Sunday, September 7, 2014

6.3 Million Unemployed not Counted in "Jobs Recovery"

For almost every month from September 2009 to April 2010, the U.S. has had over 15 million people counted as "unemployed". Today the government reports only 9.6 million (and says the economy is in a slow recovery) — but that doesn't include another 6.3 million unemployed working-aged Americans who are no longer counted as "unemployed", but also want a job — because they stopped looking for work and are no longer considered a part of the labor force — and so, are not counted among the unemployed.

Add those 6.3 million people and there are still 15.9 million people in the U.S. who are out of work — more than was ever previously reported in 2009/2010 as unemployed. The CES survey that's conducted by the Bureau of Labor Statistics has been incrementally sweeping “discouraged workers” under the carpet every month (for years) — and have relegated these unfortunate souls to the “not in the labor force” heap.)

Einstein and Insanity: Doing the same thing over and over again and expecting different results — like looking for a job. That's why we have so many "discouraged workers" — people wasting their time and limited resources looking for non-existent jobs. The labor market is so over-saturated with so many people out of work that demand for goods and services is down – hence, secular stagnation. And that’s also why we have a declining labor force — because of a lack of jobs, and not because older people prefer shuffling off into early retirements; or because millions of "lazy slackers" choose to go on the government dole. (If you ever hear anyone arguing about unemployment without also mentioning a lack of available jobs, it's usually politically and/or ideologically motivated. And that goes for many of our esteemed economists as well.)

There's been a lot of discussion lately (in wonkish economic circles) about the "Beveridge curve" — a graphical representation of the relationship between unemployment and the job vacancy rate (the number of unfilled jobs expressed as a proportion of the labor force). Mark Thoma (a noted economist that I personally admire) has posted another informative link at his website: Peter Diamond: The Beveridge Curve. Click through the link to see a video of Diamond's lecture and read the reader's comments too. About 22 minutes into this video he mentions those who are "not in the labor force". (Peter Diamond won the Nobel Prize in economics and was nominated by President Obama to serve on the board of the Federal Reserve — but Republican senators blocked his nomination.)

The U.S. Bureau of Labor Statistics (BLS) provides us with a lot of data in their JOLTS reports (Job Openings and Labor Turnover Survey). Their latest report (August 12, 2014) says the U.S. has 4.3 million job openings — and that "over the 12 months ending in June 2014, hires totaled 55.7 million and separations totaled 53.3 million, yielding a net employment gain of 2.4 million. These figures include workers who may have been hired and separated more than once during the year." (Just like many TEMP workers we know, who think this is the "new norm".) Separations are defined as people who quit, get laid off or are fired — and this contributes to the "churn" in the labor market.

Some economists explain this lack of churn in the job market (and our "slack" in the labor market) as because older people aren't leaving the work force to make room for new entrants (like high school graduates). While others say that older people who are retiring make up HALF of the decline in the labor force participation rate. Actually, it's a little of each — but it's mostly for a lack of jobs that the labor force participation rate has been in a long decline since April 2000. But either way, the Baby Boomers are: "Damned if they do and damned if they don't".

But based on the 9.6 million Americans currently counted as "unemployed", the Bureau of Labor Statistics claims there are 2.2 people "unemployed" for every job opening. But the BLS and the "Beveridge curve" doesn't include those "not in the labor force, but want a job now". The St. Louis Fed currently reports 6.3 million unemployed working-aged Americans who are not counted as "unemployed", but also want a job (chart below).

Now add those two statistics together and there are still 15.9 million people in the U.S. who are out of work with only 4.3 million job openings — that is one job for every 3.7 unemployed — and that's assuming all those job opening are real, and not scams or data collection ploys, or under-worked HR people trying to stay busy, or companies looking for a tax writeoff for "help wanted" advertising, or companies looking to replace employees with lower wages (but with greater demands). The list is endless (such as companies complaining that they can't find skilled workers and want more guestworker visas to further depress an already stagnant wage market).

If they were counted as "unemployed" (which they are),
we'd have RECORD HIGH unemployment today.

Not in Labor Force, Want Work Now

SOME BASIC FACTS TO CONSIDER (Stats for June 2009 to August 2014):

1) From June 2009 to August 2014, the U.S. has had an additional 11.2 million people "not in the labor force", but not counted as "unemployed". (A chart further below shows 11.4 million "not in the labor force".)
* Source: Bureau of Labor Statistics - http://www.bls.gov/webapps/legacy/cpsatab16.htm

2) As of August 2014, we currently have 9.6 million counted as "unemployed", but also still counted as part of the labor force.
* Source: Bureau of Labor Statistics - http://www.bls.gov/news.release/empsit.nr0.htm

3) The U.S. had 9.7 million net new jobs created from June 2009 to August 2014.
* Source: Bureau of Labor Statistics - http://data.bls.gov/timeseries/CES0000000001?output_view=net_1mth

4) From the end of June 2009 to the end of August 2014 (62 months) the U.S. had a monthly average of 12.8 million workers unemployed (See the first chart further below)
* Source: Bureau of Labor Statistics - http://www.bls.gov/webapps/legacy/cpsatab1.htm

5) From June 2009 to August 2014 the U.S. has had an additional 7.02 million workers in payment status for Social Security retirement and disability (They are counted as "not in the labor force".)
* Source: Social Security Administration - http://www.ssa.gov/oact/ProgData/icp.html

6) Since the Great Recession "officially" ended, from June 2009 to August 2014 (during six school years), we had a total of 15.7 million new high school graduates (not counting dropouts.) College students, who choose not to work, are also counted as "not in the labor force". (NOTE: We assume for every high school grad who goes on to college, we also have another college grad (or a college dropout) exiting school to enter the job market, canceling out one high school statistic.)
* Source: The National Center for Education Statistics - http://nces.ed.gov/programs/projections/projections2021/tables/table_13.asp?referrer=list 

7) From 2008 to the end of 2013, almost 24 million long-term unemployed Americans were out of work at least 6 months and received extended unemployment benefits during that time.
* Source: The White House - http://www.whitehouse.gov/sites/default/files/docs/uireport-2013-12-4.pdf

NOTES OF INTEREST -- NUMBERS TO BE RECONCILED BY SOME EXPLANATION...

