Looking at Labor Force Changes
Since we are delving into the NFP report, let’s take an even closer look at something that is often ignored: Changes in the Labor Force and the Civilian Labor Force Participation Rate.
You may recall that we have frequently exhorted people to pay attention to NILF — those people Not in Labor Force.
Over the past few years, dishonest politicos failed to mention that Unemployment had gone down primarily due to people leaving the labor pool — not due to a surge of new job creation.
Let’s go to the Labor Force data. Between January 2008 and January 2009, we saw the following changes, as measured and defined by BLS:
The Civilian labor force fell by just 108,000. Employment fell by over 4 million (4.149m), while Unemployment rose by nearly the same amount (4.040m). The number of people who dropped out of the labor pool rose by over 2 million (2,231m).
Labor Force Statistics from the Current Population Survey
Employment Level
Civilian Labor Force Level
Labor Force Participation Rate
Employment-Population Ratio
All of these charts suggest that employment levels have been pretty meager for the past decade or so. These last two charts in particular tell the astute viewer that the Employment Situation started heading south back in January 2007.
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Previously:
4.6% Unemployment is actually 5.5% (September 11th, 2007)
http://www.ritholtz.com/blog/2007/09/46-unemployment-is-actually-55/
Undercounting Under-Employment (November 6th, 2008)
http://www.ritholtz.com/blog/2008/11/undercounting-underemployed/
>
Sources:
THE EMPLOYMENT SITUATION: JANUARY 2009
BLS, Employment Situation Summary
http://www.bls.gov/news.release/empsit.toc.htm
Databases, Tables & Calculators by Subject
BLS
http://data.bls.gov/PDQ/servlet/SurveyOutputServlet
jan-09-bls-clfd (Excel)
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February 6th, 2009 at 11:55 am
All true. Unemployment has been underestimated for years, and under-employment is going to be a growing trend. One of the reasons the official numbers for job losses may be less than 1974 is that Bush led a “jobless recovery”.
February 6th, 2009 at 12:01 pm
How will jobs and employment change as we go from an economy 70% dependent on consumers buying stuff? Or will recovery mean that we will still end up with 70% of the economy depending on consumption and credit?
February 6th, 2009 at 12:09 pm
Lars: I think it is possible that 70% of the retail economy end up working 70% of the time, as 70% of their customers use 70% of their income while their home declines to 70% of its present value.
This underemployment theme is key – this is going to be very important as many companies don’t want to restructure completely but just to cut costs. Muddling through in quiet desperation is the English way, but I think it will also be the American way for a while as we retrace the slow descent into shabby gentility and declining influence that marked the 1970s in the UK.
February 6th, 2009 at 12:12 pm
It drives me crazy that every time employment goes down the market goes up. Company x announces 5,000 layoffs and their stock goes up. blah, blah, blah. As I have said, rich people like banana republics for their cheap labor and government for sale.
The trend line seems pretty obvious, more and more have to get by on less and less as Wall Street banks their bonuses.
February 6th, 2009 at 12:15 pm
Where are you getting – 4 million January YoY? From the total non-farm employment I see a drop of 3.5 million.
Since each job equates to ~$100,000 of GDP, we are talking a drop of about $350-400 billion in GDP or ~ 2.5% GDP. Actual GDP drop is slightly higher because employment typically lags.
February 6th, 2009 at 12:17 pm
Factor in self-employed and 1099 equivalent types….. the real situation is very very likely materially much worse than even the U-6 figure would indicate.
February 6th, 2009 at 12:34 pm
“Grow. Or die.”
February 6th, 2009 at 12:41 pm
@ leftback
“as we retrace the slow descent into shabby gentility and declining influence that marked the 1970s in the UK”
Bingo! the passing of an empire
As the British found out it’s an expensive proposition to run an empire after the get-rich quick part has passed.
