MAKING SENSE -- September 6, 2013 at 1:50 PM ET
America's Shrinking Workforce?
Officially, this month's unemployment number is, in the words of the Bureau of Labor Statistics, "little changed" at 7.3 percent. The other headline number -- of 169,000 jobs added -- would have elicited an "eh" in my youth; a "meh" today. More meh still: a sharp 74,000 downward revision of the summer's job numbers. If last month's supposed 162,000 new jobs had been accurately reported, as per the downward revision, it would have been announced as 104,000, it turns out. That would have elicited headlines of doom.
On the other hand, our own hyper-inclusive U-7 number dropped dramatically -- to 15.7 percent. U-7 adds to the officially unemployed (11.3 million Americans), part-timers looking for full-time work and "discouraged" workers -- everyone who didn't look for a job in the past week but says they want one.
What's going on with U-7? Fewer unemployed Americans (by about 200,000); many fewer part-timers looking for full-time work: 334,000. And there are just as many Americans officially "not in [the] labor force" who no longer say they "currently want a job."
How to make sense of it all? Well, my own guess is that the baby boom retirement story, first tentatively told here last month, is becoming more plausible.
Here's what I wrote last month:
The official "workforce" actually declined -- by about 40,000 people. What could explain the drop, given the rise in population? 'Ten thousand baby boomers turn 65 today' has become a demographic cliché (or meme, if you prefer). Barring a mass and age-selective plague, that means that 10,000 or so are also turning 66, their official Social Security retirement age. Many, if not most, baby boomers are retiring. And since 10,000 a day equals 300,000 a month, if two-thirds of them are hanging up their rock 'n' roll work shoes, Friday's numbers would make sense: 200,000 or so retirees offsetting the 200,000 or so new working-age Americans.
That was a story about July. So what happened in August? The population again increased by 200,000. And sure enough, the labor force declined -- by 300,000.
Statistically, this should come as no surprise at all. The baby boom started in 1946, a decent interval (nine months?) after several million soldiers returned from World War II.
U.S. birth rate (births per 1000 population). The red segment from 1946 to 1964 is the post-war baby boom. Courtesy of the Centers for Disease Control, "Vital Statistics of the United States, 2003, Volume I, Natality," via Wikipedia.
Add in immigration, and the year that ended in July of 1947 saw the biggest gain in the U.S. population, in percentage terms, since the early 1920s: nearly 2 percent or 2.7 million new Americans.
Now, age all the brand-new ones by 66 years, today's official age at which full Social Security kicks in, and you would have a baby boom retirement boom -- right about now.
As we've shown in our "New Adventures for Older Workers" multi-media package, while it's true that Americans are working longer, the majority are still retiring by the time they're 66. And so this month's numbers echo last month's: 10,000 baby boomers a day hitting 66 and thus, a shrinking workforce, with today's new Americans of working age, most of them immigrants, being sopped up by the ever-so-modestly growing job market.
In an interview I did just a few moments ago with economist Lisa Lynch, the dean of the Heller School for Social Policy and Management at Brandeis University, she agreed that retiring baby boomers are part of today's story. But she added that unemployment went up last month for young men, ages 25-34, with a high school diploma or less. Those men used to get jobs in construction or manufacturing, she pointed out, but no longer. And thus they sit idle.
Backing her up is a story from this week's Wall St. Journal, "Long-Term Jobless Left Out of the Recovery," though the story doesn't emphasize the extent to which the "long-term jobless" may be young people stigmatized by unemployment during the Great Recession and/or simply unemployable if they don't have a college degree.
A few further observations. One is that the steep drop in part-timers looking for full-time work seems to contradict a major criticism of President Obama's Affordable Care Act, which we're about to report on for the NewsHour. The criticism is that it will force employers to cut workers to part-time status to avoid paying for their health care. That would show up in the data as a surge of part-timers wanting full-time work. But at least this past month, it would seem, just the opposite happened.
More good news from the BLS: "The average workweek for all employees on private nonfarm payrolls increased." And in August,"average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $24.05." That offsets an ominous dip in earnings that was reported last month.
