Business Week Writes: Not Looking for Work: Labor-Force Participation Hits 35-Year Low

 

The unemployment rate fell in August but for the worst of reasons: Many Americans stopped looking for work so they weren’t counted among the unemployed. What’s harder to tell is why they stopped looking. The political right chalks it up to laziness and government coddling, while the political left says people are giving up looking because a dysfunctional economy isn’t producing enough jobs.

The Bureau of Labor Statistics said the August unemployment rate was 7.3 percent, down a tick from 7.4 percent in July. The worrisome part is why the rate fell. The size of the workforce declined by about 300,000 and the participation rate fell to 63.2 percent from 63.4 percent—the lowest since August 1978. The participation rate is the number of people either working or actively searching for work as a share of the working-age population. It rose steadily over the years as more women entered the workforce before falling sharply in the 2007-09 recession, and it hasn’t recovered since.

Also disappointing was the payroll report. While the 169,000 added to employers’ payrolls in August wasn’t far below the 180,000 median prediction of economists surveyed by Bloomberg, there was a downward revision of 74,000 jobs to the previous two months’ reports. The government said June payrolls grew by only 172,000, rather than 188,000; July’s grew by only 102,000, instead of 162,000. In other words, while employment did grow in August, it was from a substantially lower starting point than previously believed.

Listen, this is fairly easy. The unemployment numbers  that are reported by the FED (with all of their adjustments) are highly diluted at best or as some would argue, downright bogus. The truth of course is somewhere in the middle.

Millions of Americans have given up looking for good paying jobs. As such, they have technically left labor participation pool and are not being counted as “unemployed looking for work”.  I do not think these people sitting at home being happily unemployed.  Not by a long shot. They have simply tried (some for many years) to find good paying jobs but were unable to do so. Why?

As I have mentioned before, I believe the US Economy never technically left recession. The market was simply flooded with cheap credit in order to stabilize things and to give perception that things are getting better. However, with interest rates now moving higher and with stimulus velocity now pretty much being exhausted, I believe recession and unemployment are about to show their ugly head again.

So, what is the true unemployment number in the US? Hard to say, but if you count all of the people who left the labor pool due to their inability to find full time work as well as those who are considered “part time workers who would like a full time job but are unable to find one” I would put the number at around 15-20% unemployment.  

A grim picture indeed. A picture that might just get a lot worse as the US slides back into a recessionary environment in 2013-2014. If you do have a good job, treasure it. “Now”, might be a good time to start practicing your ass kissing skills. 

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