Green Room

Re: the May jobs report

posted at 6:28 pm on June 7, 2013 by

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:
Alt unemployment rate 1994-2013
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:
May LFRP by age 1998-2013
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:
May LFRP and alternate 2008-2013
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.

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Kudos Steve

cmsinaz on June 7, 2013 at 8:04 PM

Very well done, Steve.

The only change that I’d make would be to look from January 2007 (when the balance of power in Washington, D.C. shifted from Republican to Democrat as Democrats took the House and Senate) rather than 2008.

I guess we can thank the Boomers for hiding the true cost of the last 5 1/2 years of failed economics.

It’s one month shy of 6 1/2 years of failed Democrat-majority economics.

ITguy on June 7, 2013 at 9:38 PM

Hellz bellz, is there a category for those who don’t want to work but do anyway just to be counted as responsible citizens?

OccamsRazor on June 7, 2013 at 9:54 PM

Very well done, Steve.

The only change that I’d make would be to look from January 2007 (when the balance of power in Washington, D.C. shifted from Republican to Democrat as Democrats took the House and Senate) rather than 2008.

I guess we can thank the Boomers for hiding the true cost of the last 5 1/2 years of failed economics.

It’s one month shy of 6 1/2 years of failed Democrat-majority economics.

ITguy on June 7, 2013 at 9:38 PM

It’s kind of hard to go to January of any year for a comparison to May when a lot of the stats I need are not seasonally-adjusted. One can get into a LOT of trouble when improperly using unadjusted numbers to compare different months.

The jobs market didn’t really start going downhill until mid-2008, so that’s why I froze things there for my last chart.

Steve Eggleston on June 7, 2013 at 10:03 PM

Hellz bellz, is there a category for those who don’t want to work but do anyway just to be counted as responsible citizens?

OccamsRazor on June 7, 2013 at 9:54 PM

I believe that’s called the “silent majority”, or at least that’s what I call it.

Steve Eggleston on June 7, 2013 at 10:04 PM

…good job Stevie!

KOOLAID2 on June 7, 2013 at 10:07 PM

I might have to reopen the old blog after this one. It’s been a while since I posted.

Steve Eggleston on June 7, 2013 at 10:11 PM

This is excellent work.

PolAgnostic on June 7, 2013 at 10:46 PM

Thanks everybody.

Steve Eggleston on June 7, 2013 at 10:48 PM

The only change that I’d make would be to look from January 2007 (when the balance of power in Washington, D.C. shifted from Republican to Democrat as Democrats took the House and Senate) rather than 2008.

Wait. You wouldn’t include the housing bubble crash? I have a hard time believing Steve Eggleston would agree with you. Especially considering the way the inflated housing bubble had employed all kinds of folks, men especially, in construction and remodeling industries. What an odd omission.

There is a huge generational problem. Its baby boomers who won’t/can’t retire. As Eggleston points out, those over 65 are participating as never before. What is the reason for that? Because they love to work? Because they didn’t properly save? Because they are in areas of employment where once promised pensions no longer exist? My boyfriend’s parents retired in their mid 50s. One worked for a bank the other worked for caterpillar. Now, there’s a younger man working at caterpillar while the company pays both the younger person’s wages and the retiree’s pension. Both of those sources of income re-enter the economy when both the younger employee and the retiree spend money (primarily on his grand kids and other forms of family distribution). But this is a *rare* case. Most people over 50 are retiring in the post-pension era and so they must continue working. In a previous era, corporations were willing to pay a decent wage to both retirees and current employees. They used to keep communities afloat. Nowadays they seek to work people to the bone and offer them no benefits. But its Obama’s fault somehow….

libfreeordie on June 8, 2013 at 12:49 AM

Lib free

You inadervertantly just made a case of the folly of public pensions and social security. People with jobs in the public sector are guaranteed comfy retirements regardless of the coffers leading to bankruptcy. Social security will be upside down in 20 years.

Yet democrats continue to pretend that money flow does not have a balance sheet. Pay out regardless of the in flow.

Bensonofben on June 8, 2013 at 8:15 AM

You inadervertantly just made a case of the folly of public pensions and social security.

Wow. I so didn’t. I made a point about the way employers are increasingly abandoning their retired workers. In fact, this practice makes people *more* dependent upon social security, thus making reform of that public alternative to the private pension that much more difficult. It is stunning that your loyalty to corporations could cause you to produce such a profound misreading of my point.

libfreeordie on June 8, 2013 at 8:35 AM

libfreeordie on June 8, 2013 at 12:49 AM

The longer explanation for the historically-high senior labor-force participation probably deserves its own post, but I’ll see if I can squeeze in the Cliff’s Notes version in the comments. First, the reported LFRP for the various age subgroups of seniors, which I relied upon for my assertion, only goes back to 1987, but in preparing the response for you, I found that monthly data for the broad 65+ group goes back to 1948.

