Returning to the Work Force

"The concept of sitting in a rocking chair and retiring just doesn’t exist anymore"

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Nyt_retiree_nilf_1

So says Barbara Rice, a former school teacher who now works at Borders in what she calls a "hobby job."

In fact, while the 20-40 year old set has increasingly been dropping out of the work force (NiLF), this older crowd has been the only thing preventing a total crash of the Labor Participation Rate:

"While many retirees are still focused on leisure activities, a growing number are returning to the work force. A recent study by Putnam Investments estimated that seven million previously retired people, or about 10 percent of the work force over the age of 40, are now back at work or looking for jobs.

And among those, the number of older retirees returning to work is growing quickly. Today, nearly one-fourth of all people in the 65-to-74 age group hold jobs, compared with just one in six just two decades earlier, according to the Bureau of Labor Statistics. Putnam’s study found that the number of workers in the 65-to-74 group grew three times as fast as the overall work force last year."

About one-third of those surveyed said they were returning to work because they needed the additional income to survive financially.

The Putnam Survey  is very consistent with our prior look at labor force participation rates :  Look Who’s Dropping Out of Labor Force.   

Given the post-crash damage wrought on 401ks — now jokingly referred to as 201ks — by the popped tech bubble, its no surprise that Babyboomers and Retirees are going back to work. But the way the demographic trends have been running, it is somewhat disconcerting to see Students, Child Rearing Women,
and Over-qualified mid-level employees bailing out of the labor pool.

Time will tell if this is a short term phenomena, or an ongoing major shift . . .

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Source:
The Golden Years: Travels, Hobbies and a New Job, Too
ANNA BERNASEK
NYT, January 29, 2006
http://www.nytimes.com/2006/01/29/business/yourmoney/29reti.html

Graphic courtesy of NYT

Category: Employment

About that GDP . . .

Category: Economy

Economists React to GDP

The always excellent online Journal collect lots of econo-geek comments on yesterday’s GDP stinkeroo: I didn’t feel the need to pile on, but I do dig the difference between the excuse makers and those genuinely shaken by the awful data:

WSJ: "After the economy navigated a brutal hurricane season to post robust growth in the third quarter of 2005, growth cooled considerably in the fourth quarter. Gross domestic product, the broadest measure of U.S. economic output, increased at just a 1.1% seasonally adjusted annual rate as free-spending consumers became more cautious and the gaping trade deficit continued to provide a drag on the expansion. For all of 2005, GDP growth averaged a 3.5% annual rate. What does the slowdown in the fourth quarter mean for the economy in the months ahead?

Economists weigh in with their reactions:

"In both its overall appearance and underlying detail, the 1.1% fourth quarter growth in real GDP ranks as the most perplexing report in memory. At face value, such weakness would seem to make it more difficult for the Fed to tighten monetary policy again. But the underlying details reinforce — if not increase — perceptions that much faster growth lies ahead. Nonetheless, the confusing and conflicting contradictions with other data make it difficult to be confident in any inferences about the outlook."

– David Resler and Gerald Zukowski, Nomura Securities International

* * *

"Consumer spending was actually a little better than expected, rising by 1.1% in the quarter vs. our forecast of +0.3%. I think more of the decline in auto sales was apportioned to the business sector (fleet sales) and less to the retail side than we expected. Housing posted a reasonable gain of 3.5%, but this was less than half of our assumed rise. The monthly source data pointed to a bigger gain, so this is a bit puzzling."

– Stephen Stanley, RBS Greenwich Capital

* * *

"The consensus was a bit optimistic but this is a big surprise. The softness against our 2.6% forecast is explained by two components, fixed investment and government consumption. The former rose only 3.0%, with equipment and software up only 3.5%. This is baffling, given the 19.5% annualized leap in the value of capital goods production and the 14.9% rise in shipments of core nondefense capital goods. We expect big upward revisions."

– Ian Shepherdson, High Frequency Economics

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Technicals versus Economics

I got involved in a debate earlier at RealMoney – Columnist
Conversation
, and wanted to pass it along here.

Pre-GDP (1/27/2006 7:31 AM EST), I wrote :

1) Technicals remain strong, and continue to be the driving force short
term. But economics look weak, and continue to be source of concern
long term.

2) Last Friday’s market actions was the market’s early warning sign.
Very heavy volume to the downside on a big selloff is never a good
thing. I interpret that day as a foundational crack of the cyclical
Bull market. Again, we are not looking for a 1987 situation, but rather
a Q1 topping out, and an ugly rest of the year.

3) Gold also looks toppy — it’s well overdue for a 10% correction. We
are short here, but would re-establish a long position in the 480-510
range.

4) A 500 point day in Japan is too exuberant — it’s a sign of very
emotional trading. Historically, these sort of buying frenzies tend to
end badly. As such, we are lowering our multiyear price target on the
Nikkei down from 21,000 to 18,000. I would not be surprised to see this
lowered again before year’s end. And the Korean Topix, which I have
liked for some time, is geting crazed. Still plenty of upside, but
getting frothy…

Norm Conley raised a legitimate question about this:

"It seems as if you are taking two outlier one-day moves in markets (one "up"
move, and one "down" move), and extrapolating that although they are
contradirectional, they both carry ominous portents."

My response was:

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