Labor Force Participation Rate (people leaving the labor force)

[Honeycombe8]

So EVERYONE is saying that the increased jobs and lowered unemployment rate is bad news. Huh? Yes...they feel compelled to tell us that it's bad news, even though it SOUNDS good. Even here on DU.

"They" say that the rate went down because hordes of people left the labor force. I can go along with that. But then I wonder...well, the unemployment rate went down to 8.1%. It's DOWN, as compared with teh prior month, right? That's why it's called "down." But didn't people leave the labor force the prior month, too? So that when you compare the two numbers, it's legitimately called "down," because both numbers are counting the same thing: an increase in jobs AND people leaving the work force.

So doesn't that mean a legitimate decrease in unemployment? Since the criteria are the same?

The next time someone mentions that people have left the labor force, think to yourself this fact: People started leaving the labor force big time in the year 2000.




You can see where the crash happened in 2008, coming to full fruition in 2009-2010. Obama took office in 2009. The loss in labor force was already well under way, for years.

Some will also say that REAGAN's recession had an INCREASE in labor force, unlike this one, which shows that Reagan's policies were good, Obama's policies bad. Reagan DID have an increase in labor force, but it was an increase that had been happening for years, even under CARTER. So it wasn't Reagan's policies, right?

I'm wondering...the participation in labor force..does it start dropping when the outsourcing started increasing?




http://data.bls.gov/timeseries/LNS11300000/

[Freddie]

1. Public sector layoffs

Are a big factor IMO. They're the only people left with "real" pensions so they might as well retire early (with pension) knowing that they'll never get another good job in this economy, especially those 50+.
I'm payroll & benefits admin for a school district. I know most of the 50+ teachers would retire today if they could get affordable health insurance.
If people retire early and open up jobs for young people, that's a good thing!

[Honeycombe8]

2. Excellent point! I hadn't thought of that. My brother, a union worker, retired early.

With all the animosity toward unions, he took early retirement (in his 50's) so it would make it less likely his retirement package would be interfered with.

Ironically, and sady, HE IS A RIGHT WINGER! I just do NOT understand that. Personally, I think it's based on hate. He hates minorities more than he thinks it necessary to vote Democratic to protect his union contract. He figured the union contract was secure, and that's all he cared about.

[Freddie]

4. Republican teachers

Sadly, there's a lot of them--make me want to scream. My building's union rep is a flaming winger who still has Bush stickers on her car. I agree, some of it is racist and some is the brainwashed "pro-lifers".
Wanting to start collecting their pension before the state has a chance to change it is surely another factor.

[Ikonoklast]

3. I'd like to see any numbers on the Underground Economy.

People don't stop working, they just aren't showing up as employed.

[treestar]

18. True, how do self employed people count in these things?

If someone gives up looking for a job, but tries self employment, is that so bad?

[dkf]

5. The participation rate increased earlier because more women started working.

The Great Jobs Mystery: Why Are So Many Men Dropping Out of the Workforce?
Derek Thompson | Sep 7, 2012
The August jobs report set two records that we need to talk about. Both involve the labor participation rate -- the share of the working-age population that has a job or is looking for a job. First, men's participation rate fell to its lowest point on record (since 1948). Second, the overall participation rate fell to its lowest point since 1981.

So, three years into a recovery, we are at a modern historical low for working-age adults who are actually working, or trying to find work. It cannot be overstated how much that is bad new. It means we make less stuff, have less wealth, and pay fewer taxes. It's bad for growth, bad for deficits, bad for the stock market. (Weirdly, it also makes the unemployment rate seem artificially low.)

But why is this happening? There are two reasons. The first is that America is getting older, and more workers are entering that age-range where they are less likely to be employed. Imagine the enormous Boomer generation moving along this graph below, from left to right, as they age into their 60s and 70s. You can see how the labor participation rate would fall automatically, good economy or bad.

That's exactly what demographers have expected: A gradual decline in the participation rate as the Boomers retired and smaller generations beneath them struggled to replenish the working population. The dotted lines in the graph below are projected declines from before the Great Recession. The red line is what's actually happened. The hill has been steeper than we foresaw.

http://m.theatlantic.com/business/archive/2012/09/why-did-the-male-labor-participation-rate-fall-to-an-all-time-low/262100/

[Honeycombe8]

13. That article ignores the fact that participation rate has been declining since 2000. And...

it was a sudden thing, to take such a turn, from a steady increase since the '70's pretty much.

