America fact of the day

by on August 2, 2013 at 1:34 pm in Current Affairs, Economics | Permalink

The share of American adults with jobs is stuck at just 58.7 percent.

That is The New Normal.  From Binyamin Applebaum, here is more.  One additional development is that long-term unemployment is finally declining somewhat.  There is also a new result that fewer and fewer women are entering the labor force.

By the way, real average hourly earnings fell in June (pdf), not your grandpa’s economic recovery, is it?

Question August 2, 2013 at 1:55 pm

I’m sure this has been addressed by other reports, but can anyone here explain to me to what degree the aging of Baby Boomers has to do with the shrinking % of Americans in the workforce.

In other words, I would be more interested in LFPR among those under, say, 60 years old.

PD Shaw August 2, 2013 at 2:19 pm

Matt Yglesias’ link (“fewer and fewer women are entering the work force”) shows that those aged 62-66 left the workforce in 2010-11 at rates less than age coherts in 2002-2003. Likely many Boomers have less real estate equity and smaller investment portfolio than they needed.

George Doehner August 2, 2013 at 2:59 pm

ZeroHedge has been pounding this theme for some time. Conventional wisdom says the aging population will result in lower percentage of adults in the work force. Reality so is the opposite. The overwhelming bulk of new jobs are fill by over-55, while there has been no job growth for those in their prime earning years.

http://www.zerohedge.com/news/2013-08-02/record-jobs-old-workers-others-not-so-much

The second and third graphs are interesting. Better health care and nutrition would result in people working longer because of life expectancy. beyond that quality of life and divorce rates would drive up the number. The massive spike in geezer employment starting in the early 1990’s needs another explanation.

Larry Siegel August 3, 2013 at 11:27 pm

>The overwhelming bulk of new jobs are fill by over-55

Aren’t jobs filled by over-55’s offset by the same people leaving their previous job?

JonF August 4, 2013 at 4:04 pm

From what I’ve read a preponderance of new jobs have been low wage, service sector jobs. While sometimes those are filled by older people (as in the old Walmart greeter job), usually it is younger people who you find working those jobs; so I am curious why it would be claimed that specifically *new* jobs are being filled by older workers. That sounds like some lazy work that doesn’t bother to drill down into the details. Older workers may be staying in the work force, but it’s most likely they are also staying in their existing jobs, not getting new ones, since it actually is difficult for an older person to get hired these days.

Dismalist August 2, 2013 at 6:19 pm

Speaking as a bona fide boomer, I can confirm that I have less real estate equity and a smaller investment portfolio than I need.

Come to think of it, all people have less than they need. :-)

John August 2, 2013 at 11:20 pm

….less than they desire. Fixed that.

mulp August 2, 2013 at 9:28 pm

One analysis put the employment rate for those over age 57 continuing to increase, while the rate for those under age 57 falling, with the deepest reduction in the ages under 25.

My take is “markets work”.

Employers are signalling they want to retain the boomers in the workforce by paying higher wages, and want to reduce the number of workers who were the late boomers and their subsequent generations by offering lower and lower prices for labor.

Those under age 25 are so undesirable that they won’t be hired even if they work for free because just providing job training is too high a price to pay for labor by young workers.

Chris Purnell August 4, 2013 at 2:55 pm

Perhaps ‘baby boomers’ are fans of Keynes and decided that 15 hours per week is just fine: but zero is even better.

Steve August 2, 2013 at 2:05 pm

http://research.stlouisfed.org/fred2/graph/?s1id=LNS12024230

I have read from numerous sources that the majority of jobs added has been to the 55 and older crowd. The new normal.

celestus August 2, 2013 at 2:17 pm

With apologies to George Carlin: the economy is fine, it’s the people who are f*cked.

zbicyclist August 2, 2013 at 10:14 pm

Pretty sure George Carlin would forgive you.

x August 2, 2013 at 2:23 pm

It’s sad to hear that 58.7% of the U.S. population is apparently unable to both freely choose their actions and acquire enough wealth to not be unhappy.