As was in Oxford in the late 60s and the effects of WWII were still evident
February 6th, 2009 at 12:43 pm
remember the baby boomers are starting to retire. Their retirement en-mass will shrink labor pool, and shrink consumer purchase power for next 10 year.
February 6th, 2009 at 12:46 pm
BR said:
Over the past few years, dishonest politicos failed to mention that Unemployment had gone down primarily due to people leaving the labor pool
note:
Never ascribe malice when stupidity is a more likely explanation.
February 6th, 2009 at 1:07 pm
Kudlowdian Prophets claim the extremely high corporate profits we have seen are a reward for worshiping The god of Supply Side – in truth it has really only been the result of productivity gains unshared and non-distributed to real wages. Our real world workforce has had to make up the difference with credit cards, HELOCs, and other forms of credit.
Unfortunately, debt service is required for this religion to prosper. Debt rolled over into new debt is a game only the government and a few of the very rich get to play – the great unwashed have to pay their bills.
Now that the credit unwind is occuring and savings are increasing, there is desperation to attend to earnings – and with few solvent borrowers available to stimulate credit increases it become impossible to incease prices or increase sales. That leaves cost cutting. Slaves work cheaply, I hear.
Damn the workforce, increased productivity ahead!
February 6th, 2009 at 1:07 pm
@gordo365
“remember the baby boomers are starting to retire”
Those who can afford to retire…., on their much-damaged IRAs/401(k)s? unable to off-load their aging energy inefficient 4-Bdr/2-Ba family homes for smaller empty-nester homes.
But yes, purchasing power much reduced in any case.
February 6th, 2009 at 1:11 pm
batmando Says:
February 6th, 2009 at 12:41 pm
@ leftback
“as we retrace the slow descent into shabby gentility and declining influence that marked the 1970s in the UK”
Bingo! the passing of an empire
As the British found out it’s an expensive proposition to run an empire after the get-rich quick part has passed.
As was in Oxford in the late 60s and the effects of WWII were still evident
Reply:
Agreed, the empire seems to be faltering. But who to replace us? Power abhors a vacuum. And we still have far greater military might than any of our rivals–all put together. I think we’ll just find ourselves a way to leverage some of our (seemingly) untapped military capabilities to expand further. As flipspiceland says, “Grow. Or die.” It’s been that way for America since her inception.
To retrace a previous thread, IMO, the military might also goes a long way towards explaining why the dollar and treasuries haven’t yet tanked. But would our fat, dumb and sedated populace be willing to strap on a ruck-sack and boots for a little empire/domestic demand-expanding exercise? My bet is against the couch potatoes. Once that reality is made clear, then the gig is up, and the dollar/treasury market will plummet. But it’ll probably take a few years.
February 6th, 2009 at 1:18 pm
The Curmudgeon Says:
“To retrace a previous thread, IMO, the military might also goes a long way towards explaining why the dollar and treasuries haven’t yet tanked. But would our fat, dumb and sedated populace be willing to strap on a ruck-sack and boots for a little empire/domestic demand-expanding exercise? My bet is against the couch potatoes. Once that reality is made clear, then the gig is up, and the dollar/treasury market will plummet. But it’ll probably take a few years.”
If some enterprising person turned this into a TV reality show, I believe we might have something.
February 6th, 2009 at 1:29 pm
I am diappointed by the continuing desire to reach conclusions from data — with liitle actual thought
Labor force participation rates change as the work force age distributuion changes– So the comments above are a little light as they whine about this factor ( no – I do not have an answer for the issues — but the data is not a very clear lens as some think..)
