Unemployment Shrinks, and Again, So Does Labor Force Participation
How lucky for the president that his convention speech was followed by this morning’s slightly smaller unemployment rate and a more significant reduction in the U-6 rate (8.1 percent and 14.7 percent in August, compared to 8.2 percent and 15 percent
in July). For more analysis on the accuracy of unemployment rates, see David Ranson’s NCPA piece, “A Better Way to Track Unemployment.”
But looking beyond these numbers, trouble still abounds. That pesky labor force participation rate (LFPR) that politicians don’t like to talk about is almost half a percentage point lower than in July. It is now at a measley 63.5 percent, much lower than was even seen during the economic downturn of the Bush years. (See the chart below, courtesy of the Bureau of Labor Statistics.) Also, notice the similarities between the declining participation rate and the Phantom’s Revenge rollercoaster at Kennywood Amusement Park
in West Miffin, Pennsylvania.
This does not bode well for the future of tax cialis online pharmacy revenues and entitlement programs. Imagine the day when a president boasts of an unemployment rate of 1 percent, followed by “Oh, by the way, only 10,000 people are actually employed.” Or am I just a chronic worrier?
It’s amazing how transfer payments work. Smaller lfpr, less tax revenue, but more free money. 1% must be a magical number, because I’ve seen it plastered all over Obama’s soapbox.
It’s interesting that during Pres. Obama’s speech last night, that he continued to say “the job is no completed”. He stayed away from the unemployment rate, and refused to talk about the $16 trillion dollars in debt we have accrued. To continue to play the “we saved GM” card is misleading, because if you throw enough money at any business they will be able to stayed open. Being open is different than being successful.
Two studies from the Kansas City and Chicago Federal Reserve have found that demographic changes (aging baby boomers) play a large part in the declining LFPR.
“Trend factors account for about half of the decline in labor force participation from 2007 to 2011, with cyclical factors accounting for the other half.”
and
“We estimate that just under half of the decline in LFPR since 2000 is due to such factors”
From http://mjperry.blogspot.com/2012/05/demographics-account-for-50-of-decline.html
The implications of our demographic shift is important; as the baby boomers age out of the work force they will be drawing benefits which government will have a difficult (to say the least) time covering.
I love the roller coaster analogy for the economy’s trend, but a House of Horrors might be more to the point.
U-6, LFPR & other unemployment measures are explained in this recent NCPA issue brief by senior fellow David Ranson.