Are people leaving the labor force? Is unemployment really rising? The labor force participation rate says yes!
May 5, 2012 1 Comment
There have been many articles and warnings lately that people are leaving the labor force. These articles claim there are fewer people working or looking for work each year and that the labor force of employed or employable individuals is shrinking. This is occurring while the population is still rising. There is therefore apparently not a lessening of the population but a lessening of people in it that are eager to work.
That begs the question of why this is happening. Is the population just aging? Are people retiring earlier or are kids staying at home longer? Or is it that more and more people just giving up and forgetting about working or looking for work?
And if these people are just leaving the workforce out of disillusionment with the current state of the economy then how are they surviving? Is government (you and me) paying for them? Are they living off friends and relatives? Are they living off the land? What are these people doing and why and will it continue?
According to a recent online article posted on ZeroHedge the labor force has declined in the month of April by 522,000 people. That means that there are currently 88,419,000 people who are not in the labor force but who are of an age where you would expect that they would be (over the age of 16). This represents a new low.
I found a definition of the “labor force participation rate” in the Winston-Salem Journal. It is a term used by the Department of Labor and it simply means the number of people over the age of 16 working or actively looking for work. According to this article the labor force participation rate for April 2012 is 70% for men which is the lowest since the government started keeping statistics on this in 1948. For all Americans it has reached the lowest level since 1981.
Some say that high paid jobs are being replaced by low wage manufacturing and construction jobs. This could account for the lowest level ever of men working. Many of my clients have looked for higher wage jobs for years and can’t find anything. Many of these people have given up trying to find a job out of disillusionment. They simply won’t take a very low paid job at their age and skill level.
As far as 16 year olds are concerned most don’t currently work even if many of us adults think they should. Indeed the current “failure to launch syndrome” tells us that 70% of children under the age of 30 still live with their parents. Women make up more than 60% of college grads and they are entering the workforce in numbers which may contribute to lack of job availability for men. The overall labor force participation rate peaked in 2000 when women really began “flooding” the workforce according to this article.
But still it seems in general that more people are continuing to leave the workforce. Some groups have a higher rate but every group seems to have fewer people working as the numbers for the whole labor force participation is at its lowest rate since 1981.
The problem is that the government only counts unemployed people if they are in the labor force. If they have exited for any reason then they are not counted. So when you are told that the unemployment rate is declining then remember these figures. Ask yourself if unemployment really is declining because it seems to me that it is still rising. It also seems like there is an ongoing mass exodus currently from the labor force. A mass exodus that is not showing up in unemployment statistics.
You might come to the same conclusion that we are being lied to. That unemployment is rising, more people are out of work and these people appear to be so disillusioned that they have given up on work altogether. All the while we are being told that the economy is improving and unemployment is falling. I say don’t believe it.
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