To quote from a recent FED of Ohio piece on labor particpation:
The U.S. decomposition shows that the largest negative impact on the labor force participation rate comes from the 35 to 44 age group. Driving the negative effect is the share of workers (the long green bar).While the participation rates of workers aged 35 to 44 are very high, their falling share of the overall labor force has acted to lower the overall labor force participation rate. The youngest age group also has a substantial negative effect on overall labor force participation. However, its effect is driven by the fact that the labor force participation rate has fallen sharply for this group, while the change in the share of workers makes less of a contribution. On the positive side, the rise in the share of workers aged 45 through 64 has acted to increase the nation’s labor force participation. On balance, though, the overall effect (the last set of bars on the chart) is negative, with both changes in shares and labor force participation rates acting to lower the overall U.S. labor force participation rate.
February 6th, 2009 at 1:38 pm
Off-topic: http://mortgage.freedomblogging.com/2009/02/05/one-million-dollar/6234/
The million-dollar foreclosure. Coming very soon to a leafy suburb, gated enclave, high-end Tribeca loft development or beach community near you….
It’s all good, at least in the view of those of us biding our time here at Schadenfreude Asset Management.
“The stucco is peeling…… ” ($1 if you can identify the poet)
February 6th, 2009 at 2:32 pm
“All of these charts suggest that employment levels have been pretty meager for the past decade or so. These last two charts in particular tell the astute viewer that the Employment Situation started heading south back in January 2007.”
Well Duh! It takes a 150,000 to 175,000 new jobs a month just to keep up with population growth. Where Clinton averaged 225,000 new jobs a month for 8 years (22.5 million new jobs!) Bush’s policies saw us only post positive above growth about 1/2 the time on monthly figures. For 8 years he almost hit 4 million plus or about 20% of the Clinton years.
And people pretend leadership doesn’t matter or affect things.
February 6th, 2009 at 2:43 pm
@ retrogrouch-
Clinton didn’t experience 9/11 and the subesequent recession- unforseen calamity that definitely effected the US economy.
February 6th, 2009 at 2:48 pm
I’ve read other comments that this “feels” like September all over again. I would not disagree with those opinions.
February 6th, 2009 at 2:53 pm
http://www.poetryconnection.net/poets/John_Betjeman/16958
i can’t believe no one else wanted to play the game.
February 6th, 2009 at 2:53 pm
This must be the example of the “Two Blind Men and The Elephant,” or perhaps, “The Blind Elephant (The U.S. Economy) and Government Economists.” Please someone, tell me that this Bull move isn’t another Bullshit move? The stimulus is more a form of stimuli for the masses of idiots out there, than a meaningful measure big enought to matter. We are talking chump-change again! Oh, and have you noticed how they cheer on CNBC as their parent company burns? (My old-lady has stock…I told her to sell a year and a half ago.) Back to this stimulus – The Boxer is down on the mat bloody, gasping for breath and no attempt of “cheering him up,” is going to matter
February 6th, 2009 at 3:03 pm
@ Stuart: Not September yet, but maybe August, or even July. We might get a substantial rally before “IT” happens, and that might take some time. But the next problem is already out there, for sure.
Here is a dead-on description of the culture of debt and deceit that brought us to this place:
http://www.nakedcapitalism.com/2009/02/willem-buiter-us-and-uk-as-banana.html
February 6th, 2009 at 3:08 pm
Read that as well, lb. Kind of proves the point that “morals” and ethics do matter in a free market capitalist system. The feds can do everything they want to give the appearance that they’re fixing the mess but in the end it’s all just expensive window-dressing (and we love our window-dressing in the U.S…..until we don’t) if there is no trust & confidence that the system is legit. No amount of gov’t intervention can bring that back quickly.
February 6th, 2009 at 3:08 pm
@ leftback: do you really think so with the VIX above 40? Watch the TRIN go above 1, and see what happens this time around…
February 6th, 2009 at 3:12 pm
“The parasites are eating the host. I hope someone out there is taking notice.” Yves does have a way with words.
February 6th, 2009 at 3:18 pm
Karen, how’s your gold position? I got in Auy, CDE, and KBX back in November… If not a home-run, at least a hedge.
