Americans’ Participation in Labor Force Hits 35-Year Low | CNS News

http://www.cnsnews.com/news/article/ali-meyer/americans-participation-labor-force-hits-35-year-low

Fitting the trend of the past ten years, the Labor Force Participation Rate (LFPR) has fallen to a minimum not seen since the Carter administration. While the LFPR is relied on as a labor indicator, it is nevertheless arbitrary and is proving to be more deceptive than instructive.

Why is the LFPR significant?

The LFPR is the ratio of number of labor participants (the “labor force”) to the total available lawful workers. Children and certain institutionalized populations are ignored in determining the LFPR. Non-participants, such as retirees, college students, stay-at-home moms, the physically disabled, and — most critically — the long-term unemployed, also judged in the media as “the people who have quit looking for work,” comprise the percentage of the available lawful worker population equal to 100% minus the LFPR.


DECEPTION

Setting aside the media’s shameful judgmentalism in its abandonment of the long-term unemployed, the rationale of excluding capable workers from the labor force is absurd.

The Bureau of Labor Statistics (http://bls.gov) estimates the LFPR for the purpose of deriving the national unemployment rate. The rationale is that the economic policymakers shouldn’t be responsible for the employment of citizens who have voluntarily become non-participants. Fair enough if the LFPR were truly independent of economic policy, but that’s clearly not the case. Because of the entangled relationship between economic policy and the LFPR, the arbitrary manipulation of policy produces real effects in the LFPR. Not accounting for these effects in the computation renders as arbitrary the LFPR.

October 2009 was the highest measure of unemployment Americans have experienced in decades. President Obama had been in office for 9 months. The American Recovery and Reinvestment Act of 2009 (the “stimulus”) had been in effect for 8 months.

President Obama’s rhetoric has been such that his administration and Democrat-sponsored legislation has “created or saved” millions of jobs. In order to evaluate that assertion, October 2009 would thus seem to be a reasonable benchmark, yielding the most favorable possible valuation while also reasonably minimizing the allowance for excuses.

Here is the relevant BLS data:

LABOR FORCE PARTICIPATION RATE
03/2007: 66.2%
10/2009: 65.0%
12/2014: 62.7% (-2.3%)

NOT IN LABOR FORCE (16 years and older)
03/2007: 77.982 million
10/2009: 82.766 million
12/2014: 92.898 million (+10.132)

EMPLOYMENT (16 years and older)
03/2007: 146.320 million
10/2009: 138.432 million
12/2014: 147.442 million (+9.010)

UNEMPLOYMENT (16 years and older)
03/2007: 6.731 million
10/2009: 15.352 million
12/2014: 8.688 million (-6.664)

UNEMPLOYMENT RATE
03/2007: 4.4%
10/2009: 10.0%
12/2014: 5.6%

Appropriating the LFPR of 65.0% from October 2009 (President Obama’s 9th month in office), today’s labor statistics would yield an unemployment rate of 8.9%, not 5.6% as the propagandists say.

8.9%.

Without adding any jobs, achieving 65.0% labor participation would require 5.8 million non-participants to suddenly reenter the labor force.

The lower the LFPR, the lower the unemployment rate. Job seekers need not apply.


ARBITRARY

So why is the LFPR arbitrary?

Some conservatives allege that the Obama administration is deliberately manipulating the numbers of unemployed participants and non-participants in order to show a decreasing unemployment rate. Excuses abound for not counting some of the unemployed among the participant workers.

Allegations of impropriety are unnecessary. The raw numbers provide a sufficient critique.

The LFPR was remarkably steady around 66% during the Bush administration. Between October 2009 and December 2014, the BLS reports a precipitous 2.3% decline in the LFPR from 65.0% to 62.7%.

Is there a desirable benchmark LFPR?
What does the decline suggest?
Does the decline suggest anything meaningful?

Before attempting to make any subjective judgments about the LFPR, a logical question must be asked: How low can the LFPR go and still make mathematical sense?

