Wednesday, February 12, 2014

8 Million Jobs Short, 6 Million Missing Workers

The Great Recession has left in its wake a shortfall of nearly 8 million jobs.

Chart below from The State of Working America: Payroll employment and the number of jobs needed to keep up with the growth in the potential labor force, 2000-2014

8 million jobs missing

Jeffrey Frankel, Harpel Professor of Capital Formation and Growth at Harvard University, and former member of the Council of Economic Advisers:

"Unemployment has fallen unexpectedly quickly — not because of unexpectedly rapid growth in the economy which might call for earlier tightening, but, in large part, because discouraged workers have left the labor force altogether. To be sure, a big part of the four-year decline in the unemployment rate has indeed been due to a growing economy; and even part of the decline in the labor force participation rate is due to the benign long-term trend of baby-boom retirement. Nevertheless unexpected exit from the labor force is probably the biggest component of the unexpectedly rapid recent decline in the unemployment rate."

Heidi Shierholz at the Economic Policy Institute:

"Given that declines in the unemployment rate are providing a murky picture of trends in labor market health in this recovery, I think a much more useful indicator is the employment-to-population ratio of “prime-age” workers (workers age 25–54).

The employment-to-population ratio is simply the share of the population with a job, so this measure entirely sidesteps the issue of whether potential workers are in the labor force. Restricting our attention to prime-age workers serves the important purpose of avoiding confounding changes in employment that are not due to labor market conditions, but are instead due to longer-run structural factors, such as baby boomers hitting retirement age, and declining employment of young adults due to increased college enrollment.

In early 2007, the prime-age employment-to-population ratio was 80.2 percent. It dropped to 74.8 percent by the end of 2009, and has since increased to 76.5 percent...the labor market has now recovered a little less than a third of what it lost in the downturn.

Heidi Shierholz at the Economic Policy Institute:

"We lost 8,695,000 jobs in the downturn, but we have since gained back 7,844,000, so we are now 851,000 jobs below where we were when the recession began in December 2007.

The working-age population—and with it, the potential labor force—is growing all the time. Over the last six years and one month, we should have added 6.7 million jobs to keep up with growth in the potential labor force.

Instead, we are down 851,000 jobs. This means that the total gap in the labor market—the number of jobs we need to get back to pre-recession labor market conditions—is 7.6 million."

Economic Policy InstituteMissing Workers: The Missing Part of the Unemployment Story:

(Updated February 7, 2014, based on most current data available.) Total missing workers: 5,730,000 — Most missing workers are of prime working age and are listed below by age and gender:

  • Men under 25 — 960,000
  • Women under 25 — 400,000
  • Men 25–54 — 1,650,000
  • Women 25–54 — 1,170,000
  • Men 55+ — 640,000 (I am one!)
  • Women 55+ — 910,000

* The unemployment rate if missing workers were looking for work: 9.9%
* The "official" unemployment rate: 6.6%

Since Jan. 2001 private sector employment has increased by 3.4% while the “working age” population increased by 14.8%. If total employment had kept pace with rate of population increase since 2001 then there would be 157 million at work today, 12 million more than the actual figure of 145.224 million. The labor force would be 10 million larger, 165 million. The last 13 years have been a disaster for private sector employment.

Charts below from interactive charts at EPI:

missing workers

real unemployment rate

prime age workers

* Potential workers who, due to weak job opportunities, are neither employed nor actively seeking work. Volatility in the number of missing workers in 2006–2008, including cases of negative numbers of missing workers, is simply the result of month-to-month variability in the sample. The Great Recession–induced pool of missing workers began to form and grow starting in late 2008. Source: Labor Force Projections to 2016: More Workers in Their Golden Years,” Bureau of Labor Statistics Monthly Labor Review.

Bud Meyers:

Why should it matter if people voluntarily drop out of the work force if there aren't enough jobs for the 10 million unemployed people (those who are still counted) in the work force? It seems to me that less people in the work force would mean less competition for the few available jobs.

Last year in 2013 the U.S. had a record number of American workers who retired on Social Security— 1,171,737 left the work force—and we also had a record number of high school graduates 3,092,290 who were expected to enter the work force—for a difference of 1,920,553. (Those who entered college cancels out those who graduated from college). Were 1,920,553 jobs created in 2013?

The Bureau of Labor Statistics, independent economists, and the Fed have all previously forecast a decline in the labor force participation rate—and they all have predicted a further decline going forward into 2022 (before the CBO report, and long before Obamacare was even a twinkle in daddy's eye).

Obamacare doesn't cost jobs; if anything, more economic activity should create more jobs. Besides automation and guestworker visas, it's been offshoring and their multiplier effect that have given us our massive job shortage.

1 comment:

  1. UPDATE from the New York Fed

    The Job-Finding Rate

    "The job-finding rate is still substantially below its pre-recession levels, suggesting that it is still difficult for the unemployed to find work ...both the vacancy-to-unemployment ratio and matching efficiency declined during the Great Recession and have not recovered since ... the most important factor in the low job-finding rate is the persistently low level of vacancies per unemployed."