Posted by Robert* on Fri, Jan 6, 2012, at 11:30 AM:
After hearing of the falling unemployment rate for the past couple of months and having a basic understanding of how this statistic is figured, I did a bit of research. This website gives a visual demonstration of how the labor force increased after about 1980 and how it is decreasing today. Those who have exhausted their unemployment benefits and given up on finding work are not included in the official labor pool. If they were, unemployment now would be nearing 11%. No one seeking re-election (Republican or Democrat) wants the public to understand this. Therefore there is a bi-partisan agreement to keep this dirty little secret.
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CHART OF THE DAY: THE COLLAPSING LABOR FORCE PARTICIPATION RATE
4 FEBRUARY 2011 BY CULLEN ROCHE 19 COMMENTS
As I mentioned earlier today, this morning's job's report was likely exactly what the market wanted to see. It's the perfect mix of some growth, but not enough to spook the Fed. It's horrible for Main Street, on the other hand, as the jobless figures remain staggeringly high. And of course, the mainstream media is spinning the 36,000 new jobs as a positive because the unemployment rate fell. Unfortunately, the reason for the decline is simple. The labor force participation rate is collapsing as job searchers simply give up and are deemed by the BLS as no longer being part of the workforce:
Of course, the market doesn't care about the unemployment rate or the millions that are unemployed. In fact, given the current environment there is reason for the markets to cheer this report. It is a sign that growth is slowly coming back, but it is also a sign that companies aren't driving down their margins. So, profitability stays high due to strong foreign growth, tepid domestic growth and low unit labor costs. The icing on the cake is that this all likely means the Fed is in no rush to halt their accommodative approach. As I often say, the market is a heartless beast.
On another news site they shyly mentioned that the unemployment rate dropped primarily because 160,000 people "dropped off" the unemployment rolls because their benefits quit and they stopped looking.
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It's been three years but maybe Obama will get his promise right in 2009 that if we pass his stimulus bill unemployment won't go above 8%. I think it surged up right after he said that. Of course that's Bush's fault.
I also so the 11% figure of "real" unemployment yesterday. Not good!
-- Posted by not_sorry on Fri, Jan 6, 2012, at 11:35 AM
I would conclude that it is due to the fact that alternatives to labour are too lucrative. That is, if you can make a living without working, why work?
Based on your chart, however, I see a curious trend. Labour market participation appears to have hovered below 60% in the 'golden days' before welare was created. What did those non-participants do? There certainly wasn't mass starvation in America in those days. Around 1963, after a drop, it began a long incline that seems to have ended with the presidency of George H.W. Bush (the worst economy in 50 years, it was called by President Clinton), at which point it appears to have held relatively steady until about 1997, when it began a slow decline which increased about the year 2000. This would indicate that welfare reform had very little effect on 'real' unemployment, even though it is touted as having had a very significant effect.
Even so, participation in the labor market today would appear to significantly higher than it was in the days before the 'Great Society', commonly known as the 'good old days'...
Looking at the BLS site, it seems they began determining labour force participation in 1948. From that point until about 1969, the rate seldom exceeded 60%, and never for an extended period. From 1969 until 1981, it never exceeded 64%, the latest value given, but rose more or less steadily from 60% to 64%, then began the pattern I noted.
Not much to go on, but I have to wonder if participation levels higher than 60% were an anomally. Perhaps it was a Cold-War thing? The Presidency of George H.W. Bush also saw the end of that decades-long military build-up. This could account for the decline beginning around the fall of the Berlin Wall, and the subsequent dismantling of the Cold-War military buildup. The beginning of the Gulf War a couple of years later would account for the resumption of articipation, which could signal a mere delay in the post-Cold-War decline.
Just speculation on my part. The data gives no information to support it. I'm merely looking at coincidence, and speculating on causation.
-- Posted by Shapley Hunter on Fri, Jan 6, 2012, at 2:09 PM
I also so the 11% figure of "real" unemployment yesterday. Not good!
-- Posted by Dug on Fri, Jan 6, 2012, at 11:35 AM
Make that more like 15%. But a little number massage can make then look better than they are. It doesn't take much to fool a Democrat.
-- Posted by We Regret To Inform U on Fri, Jan 6, 2012, at 2:38 PM
Alot of the high unemployment can also be contributed to the robots, and other high tech tools used where they have actually took the place of the worker actually doing the job, many companies have down sized to cut the high labor cost down. Also, businesses do not know where this administration is going especially after Obama care was passed which if it stays in it's current form will force many businesses to shut down or re-locate out of the country, one other cause is in the passed three years this administration has loaded the regulations on these companies especially agencies like the EPA and OHSA many factors come in to play regarding the unemployment rate. If government would get out of the way these businesses would start hiring again, government does not create jobs businesses do.
