Why The Unemployment Rate Fell: Dipping Participation Rate

Yahoo News ^ | 01/09/2015 | By Rick Rieder of BlackRock

[SeekAndFind]

4 Factors Weighing On Labor Markets—And Implications For Fed Policy (Part 1 of 5) Labor markets are weaker than they appear, leading the Fed toward continued accommodative monetary policy. Still, the central bank may find that weakness difficult to overcome, as much of it stems from serious long-term issues and not merely short-term lack of demand.

In recent posts, my colleague Russ Koesterich outlined why the U.S. labor market recovery will continue to frustrate the Fed, and Jeff Rosenberg examined one key reason why the central bank is set to keep rates low for some time. I agree with these points, and want to step back and talk about some of the long-term structural headwinds that labor markets face today.

First, let’s take a look at the official statistics. While headline unemployment has been declining for the last three years, looking at the official unemployment rate as a signpost for the overall health of labor markets is highly misleading. Indeed, both investors and the Fed itself are increasingly focusing on a broader array of labor market metrics. Chiefly, and unfortunately, much of the decline in the unemployment rate can be attributed to the fact that more and more people are dropping out of the labor force (shown in the chart below via the decline in the participation rate).

That is hardly the sign of a thriving employment environment.

Market Realist – Dipping participation rate has led to artificially low unemployment rate

The graph above shows the labor force participation rate, the unemployment rate, and what the unemployment rate would have been if it included the effects of a dipping participation rate, which is close to its 35-year low.

[SeekAndFind]

ALSO SEE HERE:

Labor Force Participation Matches 36-Year Low; 92,898,000 Neither Had Job Nor Sought One

[skeeter]

Whaddaya know - a little candor from Yahoo news.

[SeekAndFind]

Here’s the right way to look at it (if we are realistic ):

In December, the civilian noninstitutional population was 249,027,000 according to BLS. Of that 249,027,000, 156,129,000—or 62.7 percent—participated in the labor force, meaning they either had or job or had actively sought one in the last four weeks.

Of the 156,129,000 who did participate in the labor force, 147,442,000 had a job and 8,688,000 did not have a job but actively sought one. Those 8,688,000 are the unemployed. They equaled 5.6 percent of the labor force—or an unemployment rate of 5.6 percent (which was down from the 5.8 percent unemployment rate in November).

[SeekAndFind]

Here’s the right way to look at it (if we are realistic ):

In December, the civilian noninstitutional population was 249,027,000 according to BLS. Of that 249,027,000, 156,129,000—or 62.7 percent—participated in the labor force, meaning they either had or job or had actively sought one in the last four weeks.

Of the 156,129,000 who did participate in the labor force, 147,442,000 had a job and 8,688,000 did not have a job but actively sought one. Those 8,688,000 are the unemployed. They equaled 5.6 percent of the labor force—or an unemployment rate of 5.6 percent (which was down from the 5.8 percent unemployment rate in November).

[SeekAndFind]

A record 92,898,000 Americans 16 and older did not participate in the labor force in December, as the labor force participation rate dropped to 62.7 percent.

That’s 456,000 more than the 92,442,000 Americans who did not participate in November 2014.

[nascarnation]

Your numbers seem reasonable.

I believe there’s a lot of movement from real jobs to “McJobs”. Of course McJobs is never mentioned in the MSM these days, only under Bush.

My neighbor went from a manager at a medium size factory to a Lowes red vest 29er. I think he looks the same in the govt stats as far as being employed.

[pieceofthepuzzle]

Why work? The Fed can keep printing money, and an ever shrinking proportion of the population can fund the lifestyles of everyone else. What could go wrong??

[dsrtsage]

“I believe there’s a lot of movement from real jobs to “McJobs”. Of course McJobs is never mentioned in the MSM these days, only under Bush.”

Not quite true...remember a few years back when McDonalds announced they were hiring 50,000 people? The MSM was practically orgasmic about how awesome the Obama Economy was in creating all those jobs (which were not referred to as McJobs, go figure).

[circlecity]

"I believe there’s a lot of movement from real jobs to “McJobs”."

And a bunch of thoes "new" jobs are just a result of one full time job being turned into two part time jobs all in response to the demands Obamacare.

[stephenjohnbanker]

” I believe there’s a lot of movement from real jobs to “McJobs””

There certainly is.