Michael August 2, 2013 at 2:24 pm

There is also a new result that fewer and fewer women are entering the labor force.

Well, thank heavens that Obama’s election saved us from Romney’s War on Women, otherwise we would be seeing some unknown, nebulous force preventing women from pursuing careers.

Oh, wait…

Nicoli August 2, 2013 at 3:17 pm

That Obama…at it again.

T. Shaw August 2, 2013 at 4:13 pm

From Zero Hedge:
Since the March 2009 lows, US GDP has increased by $2.3 trillion.
Since the March 2009 lows, the capitalization of the US stock market has increased by $12.3 trillion.
Delta between the two: 436% in favor of stocks.

They told me if I voted for Romney the rich would get richer and the poor would get poorer.

Phony recovery, real scandals.

JWatts August 2, 2013 at 4:10 pm

Actually, I think you got that wrong. If Romney had won this would be evidence of Romney’s War on Women, since he didn’t, it’s obviously evidence of the Republican Party’s War on Women. ;)

jacobus August 2, 2013 at 2:36 pm

Housing isn’t coming back.

Cliff August 2, 2013 at 3:20 pm

It is, actually

Tim August 2, 2013 at 3:46 pm

But maybe not where you live.

Ad Nauseum August 2, 2013 at 5:53 pm

Is it “coming back” or “leveling out”.

Cliff August 3, 2013 at 12:15 am

Coming back. Try calculatedrisk.com Residential real estate will be a major contributor to GDP growth this year and going forward.

Go Kings, Go! August 2, 2013 at 2:47 pm

It’s pretty interesting how BLS arrives at these numbers. How does a person day trading for their own account, a landlord, a writer, etc. answer the BLS questions?

I could see an investor, producer, artist or black market entrepreneur responding that they don’t “work” for profit and don’t own a “business”, which means the BLS excludes them from the labor force. And if Census workers ask those questions of 2,000 people in San Francisco, Los Angeles and Humboldt to extrapolate California’s labor force particiaption rate, you might see some squirrely numbers starting in the early 2000s.

Go Kings, Go! August 2, 2013 at 2:58 pm

Would any of these people tell a Census interviewer that that they “work” or own a business?

uffy August 2, 2013 at 8:26 pm

If they are paid I would assume they answer yes. If not paid then no is the better and likely answer.

crs August 2, 2013 at 9:09 pm

to explain the chart you’d need a discrete change in the mis-reporting at the recession. also the establishment survey (firms not households) on payrolls gives a similar picture. I think this downshift in the emp-pop ratio is sadly real, though the role of demographics should not be underestimated.

Spencer August 3, 2013 at 1:30 pm

Within the employment there is a category called “self employed” where all these people would
be classified.

It is not a problem.

Mr. Econotarian August 2, 2013 at 3:39 pm

Real hourly earnings are interesting, but what should really be looked at is hourly total compensation, as there is so much tax-deffered compensation going on today (maybe less after ObamaCare sets in?)

JWatts August 2, 2013 at 4:13 pm

Why do you think there is significantly more tax-deferred compensation this year than previously?

dead serious August 2, 2013 at 6:29 pm

Because health care premiums are rising faster than salaries? For example?

Marie August 2, 2013 at 6:51 pm

How is that an increase in compensation? The package is X amount in cash + Y amount of health care should you choose to/have to access it. If Y costs the company more, they are still not providing a higher level of compensation.

If Y always had been ad still was fungible (if that’s the correct use of the term), then the package would be X amount in cash + Y amount in cash paid to a third party instead of directly to the employee, with the option that it be paid instead to the employee. But I don’t know of any business entity that gives employees the option to refuse health care benefits and instead take the extra cash.