February 6th, 2009 at 3:18 pm
@ leftback
“the stucco is peeling…”
John Betjeman – Death In Leamington
http://www.poetryconnection.net/poets/John_Betjeman/16958
keep the buck. I googled it.
February 6th, 2009 at 3:19 pm
up big, actually. can’t complain. $vix looks to be headed to sub-30, btw.
February 6th, 2009 at 3:19 pm
Justin: Nothing goes in a straight line… I follow currencies for direction primarily, although I do not trade them. We are overdue a downturn in the $ especially with all the bailout and stimulus nonsense. A $ downturn is likely to be bullish for US equities and bearish for US Treasuries. Nobody is saying that this isn’t a bad recession, or that this is THE bottom for the broad market. I am selectively long in the mining/materials/commodity sector, long high-yield and corporate bonds and short Treasuries. I would use big equity rallies to fade the overall market.
February 6th, 2009 at 3:24 pm
@leftback: yup, read that too. Was well written and persuasive. We’ll see with Turbo Tim has to say next week. I hope you’re right that an opportunity presents itself to lighten up some more. Next week will be most interesting. “IT” will be waiting in the wings I fear.
February 6th, 2009 at 3:44 pm
Batten down the hatches for next week. Shorting more SSO. Short position now = longs.
February 6th, 2009 at 3:54 pm
IT may wait in the wings longer than any of us can possibly imagine, remember last spring’s bank rally?
Not wedded to any position here intellectually, I just play what I see and pay attention to macro trends.
February 6th, 2009 at 4:01 pm
shorting SSO? please explain- you are not just purchasing SDS?
February 6th, 2009 at 4:02 pm
Interesting juncture, the fundies are obviously pretty awful but the technical picture is something else. Very few of the charts I am looking at are bearish right now, except for UUP and TLT. Again, this is just an observation, but I would be light and tight here if I was to play on the short side, which at this moment I would not (except TLT).
February 6th, 2009 at 4:24 pm
Shorting SSO is much more efficient than SDS if you are holding more than a few days. Do a comparison chart.
February 6th, 2009 at 4:28 pm
Lefty, I agree. Do a weekly 3 year on the VIX – flag with the trend on the rise. But I think your right the fundies are awful! lol
February 6th, 2009 at 4:59 pm
The Call, from Schadenfreude Asset Management. Here is what lefty sees:
My expectation is we start out positive on Monday – not a screamer, but a little poke northwards – then there might well be a Sell-the -News pullback to 845-850 area (new support) some time Monday or Tuesday, and we might even see some sideways creep, but before too long Bob Doll and Ken Heebner will be in and then the seriously dim-witted big boots long-only fund managers with no ideas of their own are going to start buying in and we will start to see some big volume on the rallies, just watch for those huge blocks of stocks at 3.45 onwards. Sooner or later there will be an absolute Screamer that bursts through 905 and beyond. Don’t be in the way. Get short at 975.
I am waiting to hear from the maestro on the technical picture, where ya at, AT?
February 6th, 2009 at 5:48 pm
Actual unemployment rate 13.9%: Merrill Lynch
http://www.financialweek.com/apps/pbcs.dll/article?AID=/20090206/REG/902069980/-1/FWDailyAlert01
I admit that I know nothing of David Rosenberg’s track record but the fact that he still works tells me his forecasting hasn’t made him one of the idle rich. The point is inflation which he asserts “is anything but a far-in-the-distance prospect” and I would couple that with a few reports on slowdowns in mining production Peru- Cerro Verde (FCX) cancelled a capital expansion project, Southern Peru (PCU) recently announced the possibility of production cuts and Tintaya (Xtrata) recently announced the layoff of 95 payroll (de planilla) miners- all which suggests an attempt to lower supply in anticipation of or due to the undeniable fact of demand contraction. So…
Will the US become the UK circa 1973 and Zimbabwe today all at once?
February 6th, 2009 at 6:14 pm
What a rally! I think it continues next week. Hope so, so I dump it for a nice gain.