[Gaffer]

I think that when someone finds out about the true scope of what federal entitlement largess is out there for them if they only submit their hopes, their dreams, and their wills a whole new kind of slothful peace comes over them, and they really want for nothing basic.

EITC, SNAP, WICs, Section 8, TANF, Medicaid, SSI, SSDI (for those willing to give The Cochran Firm a cut) and a myriad of other covertly funded government programs though utility companies, etc. For a middle income former working American, that entitlement bounty can often be more in realizable spendable income than they had when they slogged out the 9-5 grind. Under these circumstances, why in the hell would any of them want to work?

[nascarnation]

Yes, in the Era of Baraq, fast food employment is the new “middle class aspiration”

[stephenjohnbanker]

“And a bunch of thoes “new” jobs are just a result of one full time job being turned into two part time jobs all in response to the demands Obamacare. “

In the past 6 years, fully 10-15% of my church group has either lost their good paying job, or been downsized to part time. I doubt my situation is just here in the southwest. Fedgov is counting part time jobs as if they were full time, as well.

[SeekAndFind]

Well we can get a glimpse of the NATURE of the job market from this -— the average workweek for all employees on private nonfarm payrolls was unchanged at 34.6 hours in December.

The manufacturing workweek edged down by 0.1 hour to 41.0 hours, and factory overtime edged up by 0.1 hour to 3.6 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged up by 0.1 hour to 33.9 hours.

In December, average hourly earnings for all employees on private nonfarm payrolls decreased by 5 cents to $24.57, following an increase of 6 cents in November. Over the year, average hourly earnings have risen by 1.7 percent. In December, average hourly earnings of private-sector production and nonsupervisory employees decreased by 6 cents to $20.68.

That’s a bit of a puzzle, and not a good one. Either the competition for jobs is still far too sharp to push wages up, or businesses are having to compensate for higher costs by delaying compensation increases.

According to the Household data, the US economy added an average of 231,000 jobs in 2014, well above the level needed to keep up with population growth but not exactly sufficient to make significant inroads into the ranks of the chronically unemployed. Those idled workers may be suppressing wage growth and making it difficult for workers to turn the market to their advantage. We will need higher levels of job creation to overcome that handicap, and so far we still are waiting for the real expansion in jobs to begin.

[SeekAndFind]

In a nutshell, here’s how the BLS is counting the unemployed:

QUESTION: Are you employed?

Answer: No

QUESTION: Are you actively looking for a job?

Answer Yes.

Questioner counts the interviewee as among the unemployed.

Next....

QUESTION: Are you employed?

Answer: No

QUESTION: Are you actively looking for a job?

Answer No.

Questioner puts the interviewee in a different category and BLS DOES NOT include him in the official unemployment rate.

Regardless of what it is, if you don’t have a job, you don’t have a job, whether the BLS counts you or not.

[WilliamofCarmichael]

more and more people are dropping out of the labor force (shown in the chart below via the decline in the participation rate).

I have no reason to doubt these articles.. many say what we all know. But I tire of the articles not giving a source -- other than each others articles, so I located sources and combined the several tables into one large table with links to federal government sources. I did not bother to include the unemployment rate we all know how phony that is. But here are a bunch more data to judge Obama economy including decades of the participation rate. It was low, grew steadily from the Reagan years and has been sinking recently.

This compares the Obama Adminstration economics to past administrations by combining the various tables of actual federal government data into one large table -- you do not have to visit other sites; but links are included.

• Col 3. Civilian labor force [thousands] (hover Col 4. to view);
• Col 4. Civilian labor force participation rate
• Col 6. Employment-population ratio
• Col 7. Employed full time, persons who usually work 35 hours or more;
• Col 8. Employed part time, persons who usually work less than 35 hours (hover Col 7. to view);
• Col 10. Unemployed looking for full-time work;
• Col 13. Not in labor force;
• pop. Population;
• labor. Labor force domestic born;
• Labor force foreign born (hover labor.);
• income. Median income;
• Recession. Recessions;
• GDP. GDP in billions of chained 2009 dollars (Seasonally adjusted annual rates);
• PCE. GDP Personal consumption expenditures percentage of GDP, Seasonally adjusted at annual rates;
• Percent Change in Real Gross Domestic Product (hover PCE. to view)
• U-6. U-6 unemployment rate;
• U-2 Job losers and persons who completed temporary jobs (hover U-6., starts in 1967)

Labor Force Statistics from the Census Bureau Current Population Survey (CPS) and other federal sources.

