Labor Force Participation

Despite the unemployment rate falling to 7.6%, the jobs picture is not looking good. Since March 2012, new positions have roughly matched pace with population growth. The labor-force participation rate fell 0.2% to a seasonally adjusted 63.3% in March. This is the lowest rate since 1979 and includes the unemployed as participants. So who exactly are the 36% not participating?

The labor force participation rate is calculated by dividing the civilian labor force by the total non-institutionalized civilian population. Military and government personnel are not included, nor are those in prison or mental institutions, etc. It only includes those over 16 years of age, so children are not included. Basically, it represents what percentage of working age civilians have a job.

Full-time Students, retirees, homemakers, and the disabled are all included in the number. Additionally included is the marginally attached workforce: those who are willing and able to work, but have been unemployed and have stopped looking for work. In this category are over 2.3 million Americans, according to the March Bureau of Labor Statistics jobs report. If these marginally attached workers were included in the unemployment rate, it would be 9.1%.

Federal disability roles have also substantially risen since December 2007, from 7.1 million to 8.9 million (up 25%). This now accounts for about 5.4% of the civilian workforce, age 25-64, compared to 1970 when it was 1.7% of the workforce. In 2011, less than 0.5% of beneficiaries left disability rolls to work again, compared to 20% annually for employer sponsored disability plans. The trend for these roles to swell during poor economic times and remain high has exacerbated the financial woes of the Social Security Disability Fund. The actuarial reports by the fund’s trustees predict the fund will be exhausted by 2016. Outlays have exceeding income since 2009.

Over the past year, the jobs market has been roughly stagnant. Only 43.4% of the adult population is employed full time for an employer, compared to 43.7% last March. Essentially, this means that new jobs are being created at the same rate as the population is growing. So long as this is the case, the employment picture in the U.S. will remain bleak. This state has been called hysteresis by top economists. Borrowing a term from physics, the term describes temporary market changes that result in permanent economic losses.

Additional Resources

U.S. Bureau of Labor Statistics: http://www.bls.gov/

The Wall Street Journal, Workers Stuck in Disability Stunt Economic Recovery: http://online.wsj.com/article/SB10001424127887323511804578298151374531578.html?mod=WSJ_WSJ_US_News_3

The Huffington Post, U.S. Labor Force Participation Rate Lowest Since 1979: http://www.huffingtonpost.com/2013/04/06/labor-force-participation-rate_n_3028135.html

The Wall Street Journal, Disability Fund to Be Depleted by 2016: http://blogs.wsj.com/economics/2013/04/07/disability-fund-to-be-depleted-by-2016/

The Wall Street Journal, Fewer Stay Out in Private Disability Plans: http://online.wsj.com/article/SB10001424127887323916304578404733466615470.html?mod=WSJ_WSJ_US_News_3

Social Security, Disability Evaluations, Listing of Impairments: http://www.ssa.gov/disability/professionals/bluebook/AdultListings.htm

Gallup, Federal Government Workers Report Worse Hiring Situation: http://www.gallup.com/poll/161603/federal-government-workers-report-worse-hiring-situation.aspx

Gallup, U.S. Payroll to Population Rate Stagnant in March: http://www.gallup.com/poll/161603/federal-government-workers-report-worse-hiring-situation.aspx

Amos Web, Labor Force Participation Rate: http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=labor+force+participation+rate

 

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