In an oddly titled article Vanishing workforce weighs on growth, Jim Tankersley of the Washington Post starts off like this—
Put out an all-points bulletin: Millions of Americans have gone missing from the workforce.
The Labor Department reported that the U.S. labor force — everyone who has a job or is looking for one — shrank by 500,000 people in March. That brought the civilian labor force participation rate to 63.3 percent in March, its lowest level since May 1979...
Perplexingly, the driving force behind the decline does not appear to be baby boomers beginning to retire, an event economists have long predicted would shrink the size of the workforce.
It’s people in the prime of their working years, ages 25 to 54, who began tumbling out of the job market in the early 2000s and have continued to disappear during the recovery.
Trends in the U.S. labor force, from RBC Capital Markets via the Financial Time's FTAlpha blog. Labor force participation is falling for all age groups except those who are 55+.
As the charts show, the very disturbing trend Tankersley refers to is crystal clear.
That’s obviously bad for those people, who aren’t earning money in any way that would legally require them to pay taxes. It’s also bad for the economy for a simple reason: The fewer workers, the less growth produced.
Breathtaking confusion! Skipping the strange "require them to pay taxes" part, let me rewrite that second sentence so it makes some sense.
It’s also a strong indicator that the American economy sucks: The less growth produced, the fewer workers needed.
The confusion continues.
A smaller workforce reduces what economists call potential gross domestic product, or how much the economy can be expected to expand over the long term. The decade of declining U.S. workforce participation has taken a toll on that potential growth level, many forecasters say. For example, Michelle Meyer, a senior U.S. economist at Bank of America Merrill Lynch, said her real potential growth projections have fallen from 3.25 percent a year in the mid-2000s to 2.25 percent today — all because of the change in participation levels.
We note that "potential gross domestic product" does not exist. The economy is what it is. Lowering "potential growth" based on the dwindling labor force is tantamount to piling one fantasy on top of another. See my post Economic Growth Fantasies.
So, where did everybody go? And if hiring picks up, will they come back?
Economists have ideas but not all the answers.
Another breathtaking statement. I could write a book about it.
“Prime-aged people are working less, and we don’t know why,” said Betsey Stevenson, a labor economist and associate professor at the University of Michigan. “I get concerned because there are a lot of people who have useful and productive skills that could really contribute to the economy, and we’re just failing to find ways to get them involved.”
Don't know why?
The easiest explanation for vanishing prime-aged workers is the weak job market: The economy just isn’t creating enough new jobs to keep job-seekers engaged, so many of them are getting frustrated and abandoning their search for work.
In order to pull people back into the workforce, said Heidi Shierholz, a labor market economist at the liberal Economic Policy Institute, “it’s going to take seriously improving job opportunities, and that hasn’t happened yet.”
Ya' think? What was your first clue? Nevermind... Tankersley's article should have been titled Vanishing growth weighs on workforce.
I'll skip some of the analysis and go directly to the Obligatory Hope.
The hope among many economists is that faster growth and stronger job creation will begin to pull people back into the workforce. In that sense, workforce dropouts would be like an idled army, ready to form up again when the cause demands it. That would be good news for the economy: “We don’t think all of these workers are permanently lost,” said Meyer, the Bank of America economist.
Yes, an idled army of Starbucks baristas, Gap retail clerks, Olive Garden waitresses, Wal-Mart associates and poorly compensated manufacturing workers.
Other economists are not so sure. The fear is that the longer people are out of work, the more their skills will erode. Their social networks will atrophy. Gaps in their résumés will scare off potential employers. They would become essentially unemployable.
Evidence is scant that this scenario has set in. But Friday’s numbers reignited concerns. “The idea that labor force participation is structurally or institutionally impaired gains increasing credence with each passing jobs report,” JPMorgan economists wrote in a research note Friday.
The longer the trend goes, the better the odds that’s true.
Excuse my language but it's been nearly five years since the economic meltdown, so how much more evidence do you fucking need?
OK, that ends the terminal confusion, and now I will make a few serious remarks.
Why are more and more people "unemployable"?
To quote George Carlin, "potential" American workers are giving up "on a system that threw them overboard 30 fucking years ago." Let's talk about wages (baristas, retail clerks, etc.). Would you be eager to jump right back into a labor force which will never offer you a living wage? Hell, no! People are losing are heart. Why participate in a system which is fixed against you?
Opportunity? There is no opportunity. For most Americans, there is low-wage slavery and that's all there is. If people can scrounge out a living which doesn't "legally require them to pay taxes," they will surely do so. Many have gone back to school, where they're piling up unpayable student debt or, if they were lucky enough to meet the weakening eligibility requirements, have gone on disability.
In short, Americans are desperately hoping that upgrading their skills will somehow pay off, or they are playing the system. Wouldn't you?
And the Baby Boomers? They're not retiring (graphs above). They can't! They have to keep working. For many of the others, those aged 20-54, especially the youngest, America is not a viable enterprise. For them, it's a meat grinder.
This new America is the wholly predictable product of 35 years of fraud, corruption and greed. Americans are getting used to the new reality because they know it ain't going away anytime soon.
As for writers at the Washington Post, and economists of all stripes, forget about them—they are utterly hopeless. They don't have the faintest clue about what's really going on here. And that's nothing new.