Now, if employees were receiving lower average wages but the benefits had changed on average, so that employees who once were able to get paid for broken bones are now able to get paid for eyeglasses and dental crowns, that would be an increase in compensation. But I don’t think free contraception is going to balance out the decline in wages. . .. .

dead serious August 2, 2013 at 11:35 pm

News flash: health insurance coverage is part of your compensation.

Because health care costs are rising fairly rapidly, health insurance plan premia are rising fairly quickly.

Quicker in fact than salaries.

So the tax-deferred portion of a worker’s compensation – tax-deferred comp including 401k, health insurance plans, and the like – are more than likely higher this year than in any previous year, due mostly to the health care portion.

TallDave August 3, 2013 at 12:20 am

But I don’t know of any business entity that gives employees the option to refuse health care benefits and instead take the extra cash.

It does kind of happen that way, though. As a contractor clients are throwing me unrequested raises and I suspect part of the reason (aside from my awesomeness) is that employee compensation is looking like a worse and worse deal relatively speaking.

At the same time, the distribution of the benefits of those increases is dubious — in fact that’s the basis of the most common criticism of our healthcare system, that it’s “too expensive” i.e. the marginal benefits are incommensurate — particularly when special interests start getting their whacks in at the mandates.

Marie August 4, 2013 at 2:22 am

TallDave, I can see moving more of your labor into contractors having the effect you note, but I’m not sure how much most businesses can or will do this. Would be nice if that were a bit of a break in the dam that helped people see behind the curtain and make compensation decisions more rationally. If we can break insurance away from employment again, that would go a long way towards real reform.

dead serious, I do not think you understood my comment. Let me try it another way. If I broke a leg last year and my employer provided the benefit of paying my doctor $4000 to treat, then I broke my leg this year and my employer provided the benefit of paying my doctor $5000 to treat, I have not received a greater benefit — this portion of my compensation remains the same. To be fair, you could apply the same criteria to salary and say that if my salary does not rise with the rate of inflation I have actually taken a pay cut. Which, well, I have.

I can see several ways in which health insurance as an employee benefit could count as an increase in compensation as it changes. For example, if last year insurance paid for broken legs but not broken arms and this year it covers both. Or if my copay this year is decreased and I actually used medical services that required a copay — same with decreased deductible. I’d even give it to you if insurance provided coverage for the same conditions last year and this year but this year there have been breakthroughs and cancer and heart disease are now curable — then the value of the insurance benefit my employer provides is greater. But just because the cost to my employer is greater, I don’t see how that means the value of my compensation is greater.

dead serious August 4, 2013 at 8:08 am

“dead serious, I do not think you understood my comment. Let me try it another way. If I broke a leg last year and my employer provided the benefit of paying my doctor $4000 to treat, then I broke my leg this year and my employer provided the benefit of paying my doctor $5000 to treat, I have not received a greater benefit — this portion of my compensation remains the same. To be fair, you could apply the same criteria to salary and say that if my salary does not rise with the rate of inflation I have actually taken a pay cut. Which, well, I have.”

Think of it this way: if last year your broken leg cost $4000 to treat but this year it costs $5000, your leg still ends up set and cast but instead of you paying that extra $1000, your policy covers it. So yes, your non-taxable comp is higher, whether you want to admit that or not.

Same with a loaf of bread. In 2012 and 2013 you buy and take home the same brand of bread in the end. In 2013 it costs more due to inflation, as you noted. You wouldn’t call that a decrease in your compensation. Or maybe *you* would.

Marie August 4, 2013 at 9:16 pm

Well, I kind of might, but I recognize that’s not the standard for comparison.

But what I’m trying to get at is that if I’m compensated with cash I have a lot more choices. I can buy my loaf of bread, buy a cheaper loaf of bread, buy flour and make my own, or take breakfast off. But if the company gives me $120 and three loaves of bread each day, you can tell me all you want that I got a raise because bread costs more this year than last year, but that’s going to be seen as a bit dodgy. I’m wiling to grant a titch of something there, but I think the down side for the employer is a ton bigger than the up side for the employee.