In order to strip out the effect of women entering the workforce in droves near the end of the time frame (and the resultant record participation due to that), I’ll be giving you the male numbers and the annual average. In 2012, the LFRP among senior men was 23.6%. In 2007, it was 20.5%. However, that is merely an acceleration of the growth trend since 1993, when it was only 15.6%, a record low.

Going back further, it hovered within a percentage point between 1984 and 1993. That period represents a “valley” of sorts, as the further one goes back, the higher the LFRP among senior men. In 1978, it was 20.4%, in 1972, it was 24.3%, in 1962, it was 30.3%, and in 1948, it was 46.8%.

So, what happened between 1948 and now? Back in 1948, even though Social Security had been around 11 years, the ethos was one either worked until he died or had a big enough family that one of his children would take care of him in his old age. Pensions for the masses was, at most, a very new concept.

Slowly, but surely, the combination of Social Security and the growth of private-sector pensions popularized the concept of retirement for the masses. Meanwhile, family sizes began to shrink after the Baby Boom, though the effects of that wouldn’t be felt until later.

All was going well until the private sector found out too much cash was going out the door on compensation and pensions starting, really, in the early 1980s but particularly in the 1990s. Because current retirees pretty much can’t be touched, future retirees, who had been counting on the SocSecurity/pension combo, found themselves a bit short.

The previous batch, and especially the current batch, of seniors suddenly were behind the 8-ball; they were promised they wouldn’t have to worry about saving for their own retirement, so many didn’t even have the very-limited IRAs. They also were too old to fully take advantage of compounding since by the time most of them found out they actually had to save for their own retirement, they were already in their 40s.

This is where the Baby Bust kicks in. The families are now smaller, so even if societal norms were what they were pre-FDR, the odds of the children taking care of their parents are low. The problem is, we’re far more of a “Me! ME! ME!!!!” society than a familial one.

Steve Eggleston on June 8, 2013 at 9:40 AM

I’m not sure why it’s the company’s responsibility to provide people with a “comfy retirement.” Seems to me it’s a worker’s responsibility to plan for that and provide it for him or herself.

It’s also ironic that Dems bemoan corporations not putting huge sums of money into pensions while simultaneously increasing taxes and imposing regulations that make it more difficult for them to earn a profit, nevermind employment with cushy benefits on the side.

After all, they pass all of these costs along to everyone else – whether it’s in the form of higher prices, lower dividends…or fewer jobs with shoddier benefits.

I guess the govt mentality of endless debt and/or tax increases warps Democrat minds…because they sure as hell don’t understand business or basic economics.

DRayRaven on June 8, 2013 at 9:48 AM

Steve,

WB to the GR! I intended to post on the nature of the jobs that were added. I significant number were temp jobs and low paying “hospitality” jobs.

dogsoldier on June 8, 2013 at 9:56 AM

Wait. You wouldn’t include the housing bubble crash?

libfreeordie on June 8, 2013 at 12:49 AM

You can thank the Democrat-passed Community Reinvestment Act (first passed under Carter, then expanded under Clinton), the Democrat abuses at Fannie/Freddie, and the Democrat obstruction of Republican attempts to reform Fannie/Freddie. That is what combined to create the housing bubble.

The C-SPAN record is crystal clear. When Republicans warned of problems at Fannie/Freddie and tried to push for more oversight and accountability, Democrats falsely accused the Republicans of racism (“Political lynching” of Franklin Raines, who is black), and falsely claimed that there were no “safety and soundness issues” at Fannie/Freddie.

ITguy on June 8, 2013 at 10:05 AM

Steve,

WB to the GR! I intended to post on the nature of the jobs that were added. I significant number were temp jobs and low paying “hospitality” jobs.

dogsoldier on June 8, 2013 at 9:56 AM

It’s a one-time deal.

I thought I dealt with that in the comments on Ed’s post, but if I didn’t, I blame time and space limitations.

Steve Eggleston on June 8, 2013 at 10:10 AM

All was going well until the private sector found out too much cash was going out the door on compensation and pensions starting, really, in the early 1980s but particularly in the 1990s.

What a polite way to describe that the private sector took advantage of a decreasingly unionized workforce to decrease their labor costs (ie compensation) and increase their profit margin. Now conservative economic theory says that, somehow, those increased profits are going to “trickle down” back to the working and middle classes whose compensation was reduced to serve the demand for ever increasing profit margins (this is the rub for me. Not increasing profit, but increasing profit margins became the exclusive sign of acceptable growth for Wall Street investors). But as we have seen, that simply is not the case. Real wages have only decreased as profit margins increase and, of course, that is because profit margins increases are generated by lower compensation. You have just disproved the very notion of “trickle down” economics.

