Chart of the day – Sep 3, 2017

Sep 03, 2017.

All are working but not really at work or looking for one. Labor force participation is declining despite record low unemployment rates (1997-2017).

Unemployment rate and labor participation rates

(Click on the image to enlarge) Over this labor day, it’s good time to review the status of US employment.

One of the biggest economic news headline in recent years has been the record low unemployment rate (another one is record low interest rate). At 4.4% (in Aug 2017) this simply says 95.6% of employable people are actually working. Another key data, the current labor participation rate is also record low at 62.9%. It is the number of employed workers and those actively looking for a job, and has declined by almost 4% in last 20 years. If so many people are being employed, why fewer of them are participating?

One common argument given by economists is the retirement of baby boomer and there is a certain truth to this argument. The labor participation trend (red curve) shows a steady decline, suggesting the baby boomers have indeed started calling it off. As the recession hit in 2008, this rate has a much faster decline suggesting more people started to leave or firms forced older workers to leave. Since these experienced workers cost the employers more, there would have been a much bigger return to either completely eliminate them or replace them with younger workers at lower wages.

However, one would expect this declining trend to revert & many of these workers to return back to the labor force. That is not happening. The labor participation rate has steadily declined until the end of 2016, stabilizing now to a record minimum. With such a low unemployment rate, one would expect more people to return to the workforce. There could be a few explanations to why this is not happening: skill erosion of these long time unemployed workers has made them unsuitable to work again. That’s bad news and supports President Trump’s argument that these BLS numbers are not reflective of the reality on main street. It’s also possible that the booming stock market has emboldened the retirees to live-off their impressive gains from retirement funds invested in the stock market boom. However, these funds saw an almost 40% dip during recession, so that gain is not as high as it appears. Most likely, the real truth is somewhere in between – in how the calculations are done for unemployment rates as this New York Times story explains. However, one thing is very clear: don’t trust blindly what the bean counters report. Numbers don’t lie, but they can certainly made to lie, depending on how they are collected and interpreted.

Source: Bureau of Labor Statistics (unemployment rate & labor participation rate data).

 

Previous charts-of-the-day:

Sep 06, 2017 – Foreign direct investment to India (2012-2017)

Sep 05, 2017 – no chart

Sep 04, 2017US productivity change (percent, non-farm businesses, by year, 2000-2016)

 

Sep 03, 2017Unemployment rate & labor participation rates, 1997-2017

Sep 02, 2017 – Earnings of men & women, up to 2015

Sep 01, 2017 – US household income trend, 2015

Aug 31, 2017Projected growth in fastest growing occupations, 2014-2024

Aug 30, 2017 – US median salaries for fastest growing occupations in next 10 years, 2016

Aug 29, 2017 – US household – time spent in daily chores, 2016

Aug 28, 2017 – US household leisure & sports time, 2016

Aug 27, 2017 – Peak earning vs age, 2010-2016

Aug 26, 2017Price change for TVs, Computer, Internet, Cable & Software, 1996-2015

Aug 25, 2017Number of rental units in Silicon Forest, Tanasbourne, Portland Metro

Aug 24, 2017 – Vacancy rates, for rental & homeowner houses (1980-2015)

Aug 23, 2017Rate of homeownership & number of renters, 1990-2015

Aug 22, 2017 – Comparison of $100k with mortgage vs S&P vs rent, $100k from Jan 2010 to Jun 2017

Aug 21, 2017 – no chart

Aug 20, 2017 – Construction productivity vs other industries (The Economist)

Aug 19, 2017 – no chart

Aug 18, 2017 – no chart

Aug 17, 2017 – Worth of money in parallel worlds (with housing leverage), $100k from Jan 2010 to Jun 2017

Aug 16, 2017 – no chart

Aug 15, 2017 – Worth of money in parallel worlds (long term trend), starting with $100k in Jun 1996

Aug 14, 2017 – Worth of money in parallel worlds, value of $100k invested in Jan 2010 worth in Jun 2017

Aug 13, 2017 – US consumer price index (cost-of-living index or inflation) – (2007-2017)

Aug 12, 2017 – US unemployment rate & wage growth (2010-2017)

Aug 11, 2017 – US home price change by state (1976-2017 & 2016-2017)

Aug 10, 2017 – Inflation plotted with US Treasury & Mortgage rates (2010-2016)

Aug 9, 2017 – US Treasury and Mortgage rates (2010-2016)

Aug 8, 2017 – Household credit score versus time (2001-2016)

Aug 7, 2017 – Monthly mortgage payment across key US metro regions (2012-2016)

Aug 6, 2017 – Good time to buy or good time to sell? Fannie Mae’s monthly Home Purchase Sentiment Index (R)

Aug 5, 2017 – Buy versus Rent – Trulia’s calculator (Apr 2017)

Aug 4, 2017 – Annual change in US home prices across top 20 cities (May 2011- May 2017)

Aug 3, 2017 – Best time to get a deal: time period when best discounts are available in housing market

Aug 2, 2017 – Clark County, Washington state (Portland Metro area, OR) single family home prices (2012-2017)

Aug 1, 2017 – Multnomah County (Portland Metro area, OR) single family home prices (2012-2017)

July 31, 2017 – Washington County (Portland Metro area, OR) single family home prices (2012-2017)

July 28, 2017 – US home prices 1890-present

July 27, 2017 – Median house price for Portland Metro neighborhoods

July 26, 2017 – Average rent for Portland Metro region

July 25, 2017 – Path of total solar eclipse through Oregon

July 24, 2017 – Portland metro area household income by region

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