The employment level is objective and measurable with precision: just count the number of lawfully employed workers. Same with the total population of available lawful workers: it’s exactly the number of people who aren’t children and aren’t institutionalized. The difference is exactly the number of jobless lawful workers. Therefore, the minimum possible value of the LFPR is calculated by assigning all jobless lawful workers non-participant status, yielding an unemployment rate equal to exactly 0%.

According to the BLS data, the minimum possible LFPR at selected samples during each of the Bush and Obama administrations are calculated as follows:
03/2007: 63.3% (2.9% below official 66.2%)
10/2009: 58.5% (6.5% below official 65.0%)
12/2014: 59.2% (3.5% below official 62.7%)

So the December 2014 LFPR reported by the BLS, 62.7%, would have been a mathematical impossibility during the Bush administration, when the minimum possible LFPR was 63.3%. What would have been a nonsensical LFPR then has now become a statistical opportunity as the job market stagnates.

The critical implication is that a fixed LFPR benchmark cannot be established, as the minimum possible LFPR is a function of the employment statistics. The inability to benchmark the LFPR renders it an arbitrary metric.

Due to the persistent depressed employment level, the Obama administration has been afforded a wide margin to preside over the systematic transfer of millions of unemployed participant workers to the ranks of the non-participants.

How convenient.


FAIRNESS

According to the BLS, the 2.3% reduction in the LFPR between October 2009 and December 2014 corresponds to a coincident reduction in the unemployment rate from 10.0% to 5.6%.

Consider the fictional scenario using March 2007 BLS data in which the Bush administration manipulates the LFPR in order to artificially reduce the unemployment rate. A change in the participant status of 5.4 million lawful unemployed workers produces an instantaneous 2.3% reduction in the LFPR from 66.2% to 63.9% and a reduction in the unemployment rate from 4.4% to 0.9%.

Such a scenario is farcical. The media, in disbelief of the comically low unemployment rate, brands W the “Laziness President” at the notion of a 2.3% reduction in the LFPR. Democrats call for impeachment, justifiably so, over the blatant partisan manipulation of BLS data.

And yet President Obama has indeed presided over a 2.3% reduction in the LFPR since the unemployment peak of the Great Recession.


THE NEW NORMAL

Despite population growth and government stimulus spending by both President Barack Obama and former President George W. Bush, the employment peak achieved by Bush (146.320 million in March 2007) would not be achieved again until July 2014. Measuring from the October 2009 unemployment peak yields a recovery of 57 months.

If 1.9 million people suddenly decided to retire today, unemployment would be 4.4% at a 61.9% LFPR with 94.8 million non-participants. Contrast that with March 2007, when unemployment was 4.4% at a 66.2% LFPR with 78 million non-participants. Republicans had just lost Congress.

What is truly astonishing is the explosive growth of the non-participant population with respect to the employed/unemployed labor force:

NOT IN LABOR FORCE (16 years and older)
03/2007: 77.982 million
12/2014: 92.898 million (+14.916)

EMPLOYMENT (16 years and older)
03/2007: 146.320 million
12/2014: 147.442 million (+1.122)

UNEMPLOYMENT (16 years and older)
03/2007: 6.731 million
12/2014: 8.688 million (+1.957)

Are we really to believe that the population of non-participants grew by 14.9 million while the labor force grew by 3.1 million? That’s 1 new worker for every 5 new non-participants over the past 8 years.

None of this is to gloat about President Obama’s failures on the economy. There’s no question that President Obama inherited a downward spiral from President Bush.

But the labor market is not in recovery, as President Obama maintains. At least not in any mathematically defensible way. The numbers contradict his rhetoric.
And the numbers aren’t partisan.

Source: Bureau of Labor Statistics (http://data.bls.gov/cgi-bin/srgate)
Series IDs:
LNS11300000 (Labor force participation rate)
LNS12000000 (Employment level)
LNS12300000 (Employment-population ratio)
LNS13000000 (Unemployment level)
LNS14000000 (Unemployment Rate)
LNS15000000 (Not in labor force)

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Americans’ Participation in Labor Force Hits 35-Year Low | CNS News

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