The previous batch, and especially the current batch, of seniors suddenly were behind the 8-ball; they were promised they wouldn’t have to worry about saving for their own retirement, so many didn’t even have the very-limited IRAs. They also were too old to fully take advantage of compounding since by the time most of them found out they actually had to save for their own retirement, they were already in their 40s.

And yet, based upon their voting patterns, the majority of those voters seem to think that Democrats are to blame for their economic vulnerability. Conservative economic analysts almost *never* talk about the decline in compensation from employers, why is that?

This is where the Baby Bust kicks in. The families are now smaller, so even if societal norms were what they were pre-FDR, the odds of the children taking care of their parents are low. The problem is, we’re far more of a “Me! ME! ME!!!!” society than a familial one.

Steve Eggleston on June 8, 2013 at 9:40 AM

Here’s where you go from cogent analysis to utter insanity. Though I will say I appreciate your transparency in blaming the sexual revolution for the crisis families rather than the unrealistic demands of ever increasing profit margin from the investment class. You don’t quite seem to understand the relationship between “me, me” individualism and ambition. Having children and being a tight and close knit family is an investment of time and resources. Time and energy that diverts from the pursuit of economic advancement. This worked fine when only one parent worked and the other was devoted exclusively to reproducing the home. But women, those dastardly bastards, had the temerity to desire something different. So clearly it is *there* fault, not employers who have abandoned their responsibility to communities.

libfreeordie on June 8, 2013 at 10:56 AM

Yes, you covered it, in some detail. I missed it.

http://hotair.com/archives/2013/06/07/may-jobs-report-175000-jobs-added-jobless-rate-steady-at-7-6/comment-page-1/#comment-7066322

The industrial park where I work has rented out space in the parking lots of the empty buildings to mobile vendors, mostly food trailers.

What boggles my mind is that there are developers putting up more office space!

dogsoldier on June 8, 2013 at 11:38 AM

libfreeordie on June 8, 2013 at 12:49 AM

You know how you create workplaces with more benefits and higher salaries?

The same way you create workplaces with appropriate hours and working conditions.

You don’t regulate the heck out of the industry, you have low or no corporate and business taxes (none, imo, since all taxes on business are paid by us anyways). Then you get very low unemployment and in the competition for workers, workers get more negotiating power on an individual basis. That’s how group health insurance started. That’s how two weeks vacation and two personal days started. When unemployment is low and people have options on where to work, the free market creates an environment where employees can shop for the best salary and benefits. And group health insurance didn’t get out of control price wise until government started meddling in it, treating it as a right instead of a benefit and mandating it cover certain things, value equality, yada, yada. So a company with one stressless work environment and healthy employees had to share the burden of a company trying to provide health insurance in an unhealthy workplace.

Lib policies on the other hand try to force things on the market all the while taxing the heck out of business, as we’ve seen these last 6.5 years, increasing unemployment and putting the negotiating power back into the hands of the employer. As always, the opposite effect of what you libs claim is the goal. So employers can say “You four don’t want to cut to 30 hours so I don’t have to provide expensive Obamacare insurance, I can find 4 more out there who are unemployed and will!”

PastorJon on June 8, 2013 at 2:14 PM

Libfree would rather ignore the fact that the left loved giving, encouraging, and forcing lenders to give loans to those that shouldn’t have been given such credit. The left owns most of the crash…they can whine ,lie, and distort but that is a fact.

CW on June 8, 2013 at 2:30 PM

Excellent work, Steve!

The simple fact is that whether we are talking work force participation or pensions, the reason we have problems is the federal government. Companies operate in the marketplace, they will do what they must to attract the best people – or at least people competent enough to do the work.

Government has moved towards perverse incentives with over-regulation and punitive tax laws. We are entering a new phase of this with ObamaCare. When companies are penalized for offering pensions or health care (and having to comply with byzantine and excessive regulations IS a penalty) or even having the next person on the payroll, they will postpone or abandon those plans.

The liberals cannot admit that every single liberal socialist program has failed to deliver on its promises and its costs have come in far above estimates in every single instance they have been tried, all around the world, for the better part of a century. If they acknowledge the truth, they would also be faced with the reality that NONE of their “solutions” EVER work.

Just how stupid does someone have to be to consider Social Security, Medicare, or SNAP (Food Stamps) “success stories”?

Adjoran on June 8, 2013 at 3:55 PM

libfreeordie on June 8, 2013 at 10:56 AM

Where, oh where do I begin with the fisking? Let’s start at the top…

What a polite way to describe that the private sector took advantage of a decreasingly unionized workforce to decrease their labor costs (ie compensation) and increase their profit margin.