NOTE: I display the December / fourth quarter monthly/quarterly annualized data to represent the year. In some cases the annualized data for 2014 are for November / third quarter.

See below for numbered-column table information. The remaining columns are explained individually.

The numbered column headings are for:

1. Population
2. Civilian noninstitutional population [thousands]
3. Civilian labor force [thousands]. Hover column 4. to access
4. Civilian labor force participation rate
5. Employed [thousands]
6. Employment-population ratio
7. Employed full time (persons who usually work 35 hours or more) [thousands]
8. Employed part time (persons who usually work less than 35 hours. Hover Col 7. to access
9. Unemployed [thousands]
10. Unemployed looking for full-time work [thousands]
11. Unemployment rate
12. Unemployment rate of the full-time labor force
13. Not in labor force [thousands]

Some columns are combined / omitted to fit desired columns on a PC screen. Use hover to view combined columns.

Year	4.	6.	7.	10.	13.
1948	58.8	56.6	N	N	N
1949	59.4	55.3	N	N	N
1950	59.2	56.8	N	N	N
1951	59.4	57.4	N	N	N
1952	59.0	57.3	N	N	N
1953	58.5	56.3	N	N	N
1954	58.5	55.4	N	N	N
1955	60.0	57.5	N	N	N
1956	59.8	57.3	N	N	N
1957	59.5	56.6	N	N	N
1958	59.3	55.6	N	N	N
1959	59.3	56.0	N	N	N
1960	59.6	55.9	N	N	N
1961	59.0	55.3	N	N	N
1962	58.6	55.3	N	N	N
1963	58.7	55.4	N	3460	N
1964	58.5	55.6	N	3012	N
1965	58.9	56.5	N	2474	N
1966	59.5	57.3	N	2261	N
1967	59.9	57.5	N	2384	N
1968	59.6	57.6	65503	2007	N
1969	60.3	58.1	66929	2200	N
1970	60.4	56.9	66654	3866	N
1971	60.3	56.7	67622	4055	N
1972	60.4	57.2	70115	3575	N
1973	61.1	58.2	72560	3329	N
1974	61.3	57.2	72825	4851	N
1975	61.1	56.0	72269	6436	60028
1976	61.8	57.0	74532	6104	60120
1977	62.6	58.5	77922	5260	59846
1978	63.5	59.7	81416	4680	59541
1979	63.8	60.0	83345	4941	60131
1980	63.7	59.0	82648	6612	61252
1981	63.8	58.5	82799	7491	61933
1982	64.1	57.3	80606	10111	62087
1983	64.1	58.6	83997	8017	62790
1984	64.5	59.8	87458	6891	62876
1985	64.9	60.4	89259	6697	62730
1986	65.4	60.9	91297	6586	62778
1987	65.7	61.9	93914	5635	62874
1988	66.1	62.6	95927	5236	62765
1989	66.5	63.0	98015	5298	62570
1990	66.4	62.3	98285	6311	63797
1991	66.1	61.4	96973	7392	64982
1992	66.3	61.4	97949	7799	65276
1993	66.3	61.9	99952	6999	65879
1994	66.7	63.0	101003	5980	65739
1995	66.5	62.8	102217	5928	66738
1996	67.0	63.5	104753	5774	66444
1997	67.1	64.0	107293	5127	67019
1998	67.2	64.2	109129	4801	67666
1999	67.1	64.4	111415	4547	68669
2000	66.9	64.3	114163	4510	70616
2001	66.7	63.0	112610	6619	71901
2002	66.4	62.5	112942	7203	73403
2003	66.1	62.2	113947	7215	75461
2004	66.0	62.4	115204	6560	76413
2005	66.0	62.8	117753	5991	77164
2006	66.3	63.3	120658	5479	77503
2007	66.0	62.8	121621	6009	79291
2008	65.9	61.4	118281	9009	80102
2009	64.9	58.4	110906	13444	83148
2010	64.4	58.3	111653	12848	84913
2011	64.0	58.5	113268	11487	86452
2012	63.7	58.7	115616	10288	88745
2013	62.8	58.5	116845	9110	91616
2014	62.7	59.2	118797	7873	92898
Year	4.	6.	7.	10.	13.

pop.