Of course no reporter worth his or her salt can fail to include some bad news. And so, to end on a negative note, the jobs being added in this economy seem, once again, to predominate on the upper and lower ends of the pay scale.
"Retail trade added 44,000 jobs in August and has added 393,000 jobs over the past 12 months," the BLS reported.
"Employment in health care increased by 33,000 in August. Within the industry (however), most of the job growth occurred in ambulatory care services (+27,000)."
And yet, said Friday's BLS report, "employment in professional and business services continued to trend up (+23,000)."
"A Tale of Two Cities," Brandeis' Lisa Lynch calls it, a continuation of the troubling pattern we've seen for decades, frankly: jobs at the top, jobs at the bottom, and fewer and fewer in between, the so-called "hourglass economy," as dubbed by the late Bennett Harrison back in the 1980s.
Lastly, the view from elsewhere:
Revisions have knocked -100k jobs off over past 2 reports. Given usual cyclicality, this is much worse than the +50k some may have expected.— Justin Wolfers (@justinwolfers) September 6, 2013
Wolfers follows that up with a post on Bloomberg, writing:
...Actually, the news is slightly worse than this. Typically, revisions are pro-cyclical, meaning that good news tends to be initially understated. (No one is quite sure why this is, but it's been a fairly robust pattern over the past decade.) And as such, it might have been reasonable to have expected recent healthy reports to have become even healthier. Compared to this counterfactual, today's news really is quite dismal.
August jobless rate for people 25+ with bachelor's degree or more: 3.5%. Some college: 6.1%. High school grads: 7.6%. No h.s. diploma: 11.3%— Sudeep Reddy (@Reddy) September 6, 2013
Auto industry up 18k jobs, clothing stores +14k, temp services +13k, health care sector +32k, restaurants +21k, local gov't (teachers) +20k— Reid Wilson (@PostReid) September 6, 2013
On Zerohedge.com, "Tyler Durden," writes, "Quality of August Jobs Added: Absolutely Abysmal."
Catherine Rampell, of the New York Times, analyzes the employment gains, writing:
Employment gains in the recovery have been disproportionately in lower-wage sectors like food service and retail, causing concern about not only the quantity of the new jobs but also their quality. The industries are more likely to hire part-time workers and operate on just-in-time schedules, making it difficult for employees to predict how many hours they will have from week to week.
The Wall Street Journal points out that Friday's data is at odds with more positive numbers out recently:
Other data this week indicated a strengthening economy. Activity readings for manufacturing and non-manufacturing businesses from the Institute for Supply Management soared to multi-year highs in August. Auto makers reported a pace of new sales for August not seen since before the recession. And new jobless claims, a proxy for layoffs, fell again last week. They have hovered around five-year lows since late July.
With the participation rate still falling, the unemployment rate is less relevant than ever. And all the Fed board knows it.— felix salmon (@felixsalmon) September 6, 2013
And, of course, all eyes were on Friday's numbers for an indication of what the Federal Reserve will do to its quantitative easing policy. Jeffrey Bartash reports for MarketWatch:
The lackluster employment report could upset the Federal Reserve's timetable on how much to ease the throttle on a massive economic-stimulus program. Most observers had expected the Fed to start to tap on the breaks at its two-day meeting that ends Sept. 18.
Some Fed officials have indicated they are ready to scale back their stimulus, but others have been less committal, making it hard to discern where the consensus on the policymaking Federal Open Market Committee lies.
"This is a period where it's even more important to go into an FOMC meeting with an open mind," Chicago Federal Reserve Bank President Charles Evans told reporters on Friday.
"There's been cumulative progress on the economy. I can be persuaded that there has been enough improvement."
Neil Irwin writes on Washington Post's WonkBlog:
Jobs numbers ebb and jobs numbers flow, and as always, it would be unwise to make too much of one report. But this one has enough signs of weakness embedded in enough places that it has to make economy-watchers -- including those at the Federal Reserve who meet in less than two weeks -- reassess their confidence that a solid, steady jobs recovery is underway.