Also, there’s a lot of sketchy game playing going on with medical costs, so that my broken leg might cost $5000 instead of $4000 out of pocket, but the cost for the insurance company has not gone from $2000 to $2500, it’s instead gone from $2000 to $2100. So how would you count my “raise” in that situation? The difference in the cost if I had to pay out of pocket? The difference in cost to the insurance company? Or just the difference in cost of my premiums? And how would you figure in what the cost of my premium would be if my company just handed me money to buy my own policy with?

I just can’t see it as a straight calculation, the increase per employee in insurance costs equaling a raise for the employee. No where near.

Brian Donohue August 5, 2013 at 2:57 pm

“If Y costs the company more, they are still not providing a higher level of compensation.”

Clearly, you’ve never been on the employer side of such a transaction.

Marie August 5, 2013 at 3:46 pm

Mr. D, the tax system has done a disservice to both employers and employees. If an employer can spend 20% more per employee on compensation but the employee legitimately can feel the real value to himself of the compensation has stayed even or gone down, that’s messed up.

The difference is, the employers can do something about it.

I’m a little miffed at large (ones of influence) employers that have helped drive this cost inflation, so I’m not inclined to credit them on any ledger because they’re also falling victim to it. Because corporate America took this little walk with big federal government and decided people need two middle men between them and paying their doctor, every time they get the sniffles, copays for employees are ridiculously high and premiums for families like mine that buy their own insurance (and for small businesses trying to compete for labor) are absurd.

kebko August 2, 2013 at 4:09 pm

“that long-term unemployment is finally declining somewhat” is a weird way to put it, since July continued a trend where long term unemployment has been on a linear decline for 3 years.

Michael August 2, 2013 at 4:56 pm

Who cares about the unemployment rate? Did you see that graph at the first link?

kebko August 2, 2013 at 6:43 pm

I don’t think I mentioned the unemployment rate…..

Michael August 2, 2013 at 7:37 pm

Way to miss the forest for the trees there, kiddo.

msgkings August 2, 2013 at 4:44 pm

Depends on how old your grandpa is…this looooong sloooow recovery after a debt bubble popping (which is typical) has a lot in common with the long slow recovery from the Great D, only that depression was far more severe, because of the absence of safety nets like unemployment insurance, Medicare, Social Security, etc

Brian Donohue August 2, 2013 at 6:33 pm

+1.

zbicyclist August 2, 2013 at 10:24 pm

+1, indeed. My father left school at 16 to work construction so my grandpa wouldn’t lose the farm. My mother had a full scholarship offer to college, but instead went to work as a clerk-typist so her parents wouldn’t lose their home.

We may have our kids living off us, but by and large we aren’t living off them.

Cliff August 3, 2013 at 12:17 am

Or poor monetary policy

msgkings August 3, 2013 at 11:56 pm

Agreed, that was part of it too.

dirk August 2, 2013 at 6:00 pm

“That is The New Normal.”

Did Tyrone write this post?

MC August 2, 2013 at 7:25 pm

There’s been a serious shortage of Tyrone posts recently. Tyrone is the mad prophet of our time.

Peter August 2, 2013 at 6:31 pm

One obscure but intriguing statistic is the labor force participation rate (LFPR) for males in the 35-44 age range. These are the people who, more than anyone else, you’d expect to be in the labor force, as except in very unusual cases they’re too old for full-time schooling and too young for retirement. Stay-at-home dads are pretty rare, and in any event many of the children of men in this age range are old enough to fend for themselves.

When the government began collecting this statistic in 1968, 97% of males aged 35-44 were in the labor force. Today it’s 91%. What is extremely puzzling, however, is the fact that the rate was 92% in 2007, before the start of the recession. Something happened over the course of four decades that caused one out of every twenty men in the prime of their working lives to drop out of the labor force. What that “something” is, no one knows.