February 6th, 2009 at 7:20 pm
pedped:
Can you tell us what all that means in English?
February 6th, 2009 at 11:02 pm
Are those graphs controlled for voluntary retirements due to age? I’d think, with the beginning of the retirement of the baby boom generation, that would in and of itself affect labor participation and employment ratios..
That said, I may very well not have a job after next week, so I guess it really will be a depression soon enough, at least for me :/
February 7th, 2009 at 3:28 pm
Mealer Economic Energy Plan
This plan was completed several years ago to introduce a replacement tax for fossil fuel taxes that would have been lost when Mealer American Motors Corporation introduced a certain automobile…
This automobile is different from others and very special. Once our non-fossil fuel , non-EV (Electric Vehicle) which will also power a home when it is not being driven down the road, is sold, the government fuel taxes would soon disappear.
This means, the coal power companies taxes, the nuclear power companies taxes, the taxes from hydro-electric power sources would eventually be done away with. The government would be in trouble. Today.. The government is already in trouble, but worst yet… The citizens of the nations with struggling economies are in worst trouble.
The following “brief” explains these new tax sources…
1. USA manufacturing and new USA manufacturing businesses PLUS the millions of jobs that must exist to feed the need of the manufacturing sector… The same jobs that grew this country and have since been replaced by retail salespeople and Walmart employees selling Made in China products.
A. The Mealer 3R Economic Energy Plan entails paid training by utilizing the hundreds of thousands of stores fronts that sit vacant throughout America. Many of these training centers are old, vacant Walmart stores and stores put out of business by the retail China import giant. The products made during training are resold in a host of retail stores throughout the nation and throughout the world…
B. These stores can be retrofitted and create immediate construction based jobs for those in the business and used for re-training America while the building/property owners receive huge tax breaks (through existing laws) for either donating or deferring lease payments until the 3R schools are producing a steady cash flow or until the following takes place…
2. As these smaller and solvent USA manufacturing companies come into existence, the newly schooled entrepreneurs who follow up with business law courses (community college works fine here) unless they feel confident or hire outside help, will go on and gather several other new small mfg companies and form them into one group to sell as a commodity and regulated as such. The market is huge!
This is within the scope of commodities exchange and we would expect some out of work Wall Street types to hop on board since they aren’t doing anything as it is… Could it be any easier to supply funds for any moments of struggling new USA MFG businesses than to group them together like this?
Think about it… say.. Five to Ten medium sized US businesses who manufacture several different items for resale, all being collected together as one Trade Commodity. As these Commodities form, they are placed on the bidding block and portions of their ‘value’ is returned back into the individual businesses to keep them operating smoothly. American ingenuity and the desire to succeed will work out the products, and there are thousands to choose from. The jobs from the traders and marketers and local government alone will create a small new US economy in itself. This is something that can be done in All Free Nations.
3. New jobs that are unrelated to these new USA MFG businesses will thrive as the new cash flow from these students and employees is spent to purchase normal everyday products and services. The ratio to cover one purchaser average 3 to 1, so for every new USA MFG position, the outside jobs that will be created are three per each industry. Don’t believe me? Compare this to Detroit as the automaker jobs move away due to the Big Three mfg overseas and in Mexico. Compare this to the increase in jobs when the foreign automakers move into non union states. The cities and local economies thrive!
4. More people working in a community means more government resources and jobs will be needed to serve the public. This means even more jobs.
This Mealer Economic Energy Plan is really very simple and may be implemented today with immediate economic benefits, jobs and that thing call hope for the future.. But this is real and certain hope that ends up creating money rather than costing it. No government needed, except to stay out of the way.
This is the only viable “renewable energy business plan” and by far the only viable “economic stimulus plan” that can possibly work.
Mealer Companies LLC
Mealer American Motors Corporation
http://www.betterconstructed.com
JL Mealer