Why the Job Recovery is a Farce Illustrated in Six Charts

Why the Job Recovery is a Farce.

The Labor Force Participation Rates Among Various Age Groups Show Serious Weakness in the Labor Market.

The main stream media has been trumpeting the wonderful state of the U.S. labor market.

Superlatives like “Robust” “Buoyant” “Solid” “Strengthening” are used to describe the job market.


The Job Recovery is a Farce

Here’s Why:

Non Farm Payroll/Unemployment Rate

The strong top line non farm payroll numbers and the lower unemployment rate (5.5%!) recently reported by the United States Bureau of Labor Statistics (BLS) do not reflect accurately the health of the labor market or the overall economy.

The lack of wage growth, part time nature of many of the newly created jobs and a declining labor participation rate paint a more accurate picture.

The False Job Recovery

While main stream media stories herald a “job led recovery” an examination of details behind the labor participation rate published by the BLS show a weak labor market.

Here is a chart of the labor participation rate since 1978. You can see it is at thirty six year low levels.

Labor Force Participation Rate 1978-2015

Labor force participation chart 1978-2015 rate

The labor force participation rate is at levels last seen in 1978.

Is the declining labor participation rate a function of retiring baby boomers?

Under this theory proffered by none other than Fed Chair Janet Yellen and the White House, a decline in the labor force participation rate is to be expected as baby boomers have begun to retire.

In a “solid” job market, however, one would expect that younger workers would take the places of retiring baby boomers and the labor participation among these workers would be increasing.

It’s not.

The labor participation rate among 16-19 years is lower today than when the Great Recession officially ended in June 2009.

Labor Force Participation Rate 2008-2015 Among 16-19 Year Olds

chart labor force participation rate 16-19

The labor force participation rate among American teenagers is well below the rate at the depth of the Great Recession in 2008-2009.

Perhaps the 16-19 year old age bracket is too young a group from which to draw a meaningful conclusion about the labor force participation rate. How about those that are 20-24 years old? Surely, since the recession officially ended there must be an increase in the labor force participation rate for this group.

There isn’t.

Labor Force Participation Rate 2008-2015 Among 20-24 Year Olds

chart labor force participation rate 20-24 age group

The labor force participation rate among those aged 20-24 is far below the rate when the recession started and ended.

Those aged 20-24 might still be in college. Certainly, in such a “robust” job market, recent college graduates in their twenties and those in their thirties, forties and early fifities (the prime earning years, the ones where people form households and buy homes) must be attached to the labor force in increasing percentages.


Labor Force Participation Rate 2008-2015 Among 25-54 Year Olds

labor force participation rate 25-54-2008-2015

The labor force participation rate among those aged 25-54 has declined steadily the past six years.

But where is that buyoant economic recovery with the robust job growth you read about in Reuters?

HERE is where the labor participation rate has grown since the beginning of the Great Recession:

Labor Force Participation Rate 2008-2015 Among Those 55 Years and Older

chart labor force participation rate 55years and older

The labor force participation rate among those aged 55 years and older has declined recently but is still at higher levels that at the start of the Great Recession.

The growth in the labor participation rate is even more pronounced among those aged 65 years and older.

Labor Force Participation Rate 2008-2015 Among Those Aged 65 and Older Without Disabilities

chart labor force participation rate 65 years and older

The labor force participation rate among those 65 years and older has grown sharply since the beginning of the Great Recession.

Quantitative easing and artificially low interest rates have not helped to create jobs, but rather have acted as a stimulus for some companies to fire workers so they can free up cash to buy back their own shares.

Low interest rates have forced older workers to remain in or return to the labor force because they can no longer retire on fixed income securities like certificates of deposits as they pay next to no interest. These older workers often compete for jobs with younger workers.

While just about all major economic data releases the past few months have shown little, no or negative growth, the increase in non farm payroll jobs is clearly an outlier and the concept of a job recovery a farce.

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All charts: US. Bureau of Labor Statistics, Civilian Labor Force Participation Rate, retrieved from FRED, Federal Reserve Bank of St. Louis https://research.stlouisfed.org/fred2/series/CIVPART/, March 9, 2015.

Why the Job Recovery is a Farce

Further Reading:

Why the Housing Recovery is a Farce Illustrated in Two Charts

The Dark Side of Artificially Low Interest Rates

New Home Sales vs. New Car Sales

HP Fires Workers, Buys Back its Own Shares

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