For years I have been a regular reader of David Rosenberg’s. Back when he was Merrill Lynch’s chief economist, to more recently at Canada’s Gluskin Sheff, I have enjoyed his daily “Breakfast with Dave.”

Sometimes, it is because we disagree, and I am looking for an intelligent challenge my pre-existing notions. Other times, it is to see where Dave and I agree. And sometimes, as with his missive yesterday, it is simply to see something different and interesting.

The pair of charts here are what leaped out at me. The first shows Labor Force Participation Rate. It peaked in the late 1990s. Particpation has plummeted since. This usually gets trotted out to show how weak the job market is.

With masses of baby boomers retiring, some of that is a secular issue. But the acceleration during and after the Great Recession suggests that some of this is cyclical.


The NILF chart (Not in Labor Force) was the big surprise to me. The rise in the number of people leaving the labor force because they could not find work was deeply troubling. Those who believe the employment situation is bad and getting worse frequently point to this metric as proof.

That seems to be changing. Note the collapse in the number of people leaving the workforce who still want full time jobs:


Dave writes:

No wonder the Fed is now starting to focus back on the inflation part of its mandate. The unemployment rate is falling at a pace that would augur for an end to all the Fed intervention, but these policymakers want to remain aggressive and as such continue to shift the focus and the goal posts to fit their needs. The bottom line is that it is not going to be hard to see the unemployment rate at 6% by the end of next year — even with no change in the participation rate, all it would take is for +250k payroll gains per month (hey — we had nearly +200k in 2013 with sub-2% growth … imagine what we get with 3%+ growth next year!).

I am not quite as rosy as Rosie. I am unsure if we are going to see 3 percent gross domestic product growth next year, but I like his spin on labor force participation rate. The percentage of people who say they are dropping out of the labor pool because they cannot find a job is falling.

This is a positive economic development.



Originally published here

Category: Employment

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

8 Responses to “NILF: Drop in Participation Rate Bodes Well”

  1. ashpelham2 says:

    So, I’m confused here….Are they just leaving the workforce altogether? Is this a change in immigration? I know immigration as slowed since the Great Recession, but has the slowing now accelerated? Are some of the 60 year olds who were displaced now just taking SS at 62 and giving up? Where are the people going? Will I be served Soylent Green at Christmas parties this year?

  2. rd says:

    The Fox News take on this is that the people are leaving the labor force because they are claiming disability.

    Seriosuly, I suspect that the parallel decline in homeownership over the past few years makes the labor force decline sustainable from a household finance standpoint:

    A lot of couples had a second earner in order to pay the mortgage.

  3. gman says:

    Now if the economy could just generate some real wage growth.

  4. Conan says:

    Doug Short does a regular analysis & chart about this. From what the data says it is not the 50 and over group, maybe they lost their retirement in the last 13 years or maybe they never saved for it in the 1st place?? However bottom line they are growing in participation, not reducing.

    What I see in the data is more problems with the younger age groups and male participation rate.

    here is a quote from Doug:

    What’s Ahead?

    With the improvement in the market since the 2009 index lows, many households approaching the traditional retirement age are in better financial shape and with healthier nest eggs than was the case a few years ago. On the other hand, when we look at the age 65-69 cohort, the dark blue line in the second chart above, we see that it rose steadily between the last two recessions despite the market’s improvement, although it appears to be leveling out over the past 18 or so months. If we can avoid a near-term recession and the economy continues to improve, perhaps the participation rates of the older cohorts will gradually reverse directions. That would certainly improve the job opportunities of younger generations.

  5. Willy2 says:

    - I am surprised to see that the labour participation rate didn’t go higher at a faster rate/pace in the 1990s. Was everyone who could work already employed ? Or were outsourcing and increased labour productivity already then a drag on the rising participation rate ? In those days the US Trade Deficit continued to increase.
    - I don’t share Rosie’s optimism either. It has – IMO – to do with the fact that more and more people are retiring. But that puts a drag on the US economy, it’s NOT a positive for the economy.

    We’ve experienced (bond market, stock market, taxation) inflation since March 2009 and Rosie remained a “Deflationista” all the time. And now when US interest rates are on the way up Rosie turned into a “Inflationista”. Based on the (wrong) assumption that rising interest rates equals inflation. But rising interest rates is actually EXTREMELY Deflationary.

  6. mpetrosian says:

    FYI, the comments thread for this on Bloomberg is much more entertaining.

  7. Mike Smitka says:

    Look at LF participation rates – steady or rising for those age 60 and above, thanks you guys and gals, you were supposed to take early retirement to make way for the next generation. Rates are down for prime age workers by 3-5 percentage points (from roughly 80% to 76%) but horrid for those starting careers with age 20-24 down from 70% to 60% and now with our “recovery” back to 62%. Ouch.

    For a graph see Auto recovery, yes …. but for the rest