Posts filed under “Employment”
We mentioned Labor Force Participation Rate over the weekend. It is worth exploring a bit further.
One of the lesser noted aspects of the NFP report Friday was the drop in the Labor Participation Rates. It is the percentage of the total population that is either working or potentially working. In the US, it is about ~170 million people, and excludes children, retirees, non-employed (work at home moms, etc.). That Labor Pool measure peaked in 2000 at just under 67.4%. Following the market crash and recession, it subsequently fell about 1.5% to about 65.8%. This accounted in no small part for the falling Unemployment rate from 2001 – 05.
Now, a 1.5% or so drop doesn’t sound like a lot, but remember there
are 143 million workers in the US. That drop equals about 3 million
people. These are folks who are willing to take a full time job, have
been unable to find work, and have exhausted their unemploment
The Labor pool drop appeared to have bottomed and reversed it self late 2005 (see chart above). The 5 year downtrend channel was broken, and a new uptrend — higher highs and higher lows — was beginning.
It has since started heading lower again. They do not count in the "official" Unemployment Rate statistics. However, BLS actually does measure these folks in their "augmented unemployment rate" — the jobless people who aren’t counted among the officially unemployed. That measure is 7.4%.
There is a good definition of this here. The longer term chart below parallels the unemployment rate — but from higher levels.
Some people have asked if this 7.4% level is a good or a bad thing. That qualitiative description is less relevant to me than the quantitative cobnclusion that the 4.5% Unemployment Rate is very misleading.
David Altig at Macroblog thinks it is mostly due to secular changes, and I do not disagree. But for policy makers — such as the Federal Reserve — the belief that the labor market is very tight with no slack is clearly belied by the data.
The significance: It may have an impact as to whether they have the room to cut rates or not.
The Payroll numbers are out, and they are not particularly pretty:
88,000 new jobs were created in April, according to BLS. This is the weakest job gain since November ’04. Cumulative revisions for prior months were to the downside by 26,000.
As expected, losses were in Manufacturing (19k), Retail (26k) and Construction (11k). The weakness in Construction has been very uted, implying that the full impact of the housing slow down has yet to be fully realized.
Biggest gains were had in Services (116k), Education and Health (53k), Gov’t (25k) Professional (24k) and Leisure/Hospitality (22k).
Temporary help jobs fell for a 3rd month (January was flat) making 4 consecutive months of no gains. Temp help tends to lead employment gains, and this weakness can be read as a future forecastor of employment.
We don’t pay close attention to the Household survey, (the self reported number is very volatile) but the drop of -468k was an eyebrow raiser.
To put this into some context, of those 317k new jobs hypothesized by BLS, 49k of those supposed jobs are in construction. Now what are the odds of that?
While Wall Street celebrates the upcoming recession, let me remind you that this economy requires about 150k new monthly jobs to merely keeep up with population growth.