What a polite way of saying the unions priced themselves out of the nexus of unions and Big Business.

Now conservative economic theory says that, somehow, those increased profits are going to “trickle down” back to the working and middle classes whose compensation was reduced to serve the demand for ever increasing profit margins (this is the rub for me. Not increasing profit, but increasing profit margins became the exclusive sign of acceptable growth for Wall Street investors). But as we have seen, that simply is not the case. Real wages have only decreased as profit margins increase and, of course, that is because profit margins increases are generated by lower compensation. You have just disproved the very notion of “trickle down” economics.

The problem is, the numbers don’t support your assertion. Up until Obama showed up on the scene, per capita real disposable (i.e. post-tax) personal income increased every year from 1975 on. Oops.

And yet, based upon their voting patterns, the majority of those voters seem to think that Democrats are to blame for their economic vulnerability. Conservative economic analysts almost *never* talk about the decline in compensation from employers, why is that?

Because it’s the Democrats who sold them on the illusion that they don’t have to take personal responsibility.

Here’s where you go from cogent analysis to utter insanity. Though I will say I appreciate your transparency in blaming the sexual revolution for the crisis families rather than the unrealistic demands of ever increasing profit margin from the investment class. You don’t quite seem to understand the relationship between “me, me” individualism and ambition. Having children and being a tight and close knit family is an investment of time and resources. Time and energy that diverts from the pursuit of economic advancement. This worked fine when only one parent worked and the other was devoted exclusively to reproducing the home. But women, those dastardly bastards, had the temerity to desire something different. So clearly it is *there* fault, not employers who have abandoned their responsibility to communities.

You obviously know all about utter insanity from first-hand experience. I didn’t say why families shrunk, by the way.

Steve Eggleston on June 8, 2013 at 6:19 PM

The problem is, the numbers don’t support your assertion. Up until Obama showed up on the scene, per capita real disposable (i.e. post-tax) personal income increased every year from 1975 on. Oops.

Right. But for whom? Since Reagan personal income increases result from high earners experiencing greater income increases. Per capital personal income numbers tell us nothing about the middle class.

libfreeordie on June 8, 2013 at 7:39 PM

Right. But for whom? Since Reagan personal income increases result from high earners experiencing greater income increases. Per capital personal income numbers tell us nothing about the middle class.

libfreeordie on June 8, 2013 at 7:39 PM

Where’s your stats? Oh, that’s right, they’re from the Whole Cloth Cooperative.

Steve Eggleston on June 8, 2013 at 8:25 PM

libfreeordie on June 8, 2013 at 7:39 PM

Hint – you might want to look at the Census Bureau, which conveniently has upper limits and the mean of each income quintile group in constant 2011 dollars. Even the bottom fifth doesn’t follow your example.

Steve Eggleston on June 8, 2013 at 8:38 PM

Aw, crap. Now I guess I’ll have to start treating Eggleston with more respect or something.

John the Libertarian on June 8, 2013 at 8:47 PM

Aw, crap. Now I guess I’ll have to start treating Eggleston with more respect or something.

John the Libertarian on June 8, 2013 at 8:47 PM

“Or something” seems to be in the lead.

Steve Eggleston on June 8, 2013 at 9:21 PM

Now conservative economic theory says that, somehow, those increased profits are going to “trickle down” back to the working and middle classes

libfreeordie on June 8, 2013 at 10:56 AM

No “trickle down” theory has ever existed among economists. There is no “trickle down” conservative economic theory.

The “Trickle Down” Economics Straw Man

The Trickle-Down Hoax

visions on June 9, 2013 at 8:51 AM

libfreeorgan on June 8, 2013 at 7:39 PM

…TROLLCOT …the little diCk!

KOOLAID2 on June 9, 2013 at 10:42 AM

libfreeorgan on June 8, 2013 at 10:56 AM

…TROLLCOT the little diCk!

KOOLAID2 on June 9, 2013 at 10:48 AM

Right. But for whom? Since Reagan personal income increases result from high earners experiencing greater income increases. Per capital personal income numbers tell us nothing about the middle class.

libfreeordie on June 8, 2013 at 7:39 PM

Purchasing power has also gone up for ALL Americans for decades.

And, there is a great deal of class mobility in America. Most people who are born poor don’t die poor. Also, most people who get to the 1% don’t stay there. If you look at certain group statistics some things may seem stagnant but IRS data which can be used to track individual movement of incomes shows that indeed America is a land of opportunity and that a capitalistic society does promote wealth for all people.

Even the Economist had to admit recently that astounding gains in the reduction of global poverty are due to capitalism and not socialist redistributive policies.

gwelf on June 10, 2013 at 2:07 PM