KLO August 2, 2013 at 8:52 pm

This is even more mysterious when you consider that a significant portion of the gain in labor force participation since the 1960s is the result of a massive increase in the proportion of the population that is incarcerated. Incarceration removes the least employable people from the denominator of the labor force participation calculation. The fact that the labor force participation rate is now dropping like a rock without the proportion of people being incarcerated also dropping means that a lot of the true decline in labor force participation remains hidden.

Peter August 2, 2013 at 8:58 pm

That’s true. Although I would suppose that the incarceration rate for men in the 35-44 age range is a good deal lower than for younger men.

KLO August 3, 2013 at 1:30 am

According to the Bureau of Justice Statistics, 3.7% of men aged 35-44 were incarcerated on December 31, 2010. That seems pretty significant to me.

JonF August 3, 2013 at 2:38 pm

And before the 70s we had the draft to take young men out of the workforce.

Cliff August 3, 2013 at 12:19 am

Extreme early retirement? Game? Disability?

JonF August 3, 2013 at 2:39 pm

Women went to work in large numbers, which meant that some fraction of men could stay home with the kids while the wife earned money for the family.

ladderff August 3, 2013 at 4:39 pm

Yup, no one knows.

Marie August 4, 2013 at 2:31 am

How about changes in family structure — pretty extreme over the last few decades. I’d speculate men with families to support quite often will work anything they have to in order to put food on the table. But men separated from their families, providing support through court agreements or orders through a system and at a distance, are going to be less motivated. If a man becomes unemployed when he is not in the household with his children, the child support he provided can be relatively easily made up for with state support. But if a man is living in the household with his children, it is more difficult to get state support for the family. So the incentive to work whatever job he can find is greater.

Working is always easier to drag yourself out of bed to do if you’re doing it for someone other than yourself. But, that’s a total wild guess, of course.

JonF August 4, 2013 at 4:11 pm

I find myself doubting this, because you do need an income in order to live in this society at anything other than a street-bum-living-under-an-overpass-scrounging-food-in-dumpsters level. So men without families still have a motivation to work– to support themselves. It’s most likely men with families, who can fall back on a spouse’s (or long term girlfriend’s) income that are dropping out. At the age range we’re talking about moving home with parents isn’t so much an option (though sometimes that is happening no doubt) and disability isn’t going to be very common either since one does need a legitimate problem in order to qualify and that’s also not common in this age cohort (though some men no doubt are living off disability).

Marie August 5, 2013 at 12:33 pm

My guess would be moving to disability, early retirement, working off the books, or transient lifestyles (buddies couch in addition to under the bridge). But that does seem implausible by the numbers, so it seems more likely what you’re saying.

I have known a number of households where the man had large gaps in employment while the woman stayed in the same position for years; also some where the man had some serious early health problems and the woman took on the bulk of the responsibility for income. So what you say really seems on point to me, I just don’t see why that would be increasing especially. I wonder if the more men are becoming unhealthy earlier in life? Fifties heart conditions? Hmm.

JonF August 5, 2013 at 2:07 pm

Marie, the age group we are talking about is 35-45, so I am skeptical that there’s that much disability in the population. Maybe some mental disability and of course accident-related physical disability (maybe some increase there because better trauma care means people survive bad accidents but are left disabled now that didn’t survive at all in earlier times), but outside of early-onset terminal illnesses (cancer, ALS, AIDS, etc) most people in that age group are pretty healthy.
The guys i know who actually have dropped out of the labor force– maybe just for a few years, maybe longer term– were all supported by a wife, girlfriend or boyfriend, with or without kids in the household. A generation ago that would have been pretty rare, and two generations ago, all but unheard of unless it was paired with serious disability.

Vernunft August 2, 2013 at 7:23 pm

My grandpa’s economic recovery was probably an actual economic recovery, and not propaganda, so yeah.

