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Presented with Many Questions, But No Comment

January 10, 2014, 10:47 am

Labor-Force-Dropouts-Drive-Lower-Unemployment-Rate-TheFederalist

via the Federalist

 

Category: Economics

24 Comments

  1. treeher:

    Yes, media will actually tell the truth this time because they think it will give support to the administration's push for extended unemployment benefits.

    January 10, 2014, 11:54 am

  2. greg:

    question #1, who the hell quits looking for work? What does that even mean? If I've been looking for a year, and unable to find employment, I don't suddenly find a don't really need a job and can quit looking.

    January 10, 2014, 1:26 pm

  3. TM:

    I've always been of two minds regarding the "not looking for work" numbers. On the one hand, I get the point being made about how it's not reflecting "true unemployment", but on the other hand, if you're not looking for work, then why should you be counted on the "unemployed" statistics any more than a housewife or someone living off a trustfund would be? That said, I would say that if you're not looking for work, but you are receiving government subsidies (food stamps, housing etc) that you should still be counted as unemployed. If you're self sufficient (even if you're burning savings) that's one thing, but if you're relying on someone else for support, you should be looking for work.

    January 10, 2014, 2:04 pm

  4. Matthew Slyfield:

    One word, Welfare.

    January 10, 2014, 2:17 pm

  5. Matthew Slyfield:

    But the opposite is true because research shows that most people collecting unemployment don't even start looking until around two weeks before their benefits are set to expire.

    January 10, 2014, 2:18 pm

  6. Bram:

    Or cash work, particularly if you can still collect unemployment forever.

    January 10, 2014, 3:09 pm

  7. Matthew Slyfield:

    True, for many there is the option of working under the table while still collecting government benefits they shouldn't be getting.

    January 10, 2014, 3:22 pm

  8. MingoV:

    The federal government's method of determining unemployment is a travesty. People in the following groups are not considered unemployed:
    -- High school or college grads who haven't gotten a job
    -- High school or college dropouts who haven't gotten a job
    -- Those who left the workplace for more than five years, want to work, and who haven't gotten a job
    -- Recipients of unemployment benefits who exhausted their benefits and who haven't gotten a job

    Those four groups combined are approximately as many as the officially unemployed.

    January 10, 2014, 4:49 pm

  9. MingoV:

    Joe is main breadwinner. Kate is unemployed. Because of child care, commuting costs, and taxes, the break-even point for Kate to work is $12/h. They can't afford to move unless Joe can get a much better paying job. If there are no >12/h jobs for Kate, then it makes sense to quit looking.

    January 10, 2014, 4:55 pm

  10. mesaeconoguy:

    1 answer, but first a few questions:

    So what is driving this LFPR trend?

    St. Louis Fed Gov. Bullshit er, Bullard said today this is mostly due to demographics.

    That answer is incorrect. How can we tell?

    A very good test is to compare another country with roughly similar demographic and socioeconomic composition.

    Does such a country exist, you ask?

    Luckily it does, and it’s right next door: Canada

    http://www.indexmundi.com/factbook/compare/canada.united-states/demographics

    [Yes, Canada’s population is roughly 1/10th the US, but demographically proportionally they’re close]

    Canada used to have a robust welfare state and safety net like we have cultivated the past 6+ years, and encountered major fiscal problems from it, so they reformed in the 1990s: $1 tax increase for each $6 in spending reduction (roughly).

