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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 454787  
Subject: New jobs disappont, labor participation drops Date: 5/4/2012 1:32 PM
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http://www.nytimes.com/2012/05/05/business/economy/us-added-...



U.S. Added Only 115,000 Jobs in April; Rate Is 8.1%
By CATHERINE RAMPELL
New York Times, May 4, 2012


The United States had another month of disappointing job growth in April.

The nation’s employers produced a net gain of 115,000 positions, after adding 154,000 in March...

The unemployment rate, which is based on a separate survey of American households, ticked down to 8.1 percent in April, from 8.2 percent. That may sound like good news, but the decline was not because more unemployed workers were hired; it was entirely because 342,000 workers dropped out of the labor force.

The share of working-age Americans who are in the labor force, meaning they are either working or actively looking for a job, is now at its lowest level since 1981 — when far fewer women were doing paid work. The share of men taking part in the labor force fell in April to 70 percent, the lowest figure since the Labor Department began collecting these data in 1948. ...
[end quote]

Here is the government report:
http://www.bls.gov/news.release/empsit.nr0.htm

The headline employer survey number is adjusted by the "Birth-Death Model," which the BLS pulls out of an orifice to account for new business formation and business closure. "Birth-Death" model adjustments are particularly inaccurate during economic trend changes, such as if the economy is sliding into recession.

http://www.bls.gov/web/empsit/cesbd.htm

The April 2012 "Birth-Death" model adjustment was +202,000 jobs, which was more than the entire reported increase in jobs!

Because of the "Birth-Death" model adjustment fudge factor, it's much better to look at the household rather than the employer survey numbers.

But this also has a "fudge factor." People are only counted if they are in the workforce. So many people have "dropped out of the workforce" that it is essential to count them to truly understand the unemployment situation.

Some might say that baby boomers are retiring, reducing the workforce. But only the leading edge of the baby boomers are actually over 65. Most baby boomers (including me) are between age 50 and 65, and their work participation is actually increasing. About 80% of this age segment has less than $100,000 saved in retirement accounts, so they cannot retire because they are too young for Social Security and Medicare.

Let's look at the household survey numbers, especially U-6 (Total unemployed, plus all marginally attached workers plus total employed part time for economic reasons), and labor participation.

The long-term chart of Civilian Participation shows that civilian participation rose beginning in the mid-1960s, as the Baby Boomers became old enough to enter school and the Women's Movement encouraged job openings for women who increasingly entered the work force as their kids grew up.

http://research.stlouisfed.org/fred2/series/CIVPART
http://research.stlouisfed.org/fred2/series/U6RATE

The Civilian Participation Rate reached a maximum of 67% in the late 1990s, when plenty of jobs were available for everyone who wanted to work. I consider this full employment, since 2/3 of the entire population was working and those who didn't probably didn't want to or weren't able to.

Beginning in 2000, the Civilian Participation Rate gradually began to fall below 67%. I will call this difference "Excess non-participation."

Excess non-participation began to rise rapidly after the 2008 financial crisis. Excess non-participation is now 3.4%. This should be added to U-6 for a complete picture of unemployment.

I have analyzed these numbers and posted charts here:
http://dl.dropbox.com/u/45054803/Unemployment.xlsx

Full employment, with the lowest U-6 and zero Excess non-participation occurred in April 2000 = 6.6%.

April 2012 unemployment, U-6 + Excess non-participation = 17.9%. This is the true measure of under and unemployment. It has been declining since its maximum of 19.5% in December 2009. However, this decline has been gradual and relatively small.

Millions of people are "Not in Labor Force, Want a Job Now."
http://research.stlouisfed.org/fred2/series/NILFWJNN

What happened to all the people who are unemployed or underemployed? How do they get the money to eat and live?

The answer is an explosion in Personal Current Transfer Receipts (value given with no value received, including unemployment benefits, food stamps, Social Security, corporate pensions, etc.).

http://research.stlouisfed.org/fred2/series/PCTR

Over 60% of adult "kids" get support from their parents.

http://blogs.ajc.com/business-beat/2012/05/03/62-percent-of-...

The situation today is a very far cry from the time that a young person could graduate from high school and easily get a job in a factory. The situation today is a very far cry from the time that an experienced worker could easily find a job and transfer to improve a career.

Many people have simply dropped out of the labor force because the ratio of unemployed persons per job opening is now double what it was in 2007. This number is trending downward, but it's still higher than it was during the worst of the 2001-3 recession.

http://www.bls.gov/web/jolts/jlt_labstatgraphs.pdf


When the most recent recession began (December 2007), the number of unemployed persons per job opening was 1.8.
When the recession ended (June 2009), there were 6.2 unemployed persons
per job opening.
The unemployed persons per job opening ratio has trended downward since the end of the recession and was 3.7 in February 2012.


Bottom line: Unemployment is trending downward, but sslllooowwwly. It's still far worse than it was during previous post-World War 2 recessions, especially when Civilian Labor Force participation is included.

Wendy
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