Why The Job Recovery Was And Still is a Farce Illustrated in Charts.

The Labor Force Participation Rate is lower than the rate during the Great Recession for all age groups except those 55 years and older.

The percentage of women attached to the labor force continues to decline.

In February of this year we noted that the job recovery was a farce. We reviewed the job market through the lens of the overall labor force participation rate and that rate by age group.

Last week, the U.S. Bureau of Labor Statistics released its non farm payroll (NFP) report for October. The report showed 271,000 new jobs created surpassing expectations by about 90,000. The unemployment rate was reported to be at just 5%.

Reuters called the October NFP report “blow out jobs growth”

The main stream financial media and wall street traders (and algos) only look at the headline NFP and unemployment numbers, rather than also looking at what type of jobs were supposedly created and who got or lost them.

Many criticize the NFP report because it is not a measure of actual jobs created but rather relies on a survey that uses assumptions that some believe are faulty (the numbers are based on birth/death assumptions with no proof that any jobs were actually created). This leads to charges that the NFP numbers can easily be manipulated.

The unemployment rate is also criticized for how it is calculated. If one is not considered in the labor force, the Bureau of Labor Statistics does not include them as “unemployed”. Therefore, if the laor force participation rate drops, the unemployment rate can also drop.

The analysis below assumes that even if the NFP numbers are extremely accurate, the job market is still poor.

Non Farm Payroll Three Month Average Lowest of the Year/Lower Than Last Year

The August and September NFP numbers were low and only revised slightly higher in the October NFP report. The three month average NFP reports covering August-October 2015 is about 187,000 new jobs created, lower than any three month period of this year and lower than the comparable three month period of last year.

Type of Jobs Created in October

The jobs that the NFP October report showed were mostly all part time and low paying jobs:

Education and Health: +57K

Professional Business Services/Temp Help: +54K

Retail Trade: +44K

Leisure and Hospitality: +41K

Temp Help: +25K

Manufacturing workers: +0

Mining lost workers

The Labor Force Participation Rate

The Song Remains the Same

The labor force participation rate identifies those people who have jobs as a percentage of the population. Since February of 2015, when we last examined the state of the jobs market, the labor force participation rate has not improved, despite the “robust” job reports.

The general labor force participation rate in October 2015 was unchanged from February 2015 and at levels last seen in 1978 when women had not full entered the labor force.

The persistently low labor force participation rate is not a function of retiring baby boomers leaving the labor force. (see the rising labor force participation rates of those 55+ years and older and 65+ years and older below)

Labor Force Participation Rates 1978 – 2015

October 62.5% February 62.5%

May 1978 62.6% July 1997 68.1%

Labor Force Participation Rate 1978-2015

The overall labor participation rate has continually declined since the mid 1990’s and the decline has accelerated since the end of the Great Recession.

Source: US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate [LNU01300000], retrieved from FRED, Federal Reserve Bank of St. Louis, November 6, 2015.

Labor Force Participation Rate 2008-2015 Among 16-19 Year Olds

Up slightly since February

October 32.5% February 31.8%

July 1978 71.8% January 2014 30.4%



Slightly less than a third of those aged 16-19 were working in October 2015. In 2000 more than 50% of those aged 16-19 were attached to the labor force.

In October 2015, the percentage of those aged 16-19 attached to the labor force declined to levels lower than those at the height of the Great Recession.

The percentage of 16-19 year olds attached to the labor force has declined since the end of the Great Recession.

Labor Force Participation Rate 1948-2015 Among 16-19 Year Olds

In the summer of 1978, nearly three quarters of those aged 16-19 were working.

Those aged 16-19 working has gone from a majority in 2000 to less than a third in 2015.

Source: US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate: 16 to 19 years [LNU01300012], retrieved from FRED, Federal Reserve Bank of St. Louis, November 6, 2015.

Labor Force Participation Rate 2008-2015 Among 20-24 Year Olds

Up slightly since February

October 70.7 February 70.0%

July 1989 83.8% January 1954 58.5%

The labor force participation rate among 20-24 year olds (college student/graduate age) remains lower than at any point during the Great Recession.

In October 2015, the labor force participation rate among 20-24 year olds was lower than at any point during the Great Recession of 2008-2009

Labor Force Participation Rate 1948-2015 Among 20-24 Year Olds

The labor force participation rate among 20-24 year olds peaked in July of 1989.

