People Leaving The Workforce Means…
- Posted by TheArmoTrader
- on December 4th, 2011
As the non-farm payroll jobs number came out on Friday, everyone was shocked to see that the Unemployment percentage plummeted from 9.0% to 8.6%. Obviously the first thing everyone said was that “people stopped looking for jobs”. Yes, that might be partially true, but I think it misses the bigger trend. People are getting OLDER! As people get older, they stop working, which means that the labor force participation rate drops (or if your’e a bear and/or conspiratorial, “people stopped looking for jobs”).
But as your’e going to see, that mentality totally misses the point. Joe Weisenthal of Business Insider has already laid out the argument that the Labor Force Participation Rate drops just means we are ‘mean reverting’ (to levels of other developed nations). It’s a brilliant point. Our participation rate has been abnormally high (also coincides why our production has been so high as well over the past 30 years). Below you will see data that expands on this idea.
The Labor Force Participation Rate since 1948 (semi-annual)
As you can see, from the mid 1960s to about 2000, our participation rate trended up very nicely. This makes only 100% sense why we bottomed in the mid 60s. Baby Boomers were just getting to the age where people tend to start working (18-22). From then on out we had a boom in participation. However, as you can see, baby boomers started getting old in ~2000 and the rate started to fall. Now we are decelerating. Obviously this stat is not only tied to age, but I believe that age has a big factor to do with this.
Number Of People over Age 65
People are getting older, there is no denying this. And as you can see, the acceleration is starting (just as the participation rate is decelerating).
Americans as a Percentage are also Getting Older
Even as a percentage we are getting older, so its not just the fact that there are more people living today. The age range of ’18-44′ is dropping while ’45-64′ and ’65′ is rising.
Percent of Americans on Social Security (Retired Workers)
Americans are moving from working to collecting social security. The chart below shows the percent of Americans collecting social security benefits (Retired Workers ONLY, does NOT include other SS beneficiaries). We have been in a steady rise since the start, but as you can see, there is a small bump up in 2000 (data up to 2009).
Number of Beneficiaries
What we care about here is the RED (Retired Workers) line (even though disabled workers fall into the drop in the labor force). As you can see, this also has been steadily rising (along with the chart above), but just after 2000, we see a small bump up and acceleration.
Case In Point?
As you can see, there is more to the data then just “people have stopped looking for work”. People are getting older, thus not working anymore. And look, i’m not denying there was a probable drop in the labor force from people who have stopped working. But I believe that if you believe that is the sole cause, you are missing the underlying trend.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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