That's not Baby Boomers retiring, or hordes of women entering the work force when Bush took office. The likelier explanation is...extreme Republican policies, for the first time, were implemented, and OUTSOURCING took off in the wake of it all. NAFTA had been passed in the 90's. It's no suprise, when you think of it.

[dkf]

6. Check out the graph on the bottom of this article. It explains a lot.

Oh, and what about the guys? Men's participation hit an all-time low in August. This is a record, but it's not a surprise. Male participation has been in outright decline since the 1950s, and the share of working-age women who are actually working has practically doubled since the late 1940s. Here's that picture, with men in BLUE, women in RED, and total participation in GREEN.

Most of this decline has come from older men's participation dropping dramatically since the 1950s. It's same factors we talked about above are in play. The the male population is getting older, making them less likely to work, and the economy is discouraging many from seeking a job, anyway.

But there are two more forces pulling down men's participation. In fact, they two of the most important economic trends of the last 50 years: The rise of women and the growth of the safety net. Dual-earner households have allowed men to either choose to not work or to retire early. That's part of the decline. But, perhaps even more importantly, the increase in Social Security payments, plus Medicare and Medicaid, have allowed older men to stop working and rely on government insurance programs to protect them from the risk of elderly poverty and medical catastrophe.

http://m.theatlantic.com/business/archive/2012/09/why-did-the-male-labor-participation-rate-fall-to-an-all-time-low/262100/

In the 50's the male participation rate was close to 90% because the women didn't work. Wow.

[hfojvt]

9. and men were not able to retire

in 1890, the labor force participation rate for men over age 65 was 68.3%, by 1940 it had dropped to 41.8% and by 1960 to 30.5% and by 1980 to 19.3%.

I would guess that some of the drop in participation rate comes from older people becoming a larger percentage of the population as people have fewer kids.

Not really a bad thing.

[Honeycombe8]

14. I don't buy it. Older men don't retire earlier these days, unless forced to. Women don't take

men's jobs, typically. There are jobs where both genders work, but the mass of women do "women's work," like hotel maids, secretaries, cashiers, bookkeepers. Men do technical stuff, landscaping grunt work, construction, roofers, mail room guys, etc.

Both are professionals, but the males far outnumber the women in professions.

It's possible that illegal immigration has had an effect on "recorded" male work participation. Illegals may be off the books, unrecorded workers. Although illegals/undocumented also do hotel maid work and such, so I don't know.

What I think is that outsourcing took off after the year 2000. That seems more likely. It's also likely that outsourcing has more of an effect on men, since those are manufacturing jobs and such. The timing fits. NAFTA had been implemented in the 1990's, give it a few years for corporations to build factories in Mexico, some tax laws changed rewarding companies for outsourcing, and Bush/Cheney taking office with a long list of Republican policies, such as deregulation, to be implemented. That seems more likely than a sudden wave of women entering the work force in jobs that men had held, or a big wave of baby boomers suddenly retiring in 2000.

Besides, boomers started retiring long after 2000. They would start retiring just a few years ago.

I think it's the outsourcing and economic policies.

[bhikkhu]

7. No one mentions the boomers retiring

the demographics there pretty much guarantee a drop in labor force participation. There are frustrated job-searchers for sure, but I haven't seen a break down of the numbers...

What I would like to see is an increase in wages generally, which would allow the labor participation that we have to better support the population we have. Not every individual should have to work for wages, and not everyone in a household should have to work for wages to keep the household above water. I think the ACA will make a very big difference (it certainly will in my house!), but real wage increases would go a long way as well.

[dkf]

10. The fall is steeper than they expected.

[bhikkhu]

11. Thanks!

I had looked a little bit and failed to find numbers - that graph is exactly what I was looking for.

[dkf]

12. No problem. Btw It's from the link I was posting upthread which is full of good stuff.

[Honeycombe8]

15. There was a sharp turnaround in about 2000, with participation going down....

after it had been going up for a couple of decades. It seems unlikely masses of men retired in 2000, or hordes of women entered the work force in 2000 driving men out of their jobs (what jobs do both genders do? Are there really enough women doing that to drive men out of those jobs? I doubt it.)

I'd like to see an increase in wages, too. We all do. And single payer health care. Well, we can dream.

I hope the ACA does what it was intended to do. Health care has become the #1 concern of millions of Americans.

[jtuck004]

22. That's because their particpation rate is higher as a group than it has been..

Here

It's those between 25 and 64 that are dropping out, charts at the link. Economic conditions suck for the average "employed" person because there are 26 million people chasing 3.4 million jobs.