146630

149190

152270

154880

157550

160180

163030

165930

168900

171980

174880

177830

180670

183690

186540

189240

191890

194300

196560

198710

200710

202680

205050

207660

209900

211910

213850

215970

218040

220240

222580

225060

227220

229470

231660

233790

235820

237920

240130

242290

244500

246820

249620

252980

256510

259920

263130

266280

269390

272650

275850

279040

282160

284970

287630

290110

292810

295520

298380

301230

304090

306770

309330

311590

313910

316160

319470

pop.

labor1	income3
N	N
N	N
N	N
N	N
N	N
N	N
N	N
N	N
N	N
N	N
N	N
N	N
N	N
N	N
N	N
N	N
N	N
N	N
N	N
N	43,558
N	45,435
N	47,124
N	46,759
N	46,304
N	48,287
N	49,262
N	47,702
N	46,453
N	47,224
N	47,523
N	49,362
N	49,225
N	47,668
N	46,877
N	46,751
N	46,425
N	47,866
N	48,761
N	50,488
N	51,121
N	51,514
N	52,432
N	51,735
N	50,249
N	49,836
N	49,594
N	50,148
N	51,719
N	52,471
N	53,551
N	55,497
N	56,895
N	56,800
N	55,562
N	54,913
N	54,865
N	54,674
N	55,278
N	55,689
123524	56,436
121211	54,423
116663	54,059
117006	52,646
118033	51,842
119844	51,759
120636	51,939
122558	N
labor	median
force	income
domestic
born
[1000s]

Recession

Nov 1948 to

Oct 1949

-

-

-

Jul 1953 to

May 1954

-

-

Aug 1957 to

Apr 1958

-

Apr 1960 to

Feb 1961

-

-

-

-

-

-

-

Dec 1969 to

Nov 1970

-

-

Nov 1973

to

Mar 1975

-

-

-

-

Jan to Jul '80

Jul 1981 to

Nov 1982

-

-

-

-

-

-

-

Jul 1990 to

Mar 1991

-

-

-

-

-

-

-

-

-

Mar - Nov '01

-

-

-

-

-

Dec 2007

to

Jun 2009

-

-

-

-

-

GDP

2,020.0

2,008.9

2,184.0

2,360.0

2,456.1

2,571.4

2,556.9

2,739.0

2,797.4

2,856.3

2,835.3

3,031.0

3,108.7

3,188.1

3,383.1

3,530.4

3,734.0

3,976.7

4,238.9

4,355.2

4,569.0

4,712.5

4,722.0

4,877.6

5,134.3

5,424.1

5,396.0

5,385.4

5,675.4

5,937.0

6,267.2

6,466.2

6,450.4

6,617.7

6,491.3

6,792.0

7,285.0

7,593.8

7,860.5

8,132.6

8,474.5

8,786.4

8,955.0

8,948.4

9,266.6

9,521.0

9,905.4

10,174.8

10,561.0

11,034.9

11,525.9

12,065.9

12,559.7

12,682.2

12,908.8

13,271.1

13,773.5

14,234.2

14,613.8

14,873.7

14,830.4

14,418.7

14,783.8

15,020.6

15,369.2

15,710.3

16,205.6

Billions
2009
dollars

PCE

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

1.88

-0.59

3.98

5.63

-0.69

-3.49

2.61

3.23

3.62

1.93

0.61

3.32

-1.8

4.51

4.06

3.29

0.62

1.62

0.57

2.93

1.13

-1.96

-0.07

3.08

2.33

2.83

1.83

2.08

3.07

3.88

3.93

2.35

4.06

1.44

2.12

2.78

1

2.75

0.34

-3.16

-0.01

2.79

0.94

1.32

2.51

2.21

PCE

U-6

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

N

10.0

10.0

9.5

8.4

7.6

7.1

6.9

9.6

9.8

9.8

9.2

8.6

7.9

8.8

13.6

17.1

16.6

15.2

14.4

13.1

11.4

U-6

¹labor: Hover labor for foreign born numbers.

Source: to find the tables go here Data Retrieval: Labor Force Statistics (CPS)

HOUSEHOLD DATA Table A-7. Employment status of the civilian population by nativity and sex, not seasonally adjusted [Numbers in thousands]
Employment status and nativity. Then

• select Employed under Foreign born, 16 years and over and
• Employed under Native born, 16 years and over

Scroll down to "Retrieve Data"

The data that I include above are from the month of December except for 2014 where November is the last month with data available.

