate and a 9.6% seasoned unemployment rate for October. That’s not at all good.


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It’s going to be so so so awesome when the unemployment rate is at 4.5%.

Of course, the labor participation rate will be 30%, but who cares: O~BA~MA! O~BA~MA! O~BA~MA! O~BA~MA!

Jeddite on November 12, 2013 at 7:14 PM

Jobs are so Bush era.

Murphy9 on November 12, 2013 at 7:14 PM

Italy?

The USA?

Mhhhh

Schadenfreude on November 12, 2013 at 7:17 PM

Whatever.

FREE ABORTION! FREE BIRTH CONTROL! Thank you King Obamass!

Pork-Chop on November 12, 2013 at 7:19 PM

Murph I think that was the McBush era.

CWchangedhisNicagain on November 12, 2013 at 7:19 PM

The ugly news is those under 55 are continuing to set, for the most part, fresh “modern-era” monthly LFPR lows.

Yep. Continually anemic labor demand will result in very little of the labor supply being employed in the market, and that supply will become dejected over time. This is why we need to crack down on illegal immigration and withdraw from our trade agreements. By limiting the pool of labor to only American citizens, the people the government of the United States is supposed to serve will be better served, and employment will rise.

Stoic Patriot on November 12, 2013 at 7:30 PM

This is what happens when the Incredible Shrinking President focuses like a laser on the economy.

Flange on November 12, 2013 at 7:33 PM

Anyone know who the gal with the cell phone and Polish looking face is in the often-used photo accompanying this post?

Mason on November 12, 2013 at 7:35 PM

This is disastrous.

And the only thing more bogus than the official unemployment rate is the monopoly money Wall Street bull market.

forest on November 12, 2013 at 7:37 PM

When all is recalculated, instead of a 7.0% unseasoned unemployment rate and a 7.3% seasoned unemployment rate for October, adding the under-55 group who dropped out of the workforce back in would result in a 9.3% unseasoned unemployment rate and a 9.6% seasoned unemployment rate for October. That’s not at all good.


“What can’t go on, won’t.”

For my money, the “unrecognized as yet” black swan event was Obama’s Syria clusterfvck.

Being punked by Putin is bad.

Being punked by Putin and grasping deperately for the punked solutioncatastrophic.

Everything since then has been part of an erosion of Obama’s perception on the world stage – which then enabled some of the Kneepad Media to stop their unending fluffing and note,

“When the world has dismissed Obama as an incompetent – should we be mindlessly supporting his every word, thought and deed?”

The Obamacare website merely gave them a convenient “hook” for their new narrative which is turning increasingly more negative by the day.

We are near a psychological tipping point, for my money.

When we pass it – expect the markets/Fed/QE “hopium” to start coming apart at the seams and discover there is nothing but a Big Lie supporting current price levels.

PolAgnostic on November 12, 2013 at 7:39 PM

Unfortunately, you still have the low-IQ voter who loves all that “free” stuff.

GarandFan on November 12, 2013 at 7:43 PM

Anyone know who the gal with the cell phone and Polish looking face is in the often-used photo accompanying this post?

Mason on November 12, 2013 at 7:35 PM

Who cares so long as it isn’t that creepy leering elf-like troll that has been featured on the Healthcare.gov website.

Happy Nomad on November 12, 2013 at 7:43 PM

Stoic Patriot on November 12, 2013 at 7:30 PM

The only part of that I agree with is the crack down on immigration.

Economically isolating our nation from the rest of the world will just end up with higher costs for everything we buy. Thus increasing inflation and destroying the value of the weakest in our society. Something over on the minimum wage discussion you abhor!

As for the government serving citizens, I would agree with you on that, but we all know what whiny tyrant means is the government controlling citizens’ every thought and action.

astonerii on November 12, 2013 at 7:45 PM

It’d go up if we raised the minimum wage though, right?

besser tot als rot on November 12, 2013 at 7:49 PM

Ginger…!

Seven Percent Solution on November 12, 2013 at 7:49 PM

What isn’t mentioned are all the people who are catching up on hobbies, writing that book, spending more time appreciating life, etc.

You homophobes always concentrate on the bad, never the GOOD which comes from funemployment.

Bishop on November 12, 2013 at 8:01 PM

Fiona!

22044 on November 12, 2013 at 8:13 PM

Fiona the Ginger is still unemployed? It’s been 2-3 years? She still has a dumb phone? As a redhead can’t she get minority status and get an Obumba smart phone?

Dingbat63 on November 12, 2013 at 8:44 PM

One of the biggest takeaways from the October jobs report was that, on a seasonally-adjusted basis, 720,000 people left the labor force

It’s actually even worse than how that number looks at face value.

According to BLS table A-1,

1) The civilian noninstitutional population age 16 years+ was 246,168,000 in September 2013, and 246,381,000 in October… an increase of 213,000 people.

2) The Civilian labor force was 155,559,000 in September and 154,839,000 in October… a decrease of 720,000.

So, while population increased by 213k, the labor force decreased by 720k.

63.2% of the civilian noninstitutional population was considered in the labor force in September, representing 155,559,000 people.

