Tuesday, December 31, 2013

Employment-Population Ratio at 30 Year Low

The employment-population ratio in now at a 30 year low; and the labor force participation rate is now at a 35 year low.

Dual income households for married couples have already peaked in the last decade --- another sign of too few jobs. Counting all those who are no longer considered part of the labor force ("discouraged workers" who stopped looking for non-existent jobs), the U.S. has almost 48 million unemployed --- over 4x more than what is reported by the Bureau of Labor Statistics in the U-3 unemployment rate.

For millions of Americans, the U.S. is still in a state of economic crisis, and with no relief in sight.

Many American economists consider the "employment-population ratio" as the gauge of labor market conditions. This is a statistical ratio that measures the proportion of the country's working-age population (ages 15 to 64) that is employed. This also includes people that have stopped looking for work.

The employment-population ratio has always been looked at for labor statistics, but after the recent recession it has been looked at more by economists.

To understand the use of the ratio some key terms follow:

  • Employed persons

  • Unemployed persons

  • Participant rate

  • Not in the labor force

  • Multiple jobholders

The ratio comes from dividing the civilian non-institutionalized population who are employed by the total non-institutionalized population and multiplying by 100.

The National Bureau of Economic Research: "The decline in the employment-population ratios for men and women over the period 2000-2007 prior to the Great Recession represents an historic turnaround in the evolution of U.S. employment."

The employment-population ratio peaked at 64.7% in April 2000 --- but it has since declined to 58.6% as of November 2013. The last time the employment-population ratio was this low was 30 years ago in November 1983 (at 58.7%) when the U.S. population was 80 million people less (233,791,994).

Back in 1983, the U.S. had been experiencing a boost in the labor force by women taking jobs to create duel-income households to make ends meet.

Bloomberg (Dec 30, 2013):

"Rising income inequality is starting to hit home for many American households as they run short of places to reach for a few extra bucks. As the gap between the rich and poor widened over the last three decades, families at the bottom found ways to deal with the squeeze on earnings. Housewives joined the workforce. Husbands took second jobs and labored longer hours. Homeowners tapped into the rising value of their properties to borrow money to spend. Those strategies finally may have run their course as women’s participation in the labor force has peaked and the bursting of the house-price bubble has left many Americans underwater on their mortgages. The result has been a downsizing of expectations. By almost two to one -- 64 percent to 33 percent -- Americans say the U.S. no longer offers everyone an equal chance to get ahead, according to the latest Bloomberg National Poll."

A recent CNN/ORC poll finds similar results: nearly 70 percent said the economy “is generally in poor shape,” while “just over half expected the economy to remain in poor shape a year from now.”

Recent Social Security data released 2 months ago revealed that income disparity is only growing in the United States. The released figures show that the median per capita wage in the US is $27,519 (meaning, half earn more and half earn less).

Given the costs for college, healthcare, and housing many households are simply falling out of the middle class. The two income household is now the common default for Americans. However, in many cases, two income households have arisen primarily for economic necessity. Many households today simply cannot get by on one income earner --- especially if they have children.

The decline of the middle class household would be more dramatic if it were not for the emergence of the dual income household (about 67% of married couples as of 2009). This is a large jump from the 1960s. However, as the chart below highlights, given demographic trends, it appears that we have peaked in this category and many young Americans have no choice but to live in households with multiple streams of income (like with mom and dad).

Dual-income households already peaked

The purchasing power a single-income household in 1970s was better off than a dual-income household in the 2000s.

Dual incomes killed by rising costs of living.

The Bureau of Labor Statistics currently reports in the "U-3" unemployment numbers that 10.9 million Americans are unemployed; but counting those who are not included in any "official" measurement of the unemployed (such as all the "discouraged workers" over the past 5 years), there are almost 48 million Americans who are out of work today, but would like a job.

Just as the employment-population ratio has declined, so has the labor force participation rate. Since 1948 the labor force participation rate has trended upward until the late 1990s, when it peaked at an all-time high of 67.1 --- but it has since declined. Currently it's at 63%. It hasn't been this low since April 1978 (also at 63%) --- a 35 year low --- when the U.S. had 89 million less people (225,055,487).

And several studies (including the Fed) have shown that the labor force participation rate is expected to decline further going forward into 2022. So not only are there not enough jobs for everyone who wants one, there aren't enough jobs to sustain dual- or multiple-income households. So where will all the much needed jobs come from going forward?

One particular cable news channel and political party claims that America is becoming a nation of moochers (aka "takers") --- but if there are not enough jobs being created (domestically, instead of being offshored overseas and losing the "multiplier effect"), how are people expected to support themselves? How can they work for an income if no means for that income is being offered?

CHARTS BELOW - SOURCE: Bureau of Labor Statistics

employment-population ratio

CHART BELOW - SOURCE: Bureau of Labor Statistics

employment-population ratio

The chart below is from Jared Bernstein, who is a Senior Fellow at the Center on Budget and Policy Priorities. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joseph Biden in the Obama Administration. His chart shows us the difference between one U.S. economy and another.

Related: Overthrow the Speculators (by Chris Hedges at TruthOut)

"Speculators at megabanks or investment firms such as Goldman Sachs are not, in a strict sense, capitalists. They do not make money from the means of production. Rather, they ignore or rewrite the law—ostensibly put in place to protect the vulnerable from the powerful—to steal from everyone, including their shareholders. They are parasites. They feed off the carcass of industrial capitalism. They produce nothing. They make nothing. They just manipulate money. Speculation in the 17th century was a crime. Speculators were hanged. [Now they rarely even get a parking ticket.]


  1. Short URL for Twitter:

    The employment-population ratio now at a 30 year low & the labor force participation rate is now at a 35 year low.


  2. If the employment-population ratio and the labor force participation rate is falling, then it's worse than I first thought --- because the U.S. population growth is at slowest rate since the Great Depression. If job growth can't keep pace with a slow population growth, maybe we should adopt China's "one child" policy.


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