-- Posted by swampeastmissouri on Fri, Jan 6, 2012, at 2:48 PM
"...many companies have down sized to cut the high labor cost down."
If that's true, then the blame lies with the high cost of labour, and not the methodology used to overcome it.
-- Posted by Shapley Hunter on Fri, Jan 6, 2012, at 2:49 PM
Shapley: Matching Fica 7.65%, Increased Unemeployment Insurance Contribution, Fed FUTA Tax, Worker Compensation (Sky Rocketing increases), General Liabilty Insurance (Increased yearly cost), Employer Health Insurance for employees (Unbelievable high cost each year)Increased Government Regulations imposed on businesses, Commercial Vehicle Insurance (Cost increase each year)just naming a few cost regarding operating a business in this country this is why many employers have down sized to cut down on the labor cost and overall overhead. Everybody needs to run a business at least once in their life time and they would understand you don't get rich especially small business this day and time like many people think we do.
-- Posted by swampeastmissouri on Fri, Jan 6, 2012, at 4:11 PM
No it didn't. Private sector job growth has been trending upward since March of 2009.
-- Posted by Spaniard on Fri, Jan 6, 2012, at 11:38 AM
You and common have a hard time with facts. First, I was correct unemployment did surge in 2009. If you get your information from media matters (George Soros) you might be able to spin it. But you are completely wrong on the unemployment number. Just go to the Obama bureau of labor statistics and see the chart:
And the Obama admin did say if stimulus passed unemployment wouldn't go above 8%. Hmm.... spin that.
-- Posted by not_sorry on Fri, Jan 6, 2012, at 5:43 PM
The unemployment will remain high until businesses knows what direction this administration is going, by the way Spanaird the President has been anti business for some reason since he has been in office. This Obamacare law which we cannot afford and needs to be repealed has scared these businesses because of what it will cost them many small business would have to shut down because of this law which should have never passed in it's current form.
-- Posted by swampeastmissouri on Fri, Jan 6, 2012, at 7:14 PM
"Those who have exhausted their unemployment benefits and given up on finding work are not included in the official labor pool."
Don't view it as a 'secret,' really, but certainly have noticed that when the unemployment rates are published, that isn't mentioned. Sadly enough, guess the politicians or whoever realize that the average American can't figure that one out ... and unfortunately they're right! Nor does anyone but perhaps me realize what the unemployment rate would be if it included those who don't work because of welfare, or those just entering the employment field and who want a job, but have never qualified for unemployment (Nil had a good comment on the latter).
-- Posted by gurusmom on Fri, Jan 6, 2012, at 7:54 PM
-- Posted by swampeastmissouri on Fri, Jan 6, 2012, at 4:11 PM
I've commented on all those before. My point is, blaming automation for the loss of labour is like blaming insurance for the cost of medical care. Both are a response to rising costs, not a cause of them.
-- Posted by Shapley Hunter on Fri, Jan 6, 2012, at 9:42 PM
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After hearing of the falling unemployment rate for the past couple of months and having a basic understanding of how this statistic is figured, I did a bit of research. This website gives a visual demonstration of how the labor force increased after about 1980 and how it is decreasing today. Those who have exhausted their unemployment benefits and given up on finding work are not included in the official labor pool. If they were, unemployment now would be nearing 11%. No one seeking re-election (Republican or Democrat) wants the public to understand this. Therefore there is a bi-partisan agreement to keep this dirty little secret.
Home » Chart Of The Day, Most Recent Stories
CHART OF THE DAY: THE COLLAPSING LABOR FORCE PARTICIPATION RATE
4 FEBRUARY 2011 BY CULLEN ROCHE 19 COMMENTS
As I mentioned earlier today, this morning's job's report was likely exactly what the market wanted to see. It's the perfect mix of some growth, but not enough to spook the Fed. It's horrible for Main Street, on the other hand, as the jobless figures remain staggeringly high. And of course, the mainstream media is spinning the 36,000 new jobs as a positive because the unemployment rate fell. Unfortunately, the reason for the decline is simple. The labor force participation rate is collapsing as job searchers simply give up and are deemed by the BLS as no longer being part of the workforce:
Of course, the market doesn't care about the unemployment rate or the millions that are unemployed. In fact, given the current environment there is reason for the markets to cheer this report. It is a sign that growth is slowly coming back, but it is also a sign that companies aren't driving down their margins. So, profitability stays high due to strong foreign growth, tepid domestic growth and low unit labor costs. The icing on the cake is that this all likely means the Fed is in no rush to halt their accommodative approach. As I often say, the market is a heartless beast.
http://pragcap.com/chart-of-the-day-the-collapsing-labor-force-participation-rat...
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