Wait, he grew up during the Depression, so nope. Propaganda then too.

RM August 2, 2013 at 9:02 pm

Who is buying all this food that the new waiters are serving? Are hours for wait staff being cut, or is the price of restaurant food falling?

mulp August 2, 2013 at 10:46 pm

Why not look at the unemployment rate falling indicating the labor force is finally responding to the price signals from employers to supply less labor to the economy.

But I guess that requires rejecting supply side economic theory, that if you throw lots of labor at employers, employers will consume more labor, but instead focus like a Keynesian on demand side economics – to have more employment, ie a higher ratio of workers to population, then employers must be made to demand more labor.

The way this was done during my lifetime, even by Reagan, involved pump priming of tax and spend. Reagan in January 1983 signed the tax and spend transportation bill – it took cash out of your pocket so government could invest it more wisely than you could on fixing roads and bridges. That was a doubling of the transportation tax rates.

FDR converted a good part of Hoover’s dole into jobs – young adults of families on the dole were offered jobs in the CCC and some other programs which paid $1 a day plus room and board, with $25 sent home to their parents and siblings, and $5 provided for spending money. These young people were basically supervised like a deployed reserve military unit to do forestry work, conservation work, national park work. Basically all the things the CCC in men’s camps in the 30s will serve an important purpose if done today. Rather than idle youth living at home with the family on the dole, FDR through Henry Hopkins created demand for young adult workers, and they came out of those millions of idle. Demand side economics.

Today, lots of supply in young adults looking for jobs, but the employers have been increasingly saying “go away, we don’t want young workers.” Supply side economics is not working. Pay is falling, but the quantity being employed is still falling. The only way for the market to clear is for workers to understand the low pay means reduce the supply of labor.

Cliff August 3, 2013 at 12:20 am

So, cut welfare and food stamps, replace it with a jobs program? Sounds reasonable.

JonF August 3, 2013 at 2:36 pm

I wouldn’t cut welfare, but I would make the dole (for able bodied adults not responsible for pre-school children or the sole care-giver of a disabled person), dependent on working some sort of public job.

ladderff August 3, 2013 at 4:42 pm

makework is always wrong, always.

JOnF August 3, 2013 at 6:01 pm

There’s plenty of things that need to be done, just about everywhere, so it wouldn’t have to be “make work”. However even make-work has value since it eliminates the highly toxic “money for nothing” aspect of the dole, imbues the workers with a degree or order and discipline, and keeps them out trouble.

jerseycityjoan August 4, 2013 at 1:25 am

I believe that in most states, there is no cash assistance for healthy adults without children under 18 in the house.

Is that the dole you are talking about?

Jonf August 4, 2013 at 4:13 pm

Food stamps are available to everyone regardless of family structure. However food stamps do not pay the rent, or anything else besides food.

ChrisA August 3, 2013 at 1:48 am

You do realize that this forced labor workforce would be largely young blacks? Black youth unemployment rate is over40% versus 20% for white youths. I think there may be some issues with this idea.

MD August 3, 2013 at 2:03 am

Forced labor?

jerseycityjoan August 4, 2013 at 1:30 am

If the government offered direct employment for the unemployed, I think we’d have volunteers by the millions.

That would be true even if the only work offered was the kind of outdoor work done by young men in the 1930s.

If we had age-appropriate, full-time direct employment offered for all the unemployed and underemployed out of full time work for, say, two years or more, we’d probably have tens of millions signing up.

TallDave August 3, 2013 at 12:00 am

Incentives matter.

It’s harder to hire people, easier to not work, and leisure time is getting more fun.

And of course the Fed wants high unemployment for some reason. Dual, shmual.

JonF August 3, 2013 at 2:35 pm

What is the historical average, say, since WWII when we had good figures? Our perceptions may be skewed a bit by the 90s peak in labor force participation, which was probably never sustainable.

Aura Yepez August 20, 2013 at 6:41 pm

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