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Labor Force Participation Hits 34-Year Low; Nothing to Celebrate for Labor Day?

Fri August 30 2013 8:56 am
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The nation’s jobless rate declined slightly to 7.4 percent in July, down from about 10 percent in 2009, but Express Pros, an employment professionals company, has produced a white paper that explains why the effective employment rate is actually related to the Labor Participation Force Rate (LFPR). The unemployment rate doesn’t show the nation’s pain like the LFPR.

Economists are engaged in a vigorous debate about the causes behind the shrinking workforce
and the extent to which each plays a role in today’s labor market. But there are three
undeniable facts, known as the Great Shift.

1. Baby Boomers are retiring.

2. Workers in their prime, especially Millennials, are unexpectedly giving up on the job search.

3. A growing number of Americans are stuck in the safety net of government benefits.

Declining Baby Boomers
Baby Boomer generation, defined as those born between 1946 and 1964, from the workforce, comprises 26.4 percent of the population and makes up the largest percentage of the workforce in the U.S. at 38 percent. After losing long-held jobs in the economic downturn, unfortunately many

Boomers just can’t compete in today’s workforce. So with few employment prospects, they’ve given up and have left the labor force. Many of these workers are “hanging on by the skin of their teeth” stretching their money hoping to make it long enough to qualify for Social Security and Medicare. As Boomers leave the workforce, there is also an increase in disability among the baby boomers.

“Following the Great Recession, we’ve entered into the Great Shift.”

– Bob Funk, CEO and Chairman of the Board, Express Employment Professionals

Echo Boomers Aren’t Echoing: Workers in Their Prime are Giving Up
Generation Y, also known as the Millennial Generation or Echo Boomers, is the demographic segment following Generation X. Millenials are believed to have birth dates from the early 1980s to the early 2000s. There are an estimated 1.8 million young adults in their prime who are not in the labor force because they have given up on job hunting for the time being.

According to Gallup’s “Payroll to Population” measure, fewer Millennials were working full time in June of 2013 than in June of 2012, 2011, or 2010.

Increasing Disability
Since 1983, the number of former workers on disability has increased every year. Fourteen million Americans, including roughly 8.5 million former workers receive disability. In
2011, that included 4.6 percent of the population between the ages of 18 and 64. These Americans are not included among the “unemployed.”

Increased Immigration Might Be Needed Because of Low Birth Rate
Immigration is also a consideration for replacing the work force. The birth rate in the United States is not enough to maintain population levels and produce enough workers. In order to keep the ratio of working to retired population constant in 2020 at 2004 levels, the United States will need to import 17 million people of working age, according to Professor Tassu Shervani of Southern Methodist University’s Cox School of Business. Shervani says that “by 2050, we would be lucky to have three-quarters of a person working for every retired person.”

Compounding the Problem with Lack of Skills
A recent survey of Express Employment Professionals offices across the United States asked,
“How easy is it for you to recruit and fill positions?” Only one percent of Express Employment
Professionals offices said “very easy” and 19 percent said “somewhat easy.” In contrast, 66
percent said “somewhat difficult” and 12 percent said “very difficult.

The survey also found that 53 percent of more than 400 U.S. employers say that recruiting and
filling positions is “somewhat difficult” or “very difficult.”

In a 2011 study, the Manufacturing Institute found 600,000 open jobs in the manufacturing sector alone, unfilled because employers couldn’t find capable workers.

There aren’t enough skilled workers for the jobs that employers are looking to fill.

Summarizing the Difference Between Unemployment Rate and LFPR
“Express Pro helps us understanding the Relationship Between the Labor Force Participation Rate and Unemployment Rate with a story about ten people that represent the population.

Imagine a country of 10 people. Bob, Bill, Betty, Bonnie, and Ben have full-time jobs. Chuck and Celia are looking for work after losing their jobs. David, Dee, and Darla are retired.
The labor force participation rate is 70 percent. Seven in 10 have a job or are looking for work.

Three in 10 are retired and out of the labor force.

The unemployment rate would be 28.6 percent because two of the seven in the workforce don’t
have a job.

Now imagine that Chuck, despite wanting a job, has lost hope. He gives up looking. That means
he leaves the labor force, so the labor force participation rate decreases to 60 percent. But even though Chuck is not working, the unemployment rate actually goes down. No one new found
work, but the unemployment rate would now be 16.7 percent. Of the six people left in the labor
force, only one isn’t employed.

Sometimes the good news of a falling unemployment rate hides the bad news of dispirited
workers leaving the labor force.”

See the white paper …
The Great Shift: Where Have All the Workers Gone? [PDF]

See also …

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