[bhikkhu]

23. The number retiring far overcome the few percentage points higher participation

Its something you have to think through - in 2009 a significant demographic group has a 55% labor participation rate. Three years later, as age has transferred it to another demographic group, now the same group of people has a 32% labor participation rate. A bunch of them retired.

The baby boomers are a large enough group to skew the whole graph - as they move from high participation to retirement, the groups behind them are smaller; you have far more people leaving into retirement than previously, and fewer entering the workforce as well. Even with the rise in job-keeping among older people.

The net effect (estimated) is that for the past ten years or so, we haven't needed that 150k new jobs per month to keep up with people entering the workforce; its been more like 80-100k, and shrinking.

[jtuck004]

24. Think through so we can come to a predetermined conclusion with no data

based on unsubstantiated and unsupported rumor and opinion?

No thanks. <G>. I know what I prefer, but one should feel free to believe what they want. It would be nice if people actually had anything like authoritative numbers that show something different, (other than some bad student's opinion on a blog, or Gallup, of course).

While I realize that a lot retired, the participation rate is still higher than it has been for that age group in years. Many can't retire because they have lost their homes, they are supporting their grown children and their families, their pension or 401K won't give them enough to live on, etc. Those numbers are in the tens of millions. And I didn't see any mention of deaths. Dead means not part of anything, so they can't "skew" things either..

The above misses the lack of participation in the other three graphs on that link, all of which are lower for the younger demographic, and clearly show the lack of participation is due to economic weakness in that younger group. Unless one thinks that millions of people are retiring between 25 and 54.

The numbers are on the BLS and U.S. Census sites to be drilled into, if you care. Not just made up assumptions, but real numbers bought and paid for with the labor of hundreds of public sector workers, btw. Several other analyses support the same conclusion.

Fed job calculator you can test your assumptions with, here.

Btw, that last line neglects to add in the people who ALWAYS move from not participating in the workforce to in the workforce AFTER the recession ends. That doesn't happen because they get younger. It happens because they are 25-54 and there is no work now.

Birth rates kinda tailed off after 1980, but the real reason fewer people are entering the workforce is because there is not enough work. (Again, if you have data that refutes the BLS I would love to see it published). Those stats say there are 26 million people who answered that they want or need full-time work. Table a-38, iirc, the BLS attempt to snag their under count of those wanting jobs, shows nearly 6.5 million people of those folks, each and every one NOT in the labor force - thus just because they are "not in the labor force" doesn't. They are the ones that will move back and forth while there are not enough jobs, and will be joined by perhaps as many more if the history of every single recession in U.S. history is any indication.

It would be easier to just blame it on the Boomers, especially if one is a bank, or wealthy, or a politician that does their bidding, which leaves everyone off the hook for taking the side of the people against the thieving leisure class and actually doing something about it. Far easier to divert and make excuses.

Oh, and I don't mean to say the Boomers retiring aren't part of the group, but people want to explain away the participation rate giving them much more of a percentage than they comprise of the total. It might be as low as 40 or 50%, and then you take out those that will never return for whatever reason, you may have 10 or 20 million more that want to jump back in when there is an economy where the opportunities aren't being stolen by the wealthy.

[bhikkhu]

26. I think this would be the data (?):

Not to overstate the point made upthread, but looking at the chart, it indicates among the young a trend toward both college and early unemployment, in the middle years about a 2% shift toward unemployment, and in later years a trend toward continuing work. I'm not actually disagreeing with you (much), and perhaps the reason I emphasize (or over-emphasize) the point of labor participation rates shifting as a result of boomer retirement is that I never hear it mentioned anywhere in discussions of labor participation. Each month we have discussions of the employment numbers, and their improvement, and understanding the underlying demographic trends would make that more informed and useful.

This is the graph I'd point out to balance the perspective:



Yes, there are discouraged workers, but - as in the first graph - there is a trend toward college among the young, and a demographic shift that began shrinking the expected labor participation rate years ago; neither quite overcome by a trend among older workers to remain in the workforce.

I don't find it to be a matter of rumor and opinion, and if one simply wants to be "free to believe what they want", then why engage in discussion at all?

[jtuck004]

25. And look at this site - has a letter from a Fed bank where they addressed this -

"The problem with the thesis in the letter, of course, is that most of the decline happened all at once, but the boomers don't retire all at once. They do so over time. In fact the big "step function" took place over the space of less than two years, which is rather dramatic -- and doesn't mesh with a "demographics" explanation."