³income: For the Census Bureau income data go here. Choose "Consumer Income Reports (P60)" then choose "P60-249 Income and Poverty in the United States: 2013" (pdf file).

Table Information

Column headings 1 to 13

I've combined several tables into one. Most of the tables were obtained here: go to Bureau of Labor Statistics (BLS) Labor Force Statisics from the Current Population Survey (CPS). Make your selections. I chose quarterly data.

I took the fourth quarter data from each table and combined them into the main part of the table above. For the year 2014 I took the third quarter data.

pop. Population data

Go here U.S. population and US Census clock, Dec 22, 2014 319.47 million

Recession

CENSUS BUREAU, BUREAU OF LABOR STATISTICS SOURCES

National Bureau of Economic Research, Inc. Cambridge MA 02138 US Business Cycle Expansions and Contractions Link from BLS SPOTLIGHT ON STATISTICS THE RECESSION OF 2007 – 2009

The NBER does not define a recession in terms of two consecutive quarters of decline in real GDP.
Rather, a recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.

GDP in billions of chained 2009 dollars (Seasonally adjusted annual rates)

GDP 1929 - 2014

PCE Personal consumption expenditures

The GDP Personal consumption expenditures percentage
hover GDP Personal consumption expenditures percentage for Percent Change in Real Gross Domestic Product
US Department of Commerce, Bureau of Economic Analysis (BEA) Gross Domestic Product (GDP)
If you are not at Gross Domestic Product (GDP) search for it.
It should be on page http://www.bea.gov/national/index.htm.

Then click on

• "Interactive Tables: GDP and the National Income and Product Account (NIPA) Historical Tables"; that page should be
• National Data GDP & Personal Income;
• click on "Begin using the data"; that page should be
• National Data National Income and Product Accounts Tables; click on Advanced Download Section; that page should be
• Download NIPA Tables and it is where you can download series of tables.

I did not know which tables to look for so I chose to download them all in csv format. I clicked on Section 1 (2852.7k)

I used Table 1.1.2. Contributions to Percent Change in Real Gross Domestic Product
; Seasonally adjusted at annual rates
Quarterly data from 1969 To 2014
Bureau of Economic Analysis. The data that I include above are from the month of December except for 2014 where November is the last month with data available.

U-6

Hover column for U-2 data.

U-1 to U-6 unemployment rates. We know how the "official unemployment rate" is manipulated so I won't include it here. These are annualized monthly data for December. For 2014 I used November.

Series Id: LNS13327709
Seasonally Adjusted
Series title: (seas) Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers
Labor force status: Aggregated totals unemployed
Type of data: Percent or rate
Age: 16 years and over
Percent/rates: Unemployed and mrg attached and pt for econ reas as percent of labor force plus marg attached.

U-2

U-1 to U-6 unemployment rates. These are annualized monthly data for December. For 2014 I used November.

Series Id: LNS14023621
Seasonally Adjusted
Series title: (Seas) Unemployment Rate - Job Losers
Type of data: Percent or rate
Age: 16 years and over
Reasons looking for work: Job losers and persons who completed temporary jobs U-2

Footnotes

N Not available.

Z Represents or rounds to zero.

[Socon-Econ]

The rate also fell because Congress refused to extend benefits for the long-term unemployed, thereby motivating them to get jobs.

[SunkenCiv]

• Labor Participation Rate Drops To Fresh 38 Year Low; Record 92.9 Million Not In Labor Force
• Unemployment rate falls to 5.6 percent as U.S. gains 252,000 jobs
• Unemployment rate drops to 5.6% as economy creates 252,000 jobs
• U.S. jobless claims dip to 294,000; 2014 layoffs lowest in 17 years
• Jobs Mirage Caught Up with Obama, Dems
• Last Two Election Cycles, Unemployment Dropped Drastically Right Before Election, Rose Soon After
• Last Two Election Cycles, Unemployment Dropped Drastically Right Before Election, Rose Soon After
• 4 Of 5 Top Job Additions In September Were Low Or Minimum Wage
• U.S. unemployment rate drops to 6-year low at 5.9%
• U.S. Added 248,000 Jobs in September, Unemployment Rate Falls to 5.9%
• U.S. Weekly Jobless Claims Unexpectedly Drop To 287,000 [4th straight week below 300,000]
• Hedge Fund Manager Kyle Bass: Unemployment Rate Is 'Rigged', Closer to 11%
• U.S. initial jobless claims fall by 36,000 to 280,000 last week