Re: the May jobs report
posted at 6:28 pm on June 7, 2013 by Steve Eggleston
Ed has his usual thoughful analysis on the front page, but he invited me back to the Green Room to add my two cents’ worth. What caught my eye is the following paragraph:
The number of people not in the workforce dropped by 221,000 at the same time in the Household Data report. The number of those not in the workforce but who want a job rose, though, by almost 300,000 to roughly the same level as March; April’s sharp drop looks like a polling outlier. The workforce participation rates held steady or improved; employment-population ration remained at 58.6%, where it has been nearly all year, and the civilian labor force participation rate rose from its generation-low 63.3% of the previous two months to 63.4% in May.
Even though those numbers are seasonally-adjusted, there has historically been a May disconnect between the change in the number of people not in the workforce, as well as the portions who are “discouraged” and who are marginally-attached to the workforce, and the change in the portion of the non-workforce who want a job. That is because the discouraged/marginally-attached are those who not only want a job, but last searched for work between 5 and 52 weeks prior to the survey, while the larger number of those who want a job but are not part of the workforce are those who last searched at least 5 weeks prior, or even those who never searched before. There is a significant student population, both in high school and college, who fall into that category.
Related to that, last year, I decided to use that larger “want work” number to create a measure of unemployment that includes the “barely hopeful”. Here’s the data that goes back to 1994, the start of the current version of the unemployment survey:
By that measure, the state of unemployment is still worse than any time between at least the second year of Bill Clinton’s term and the start of Barack Obama’s. It still has the same fundamental flaw the other measure have, though; it counts only those who want to work.
That leads me to the labor force participation rate (LFRP). It is historically low, and the conventional wisdom is that it is due to all the Baby Boomers who are retiring. It’s not quite that simple.
Some economists have been noting that those under 55, and especially those under 30, have been dropping out of the workforce. Meanwhile, those over 55 have been increasing their participation, and those beyond the retirement age of 65 are participating as never before. The proof of that is in the graphic:
The chart doesn’t show it because I combined the 25-29 group with the rest of the “prime workers”, but after years of parity with their elders, the decline in that group, which gets to freeload on their parents’ health insurance until age 26 nationally and age 27 in Wisconsin, has accelerated since 2008. The LFRP in that group dropped from 83.0% in May 2008 to a fresh modern-era low of 80.6% in May 2013. Indeed, every 5-year group between 20 and 54 hasn’t had a May LFRP this low (or within 0.1 percentage point of that) since before women reached near-parity in the workforce, and the 16-19 group is barely off its post-World War II-era low. The reasons for that can be hashed out in the comments.
Even with that trend that began in earnest with the Great Recession, the changes in the relative sizes of the various age groups have dictated that the LFRP begin its inevitable drop with the vast number of Baby Boomers retiring and the relatively few who succeeded them. I decided to model what the LFRP would be if every 5-year age group had the same LFRP as it did in May 2008:
Had each age group had the same LFRP as it did in 2008, the May LFRP (not seasonally adjusted) would have dropped from 66.0% to 64.8%, the worst May since 1985. Instead, it dropped to an unadjusted 63.5%, the worst May since 1983.
More importantly, the U-3 rate would have been a seasonally-unadjusted 9.1%, which would seasonally adjust to 9.4%. I guess we can thank the Boomers for hiding the true cost of the last 5 1/2 years of failed economics.