Posted on 04/17/2015 9:03:29 AM PDT by SeekAndFind
Despite last month’s poor jobs report, the U.S. labor market is improving.
Job creation is running at the fastest pace since the late 1990s, and there is some evidence that wage growth is finally starting to accelerate, albeit modestly.
However, one key component is missing from the labor market recovery: rising labor force participation.
In March, labor force participation declined 0.1% to 62.7%, the lowest rate since the late 1970s.
Why are so few Americans participating in the labor market even as jobs become more plentiful? I see three main reasons.
While the Great Recession inflicted significant damage on the labor market, much of the decline in the participation rate can be traced to the simple fact that the population is getting older. Older individuals tend to work less than younger ones. This is why the participation rate has been declining for 15 years. According to a White House Study, from the beginning of 2011 through the second quarter of 2014, the participation rate fell by 1.4 percentage points. Roughly 70% of the decline can be attributed to the aging of the population.
Male labor force participation has been dropping for decades, but for most of the past 60 years that decline has been offset by a steady rise in female participation. This trend seems to have come to an end. Female participation started to peak in the late 1990s, at around 61%. It plateaued at that level until the financial crisis. Since then, it has been steadily slipping. As of last month, female labor force participation was down to 58.1%, the lowest level since the early 1990s.
While a large part of the decline in participation is secular, there is a cyclical component as well. People typically drop out of the work force during, and immediately after, recessions. What is different this time is that those individuals are not returning to the labor force as was the case in past cycles. This is arguably a function of the unique nature of the last recession. Demand for workers has shifted. In many industries, construction for example, demand is still well below the pre-recession peak. Displaced workers also may lack the necessary skills for the new jobs, for example in healthcare.
Other factors may be contributing to the decline as well, including a larger percentage of younger Americans in college and a sharp spike in Americans on Social Security disability. Looking forward, while a stronger labor market should slow, or at least temporarily reverse, some of the decline, demographic trends and structural changes in the labor market suggest that participation rates will remain under pressure.
For investors, this has two critical implications: slower real U.S. economic growth and low rates. If aggregate hours worked grow more slowly because fewer Americans are working, absent a spike in productivity, real growth will be slower. And to the extent real growth slows, nominal growth is also likely to be slower, a trend normally associated with lower interest rates.
Great, when ANYTHING is failing blame those born between 1947 and 1965. Is there anything these people didn’t cause?
The administration and the Congress, are both to blame for the TOTAL LACK of “RECOVERY”. There has been none for almost seven years. Only decline and massive national debt increase accompanied by radical, rampant spending on useless measures.
These perps will try and blame ANYONE AND ANYTHING but themselves assisted by the complicit MSM. Same old “stuff”.
40 million new jobs today?
Why should people work when they are better off on welfare? Why are we subsidizing college degrees in LBGTQ studies instead of marketable skills? Why should companies hire citizens when they can hire illegals cheaper?
Notice the “White House Study” cited as a reference.
Riiiiiiiight!
Why are so few Americans participating in the labor market when here are plentiful openings available? Reasons
1. There has been the issue of 99 weeks of unemployment granted.
2. there has been an increase of the number of people on social security disability.
3. There has been a significant increase in the number of food stamp recipients and welfare recipients.
4. America has a loser for pResident!
“..Why are we subsidizing college degrees in LBGTQ studies instead of marketable skills? Why should companies hire citizens when they can hire illegals cheaper?”
The whole system, including the government is out of control...run by liberal socialists, which says it all. If we ever get a responsible government back, and we get control over this mess, things can get back to what we had decades ago. I could happen. Long road, though.
The labor market is not improving.
There is one singular indicator that tells you whether the labor conditions for the class of people who are employed (FT/PT/contract/freelance, doesn’t matter) is improving: wages.
Simple economics 101: supply and demand. If demand rises relative to supply, the price (wages) goes up. Wages have not gone up - we’ve been flatlined for way too many years. Thus, the labor market is NOT improving - at least for people doing labor. Perhaps from Blackrock’s point of view, the market has improved - for employers, not workers.
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