Here.

Ignore the insulting heading on the site and look at the graph. (It was the first one I found in my links with a good graph<G&gt



As he points out, the huge drop in participation took place over about 2 years, but the Baby Boomers will take a lot longer.

[bhikkhu]

27. Yes, the recession bumped the data a few points ahead of the expected trend

Which is what I was originally "seeing" - imagining an increase in early retirements, but the points you made above do indicate that perhaps there's more than a simple story.

So that the expected retirements may actually be slower than predicted, but offset on the other end by younger people delaying entry into the workforce, and a general small uptick in unemployment for all those in between.

and on edit - my take-away of "ok, so what do you conclude from all that"...wages should increase. While the labor participation rate is trotted around as a big portent of doom at times, I'd much rather see the an increase in wages than an increase in the participation rates. Not everyone should have to work for wages, and there are many good roles in society that are left unfilled for want of time and money, as work often takes too much of one and provides too little of the other. It shouldn't be necessary for everyone in a household over 16 to work for wages to support that household.

If you look at productivity per capita, or GPD growth, or average educational levels, or whatever indicator you like, everything points to a more skilled and productive workforce - while real wages have remained perfectly stagnant for decades.

[cthulu2016]

8. There are two different things in play here

First are the structural factors. Women entering the workforce resulted in a steeply climbing participation rate from the 19602 through the 1980s.

And baby boomers reaching retirement age led to a decline in the 21st century.

Also, the participation rate being high is not necessarily better. If wages doubled the participation rate would plummet. A lot of two-income households would be able to become one income households, with one spouse staying home with the kids. And young people being able to afford college is a good thing, but one that decreases the participation rate.


Against that broad demographic background we have the acute effects of a bad economy.

To isolate the economic effects, versus the demographic effects, we can look at ages 25-54, which avoids the effects of college and retirement. And we see a big hole blown in the situation that has not mended, but rather exists as the new normal.

[Honeycombe8]

17. You make some excellent pts. I noticed in the DOL stats that a good economy...

didn't seem to necessarily correlate to a high participation rate.

I noticed that during Carter's term, the participation rate steadily climbed dramatically. But the economy was BAD during those years. They cont'd to climb during Reagan's years, but not as consistently and not as much. Same thing in the Clinton years, when we know the economy was much better than during Carter and Reagan years.

So I wonder if it is sometimes a good indication, as you say, that the participation rate declines, sometimes meaning that some people don't have to work in a 2-adult household.

[treestar]

16. Baby boomers retiring

will cause huge drops in the labor force. They are starting to turn retirement age. Born in 1946 and you are 66 already. That's just going to increase up until those born in the peak year of 1957 are retiring.

Anyone who can afford to quit looking for a job is somebody who has a way of surviving without one. I'm more worried about the people still looking. And if the number of jobs goes up rather than down, that's good for them.

[Honeycombe8]

19. The sharp decline in participation rate started in 2000, not 2012. And it was fairly sudden.

It doesn't seem likely that a whole bunch of baby boomers suddenly retired in 2000. What seems much more likely is that outsourcing took off as a result of NAFTA and tax laws and such.

[treestar]

20. But those people would not quit looking

unemployed for 12 years and never looked in 12 years for a job? Impossible.

I don't know the explanation for 2000. But it does not have to be these so called "discouraged workers" who could hardly expect to find a job if they won't look. And keep looking to keep the statistic higher - why let it look like it's going down and no stimulus needed when you could keep counting yourself? I don't see how any rational person could do this and survive.

[Honeycombe8]

21. If they couldn't find another job, they'd quit looking. They would show up later...

if they found a job (one of the "jobs increase" monthly numbers). Because someone no longer appears on teh labor force rolls doesn't mean they forever are off the list.

Boomers (born mid-40's) would start retiring 2002, but most not until 2005 and on. Few people can afford to fully retire at age 62.

That's just not it, as I see it.

I'm not sure what it was, but it started in 2000 or thereabouts, and was a marked change downward from what had been an upward slant. Bush was elected in 2000. Republican policies were going to be implemented. Possibly tax changes (tax laws reward companies who offshore, but I don't know when that started). And outsourcing in big numbers isn't that old a phenomena and was indeed started off with NAFTA. NAFTA was signed into law in the mid-90's, and it would take a while for companies to actually move their factories down there. It would start slowly and build, with each successful factory.

We did have a recession in the early 2000s, but that started after 9/11, as I recall, and labor reduction started before then.