  • As of June 2009 the U.S. had 14.7 million counted as unemployed and 80.9 million not in the labor force. (TOTAL: 95.6 million)
  • As of August 2014 the U.S. had 9.6 million unemployed and 92.3 million not in the labor force. (TOTAL: 101.9 million, for a difference of 6.3 million.)
  • Since June 2009 to August 2014 we have had an additional 11.4 million more working-age people not in the labor force (and also a difference of 5.1 million less people counted as unemployed).
  • Of the 11.4 million not in the labor force, we subtract retired workers (many who were forced to retire early because they couldn't find work) and the disabled workers, and that equals the balance of 4.38 million workers not in the labor force who may also be disabled workers (also unemployed, but NOT in payment status for benefits) who applied for Social Security benefits — but were ultimately denied; discouraged workers who said they "dropped out of the work force" because they couldn't find work; voluntary non-working college students, voluntary stay-at-home parents and other voluntary non-participants in the labor force.
  • Here's the Cleveland Fed in a recent post about the "Beveridge curve", but it gives no significance to those NOT IN THE LABOR FORCE.

CONCLUSION: When physical human labor in the U.S. eventually becomes mostly obsolete (maybe because of robotics or more offshoring), everyone in the work force could hold a Ph.D and there still wouldn’t be enough jobs for everybody (so here’s no “skills gap” either). That’s why a Basic Income will eventually be needed. But in the mean time, we might be better off with direct cash transfers vs. quantitative easing.

The charts below are from June 2009 to August 2014 for the number of Americans (16 and older) who are NOT IN THE LABOR FORCE and for the number of workers who are still counted as UNEMPLOYED.

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Shaded areas in the charts below denotes the months during the Great Recession. Because unemployment is considered a "lagging indicator" in the economy, most of the highest unemployment occurred AFTER the Great Recession "officially" ended.

Series Id: LNS13000000
Seasonally Adjusted
Labor force status: Unemployed
Type of data: Number in thousands

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2007

7116

6927

6731

6850

6766

6979

7149

7067

7170

7237

7240

7645

2008

7685

7497

7822

7637

8395

8575

8937

9438

9494

10074

10538

11286

2009

12058

12898

13426

13853

14499

14707

14601

14814

15009

15352

15219

15098

2010

14953

15121

15212

15333

14858

14483

14527

14660

14578

14520

15097

14373

2011

13910

13858

13748

13944

13873

13971

13785

13820

13905

13604

13326

13090

2012

12650

12883

12732

12603

12689

12702

12698

12464

12070

12138

12045

12273

2013

12315

12047

11706

11683

11690

11747

11408

11256

11203

11140

10841

10351

2014

10236

10459

10486

9753

9799

9474

9671

9591

-

-

-

-

Series Id: LNS15000000
Seasonally Adjusted
Labor force status: Not in labor force
Type of data: Number in thousands

Year

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

2007

77506

77851

77982

78818

78810

78671

78904

79461

79047

79532

79105

79238

2008

78554

79156

79087

79429

79102

79314

79395

79466

79790

79736

80189

80380

2009

80529

80374

80953

80762

80705

80938

81367

81780

82495

82766

82865

83813

2010

83428

83279

83195

82687

83394

84060

84184

84013

84351

84899

84588

85250

2011

85506

85571

85597

85580

85787

86110

86362

86147

86012

86330

86368

86658

2012

87942

87610

87793

88218

88019

88022

88384

88897

88754

88476

88895

88865

2013

88963

89317

89896

89815

89754

89730

90062

90524

90695

91756

91283

91808

2014

91455

91361

91030

92018

92009

92120

92001

92269

-

-

-

-

* Source for both charts: Bureau of Labor Statistics - http://www.bls.gov/webapps/legacy/cpsatab1.htm

2 comments:

  1. NEW YORK TIMES:

    Job Growth Is Sluggish, Raising Fear of Malaise

    “The fall in the labor participation rate cannot be dismissed as an aberration. The rate dropped to 62.8 percent last month, the lowest level since the late 1970s. Although the shrinking proportion of Americans in the work force is often attributed to the retirement of baby boomers, 25-to-54-year-old workers are quitting as well. Just over 81 percent of this group was in the work force last month, compared with 83.4 percent in early 2007, equivalent to the disappearance of nearly three million workers.”

    http://www.nytimes.com/2014/09/06/business/august-jobs-report-released-by-labor-department.html?_r=0

    ReplyDelete
  2. Ten years ago, I was making over 90K as a computer analyst. Including my wife's pay, I was paying over $10K in federal income tax every year. In 2007 my wife hours were cut and my company eliminated my position and gave me early retirement. Where did my job go? Overseas of course. Now with my retirement and my wife's meager income, I pay just over $2K in income tax every year. So the government has screwed itself out of $8K every year since 2007. Multiply that by the 50 million other people in the same boat as I am and you have the entire Defense Dept budget. So essentially, 25% of the entire govt's operating budget is gone, which is why they have to print so much money every year. Personally, I think the economy has been permanently damaged, and any talk of 'real' recovery is just wishful thinking.

    ReplyDelete