Source: US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate: 20 to 24 years [LNS11300036], retrieved from FRED, Federal Reserve Bank of St. Louis November 6, 2015.

Labor Force Participation Rate 2008-2015 Among 25-54 Year Olds

October 80.9% February 80.9%

May 1978 76.7% March 2000 84.5%

In a robust economy and job market one would expect the labor force participation rate among 25-54 years olds to be increasing. The percentage of those in their prime earning years, however, has remained flat all year and lower than at any time during the Great Recession.

At the height of the Great Recesssion a larger percentage of 25-54 year olds were attached to the labor force than in October 2015.

Labor Force Participation Rate 1978-2015 Among 25-54 Year Olds

The labor force participation rate among 25-54 year old has declined steadily since the late 1990’s.

Source: US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate: 25 to 54 years [LNU01300060], retrieved from FRED, Federal Reserve Bank of St. Louis, November 6, 2015.

The Myth of Retiring Baby Boomers

Labor Force Participation Rate 2008-2015 Among Those 55 Years and Older

Up since February

October 40.0% February 39.9%

May 1956 44.0% July 1993 28.9%

One oft cited rationale for the declining overall labor participation rate and one that Fed Chair Janet Yellen subscribes to is that as baby boomers retire, there predictably are fewer people as a percentage attached to the labor force.

The U.S. Bureau of Labor Statistics data directly contradicts this assertion.

As we have seen above, there have been declines in the percentages of each of the 16-19 year old, 20-24 year old and 25-54 year old labor force participation rates since the Great Recession.

If the theory that retiring baby boomers are contributing to a lower overall labor force participation rate, then we would expect an even steeper decline in the labor force participation rate among baby boomers.

Rather, the labor force participation rate among those 55 years and older is increasing!

Baby boomers are staying employed longer or coming out of retirement to work because they either have insufficient retirement savings or can not make ends meet on their retirement savings as there is no longer any meaninful interest paid on bank deposits and certificates due to the Federal Reserves zero interest policy the past six years.

Those aged 55 years and older are increasingly attached to the labor force as they defer retirement or come out of retirement to work.

Labor Force Participation Rate 1948-2015 Among Those 55 Years and Older

Early retirement for those aged 55 an old peaked in the early 1990’s.

Those aged fifty five years and older have become increasingly attached to the labor force the past twenty five years.

Souce: US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate: 55 years and over [LNU01324230], retrieved from FRED, Federal Reserve Bank of St. Louis, November 6, 2015.

Labor Force Participation Rate 2008-2015 Among Those Aged 65 and Older Without Disabilities

Up since February

October 24.3% February 23.9%

December 2008 21.4% May 2013 24.4%

Strong growth in the labor force participation rate among those sixty five years and older has been a hallmark of the period since the Great Recession. The oldest baby boomers (those 65+ years and older) have experienced the greatest increase in labor force participation rate of any age group.

An increasing percentage of those sixty-five years and older are attached to the labor force.

Source: US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate: With No Disability, 65 years and over [LNU01375379], retrieved from FRED, Federal Reserve Bank of St. Louis, November 8, 2015.

Labor Force Participation Rate 2008-2015 Women

October 2015 56.7% February 2015 56.6%

Jan 2008 59.2% July 1997/June 1997 60.4%

January 1948 30.7%

The labor force participation among women has declined sharply since the end of the Great Recession.

Women’s participation in the labor force since the end of the Great Recession continues to decline.

Labor Force Participation Rate 1948-2015 Women

Gains in the labor participation rate among women peaked in 1997.

Source: US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate: Women [LNU01300002], retrieved from FRED, Federal Reserve Bank of St. Louis, November 6, 2015.

What the Non Farm Payroll Numbers Mean for Fed Policy

The Fed desperately wants to raise rates to validate that their mulit-year multi trillion dollar quantitative program and zero interest rate policy worked. Irrespective of any analysis of the labor force participation rates, the Fed can point to the “sturdy” non farm payroll numbers as validation that their policies have worked.

The Fed needs to raise interest rates to gain that confirmatory credibility and to combat de-dollarization initiatives by the BRICS nations and the continued rise of the Chinese Yuan as an international currency. Raising rates also gives the Fed the leeway to lower rates as the economy decelerates.

Having gained some credibiity in raising rates, the Fed can eventually institute a negative interest rates, embark on another round of quantitative easing and help usher in a cashless society where they will have even greater control over monetary policy and the economy.

All made possible due to a “blowout” jobs report.

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