Where Has All the Work Force Gone? (Long Time Passing)

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unemployment4Last week’s Job Report, issued by the Bureau of Labor Statistics presented some figures that evoked some serious questions..

The local CBS affiliate in Washington, DC reported that

Despite the unemployment rate plummeting, more than 92 million Americans remain out of the labor force.

The unemployment rate dropped to 6.3 percent in April from 6.7 percent in March, the lowest it has been since September 2008 when it was 6.1 percent. The sharp drop, though, occurred because the number of people working or seeking work fell. The Bureau of Labor Statistics does not count people not looking for a job as unemployed.

The bureau noted that the civilian labor force dropped by 806,000 last month, following an increase of 503,000 in March.

The amount (not seasonally adjusted) of Americans not in the labor force in April rose to 92,594,000, almost 1 million more than the previous month. In March, 91,630,000 Americans were not in the labor force, which includes an aging population that is continuing to head into retirement.

“The labor force participation rate fell by 0.4 percentage point to 62.8 percent in April. The participation rate has shown no clear trend in recent months and currently is the same as it was this past October. The employment-population ratio showed no change over the month (58.9 percent) and has changed little over the year,” the bureau said in a statement.

So, if the “economy is improving” what have so many Americans dropped out of the work force?

According to The Washington Post, there are 3 reasons:

…1) The aging of America. One major reason the participation rate dropped involves long-run demographic trends that have little to do with the current economy. Baby boomers are starting to retire en masse, which means that there are fewer eligible American workers.

Demographics have always played a big role in the rise and fall of the labor force. From 1960 to 2000, the labor force in the United States surged from 59 percent to a peak of 67.3 percent. That was largely due to  more women entering the labor force. But it was also due to improvements in health and to the fact that the types of jobs available allowed Americans to work more years.

Since 2000, however, the labor force rate has been declining steadily as the baby boom generation has been retiring. That’s why, in 2012, the Federal Reserve Bank of Chicago predicted that the labor force participation rate would be lower in 2020 regardless of how well the economy does.

Americans over the age of 65 are much less likely to work than prime-age Americans. And since that subset of Americans is expanding its ranks, that drives the labor-force participation rate down. Note that this shift is happening even though older Americans are staying on the job for longer than they did during the 1990s.

Economists disagree, however, on exactly how much demographics are responsible for the current fall in the participation rate. The Chicago Fed estimated in 2012 that retirements accounted for one-fourth of the drop in labor force participation since the recession began. Other analysts, including Barclays, have suggested that aging Boomers could account for more than half the drop.

Meanwhile, a recent paper by Shigeru Fujita of the Federal Reserve Bank of Philadelphia staked out a more nuanced view: Demographics, he argued, didn’t play a huge role in the labor-force drop between 2007 and 2011. But since then, retirements are responsible for basically the entire fall of the participation rate. One possible reason is that many older Americans postponed retirement immediately after the financial crisis to rebuild their battered 401(k)s. By 2012 or so, they began retiring en masse.

2) The bad economy is keeping workers in school and out of the labor force. Demographics can’t entirely explain of the labor force slide. For one, the number of Americans working or actively seeking work has actually fallen faster than demographers had predicted.

And here’s another clue that this isn’t just a demographic story: The participation rate for workers between ages 25 and 54 fell sharply during the recession and still hasn’t recovered. Obviously, retirements can’t explain this.

…3) More workers are going on disability insurance: There are now roughly 8.8 million Americans receiving disability benefits, a number that has doubled since 1995. Could that be a factor pulling people out of the labor force?

Possibly, although this is likely a smaller part of the story than the other two factors. Back in 2007, about 5.3 percent of working-age Americans were disabled and not in the labor force. By 2012, 6 percent of Americans were in this category. That’s an increase of about 1.8 million people. But it’s still less than one-third the total number of people who left the labor force altogether during that span.

Okay…so what’s the deal?

If somehow…someway…the economy is “recovering”…why are more and more Americans giving up on ever finding a job, again?

Here is what I think (After all, this is my Blog.): This economy is in a “false recovery”.

If you visit the Internet Job Boards, the jobs that are available are either “Beginning/Unskilled Jobs”, i.e. , “You want fries with that?”  or “High End Jobs” requiring specialized technology or company-specific training, i.e, “We’re looking for a Six Sigma Black Belt.” I once read a book on Judo. Does that count?

America’s Middle Class has always been the engine that drives America’s Economy. Without a healthy Middle Class, employed by the Private Sector, resulting in both its healthy participation in the work force and its purchasing power, giving back to the economy, America’s EconomicOutlook will remain bleak.

That being said, I am not about to give up in my job quest.

You do the same.

Allen

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