    So how does their Labor Force Participation Rate compare?

    http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2013/08-2/20130907_pop2.png

    [Note the large dip in participation in the 1990s, before & during reform]

    January 10, 2014, 4:59 pm

  11. mesaeconoguy:

    U-3 headline number (meaningless)

    U-6 unemployment + underemployment

    Long-term discouraged workers:

    In 1994, “discouraged workers”—those
    who had given up looking for a job because there were no jobs to

    be had—were redefined so as to be
    counted only if they had been “discouraged” for less than a year. This

    time qualification defined away a large
    number of long-term discouraged workers. The remaining shortterm

    discouraged workers (those discouraged
    less than a year) were included in U.6.

    http://www.shadowstats.com/alternate_data/unemployment-charts

    See also:

    http://explistats.com/economic-activities/household-survey/

    January 10, 2014, 5:30 pm

  12. marque2:

    A lot of people can quit. College grads can stay in their parent's basement and at video games fairly comfortably, for instance. If you have a lowevel of responsibity in that you don't have people dependent on you you can stay out. Or if your spouse works you can hang out longer.

    I have a stay at home wife - so when I lose a job I am extremely motivated to find a new one.

    January 11, 2014, 7:03 am

  13. marque2:

    And it is not like Kate isn't working - she is probably providing a higher economic benefit staying at home - but since she isn't paid - it doesn't count. Working for $12 and having others take care of the kids would add 60k a year to the economy per government figures.

    January 11, 2014, 7:06 am

  14. marque2:

    Used gum collectors.

    January 11, 2014, 7:06 am

  15. Dirk:

    The high difference between ~ 11% and 7% seems a bid odd. It would mean that the base (=Labor Force Participation rate) shrank by almost 40%. This seems unrealistic to me.

    January 11, 2014, 8:52 am

  16. rst1317:

    This is stagnation, not a recovery

    January 11, 2014, 10:26 am

  17. An Inquirer:

    Considering the question if the shrinking participation rate is due to demographics, looking at the participation rate by age group would give us insights. That investigation gives us the opposite answer. We have diminishing participation rate for people in their 20s and 30s, and increasing participation rate for people in their 60s and 70s. If retirement moves by the baby boom generation was to explain the shrinking participation rate, we would see the opposite trends. Instead, we see that something is motivated young people in their 20s and 30s to drop out of the workforce.

    January 11, 2014, 4:47 pm

  18. mesaeconoguy:

    Exactly correct, employment demographic gains are most pronounced in the 55+ range.

    The younger 20s -30s millenials are bearing the brunt of this terrible economy.

    January 12, 2014, 8:48 am

  19. Simon Fraser:

    In related news . . .

    http://tinyurl.com/ly5ev9f

    January 12, 2014, 9:51 am

  20. morgan.c.frank:

    actually, no, not exactly correct.

    consider:

    if people in their 60's and 70's have a LGPR of 20% (i'm just making up numbers here) and people in their 40's and 50's have a LFPR of 70%, then moving people from one cohort to the other causes a big drop in labor force participation.

    that drop is big enough to cover even a BIG rise in 60-70 LFPR.

    a 10 point gain would barely make a dent int he overall effect.

    you have to account for 2 different things here: changes in the rate of a cohort and movement of population between cohorts to get at the net vector. in this case, the 2 are acting in opposition to one another, but the effect is still demographically negative.

    while i absolutely agree that much of this demographic argument is being overstated, it's worth making sure one handles the numbers correctly to get the correct conclusions.

    the evidence AI cites is only a part of the pattern.

    January 12, 2014, 10:52 am

  21. morgan.c.frank:

    no, it doesn't.

    you're math is bad.

    the LFPR dropped from 66.4% to under 62.8%.

    http://data.bls.gov/timeseries/LNS11300000

    that's a 3.6 point drop which flows right into unemployment as those people are subtracted from the "looking for work" population.in u3.

    January 12, 2014, 10:56 am

  22. Dirk:

    No, its just that the text in the graph is misleading. The difference is due to the definition of unemployment (and adding/subtracting people in or not) rather than a base effect.

    January 12, 2014, 3:33 pm

  24. jukin:

    Like everything, the economy has momentum. Something happened in early 2007. The democrat party came to power in both the HOR and the senate. One year later we had catastrophe. Until the democrats are out of the legislative branch there will be no change. That is just a fact.

    January 17, 2014, 6:21 pm