If we had simply maintained that level of participation in October, then 63.2% of 246,381,000 would have been employed… approximately 155,713,000 people. Instead the number in the workforce in October was only 154,839,000 … which means that if we had simply maintained the same level of participation as we had in the prior month, 874,000 more people would have been in the workforce.

==========

Even more importantly,

58.6% of the civilian noninstitutional population was employed in September, representing 144,303,000 people.

If we had simply maintained that level of employment in October, then 58.6% of 246,381,000 would have been employed… approximately 144,379,000 people. Instead the number of employed in October was only 143,568,000 … which means that if we had simply maintained the same level of employment as we had in the prior month, 811,000 more people would have been employed.

So, it’s not just that 720k left the workforce, it’s that 811k who should have been employed in October, weren’t.

In a single month of the Obama economy, we fell further behind by over 800,000 jobs.

ITguy on November 12, 2013 at 8:50 PM

Fiona !!!!!!

Rio Linda Refugee on November 12, 2013 at 9:16 PM

Red hasn’t found a job yet?

whatabunchoflosers on November 12, 2013 at 9:24 PM

Correction:

If we had simply maintained that level of participation in October, then 63.2% of 246,381,000 would have been employed in the workforce… approximately 155,713,000 people. Instead the number in the workforce in October was only 154,839,000 … which means that if we had simply maintained the same level of participation as we had in the prior month, 874,000 more people would have been in the workforce.

All the rest of comment above is correct, but I note that

1) The September Employment-population ratio was 144,303 / 246,168 = 58.62%, rounded down to 58.6%

2) The October Employment-population ratio was 143,568 / 246,381 = 58.27%, rounded up to 58.3%

That rounding made my estimate of under-employment too low…

If we had simply maintained the same ratios that we had in September, then the 213k increase in population in October should have meant:

A) An increase of 154k in the workforce (Actual was a decrease of 720k, a difference of 874k!)
Repeating for emphasis: the workforce should have increased by 154k but instead decreased by 720k.

B) An increase of 125k employed (Acutal was a decrease 735k, a difference of 860k!)
Repeating for emphasis: the number employed should have increased by 125k but instead decreased by 735k, meaning
if we had simply maintained the same level of employment in October as we had in September, 860,000 more people would have been employed!

860k more should be employed right now, if we had just maintained.

And if we had December 2006 63.4% employment levels (the last time Republicans controlled the House, Senate, and Presidency) now, well over 12.5 Million more Americans would be employed right now!

ITguy on November 12, 2013 at 9:26 PM

The shrinking labor force participation rate
posted at 7:11 pm on November 12, 2013 by Steve Eggleston

One of the biggest takeaways from the October jobs report was that, on a seasonally-adjusted basis, 720,000 people left the labor force, driving the labor force participation rate down to 63.8%

Steve, minor correction to your post: that should read 62.8%.

ITguy on November 12, 2013 at 9:51 PM

Steve, minor correction to your post: that should read 62.8%.

ITguy on November 12, 2013 at 9:51 PM

That’s what happens when I rush things ;-)

Steve Eggleston on November 12, 2013 at 10:32 PM

Senior employment rates are going UP. The seniors have a work ethic and useful skills.

The low information kids with useless college degrees are 53 percent unemployed or under employed… and getting worse.

ama on November 13, 2013 at 12:00 AM

Mason on November 12, 2013 at 7:35 PM

Fiona.

Great write up Steve. We are in deep trouble.

dogsoldier on November 13, 2013 at 5:22 AM

Fiona’s still trying to hook up with the storm trooper.

Oldnuke on November 13, 2013 at 8:38 AM

The roommate of one of my employee’s has been out of work for more than 2 years. Last year he was about to go out and start looking when his benefits were going to expire. Nobama extended unemployment benefits for another 18 months so it was back to the couch.Woohoo! Facepalm!

faol on November 13, 2013 at 8:41 AM

As someone in the over-55 group, I’ll offer my perspective on why the LFPR is so high for that us. I suspect many of my cohorts have the same philosophy I do: with all the economic uncertainty, the sorry state of Social Security, and the possibility that my IRA and 401k may be nationalized, why on God’s green Earth would I retire when I have a secure, well-paying gig that I can do until I’m in my 70′s? My “retirement” plan is that they can have my job when they pry the keyboard from my cold, dead fingers.

lovesthesun on November 13, 2013 at 11:52 AM

As someone in the over-55 group, I’ll offer my perspective on why the LFPR is so high for that us. I suspect many of my cohorts have the same philosophy I do: with all the economic uncertainty, the sorry state of Social Security, and the possibility that my IRA and 401k may be nationalized, why on God’s green Earth would I retire when I have a secure, well-paying gig that I can do until I’m in my 70′s? My “retirement” plan is that they can have my job when they pry the keyboard from my cold, dead fingers.

lovesthesun on November 13, 2013 at 11:52 AM

Even though I’m in the under-55 group (specifically, the group that won’t see a dime from the welfare state because it will have collapsed just before we reach “retirement” age), I don’t begrudge you having a solid job as long as you’re willing to work it.

Steve Eggleston on November 14, 2013 at 9:01 PM