Long post, but explains a lot about the unemployment rate. Having been unemployed since April, I have lots of time to research topics of interest. I check facts against things politicians or news types say. I often use the Bureau of Labor Statistics (BLS). They have lots of data but their reports read like they were written by engineers. They are hard to read. I wanted to find out the facts about the (1) unemployment rate (UR) and (2) what the Republicans like to reference, the Labor Participation Rate (LPR). The BLS is the designated organization to produce the UR and the LPR which they do once a year in January. Data is as-of the previous 30 September. There is are so many factors that go into the final numbers that it takes the BLS 3 months to collect and QC the data. The UR and LPR seen on TV are not from the BLS and are rough estimates that ignore most of the input data because it is so hard to collect, and are almost always .1 to .4 off. Is the LPR more important than the UE as Republicans often claim? The answer is sometimes, but in the last several years, the answer is yes. Its nobodies fault, its just the ways the numbers fall. Remember that the BLS doesnt just report the numbers, the explain how each input factor changed and why, how it all fits together, and what the trends mean for the economy. The BLS numbers include everyone in the US except illegal aliens. People living in the US (except the illegal aliens) are divided into 2 groups called Civilian Institutional (CI) and Non Institutional (CNI). CI includes prisoners, active duty military, children under 16 (dont know why it is not under 18 or 19) etc and are not included in employment statistics. CNI is everybody else, about 243,000,000 in 2012, available to work. The CNI are divided into people (Group 1) working or looking for work (154,000,000 total in 2012, with about 12,500,000 of those looking for work) and (Group 2) everybody else in CNI (theoretically available to work but not doing so) 86,000,000 in 2012. Since 1950 the people working or looking for work has held at about 2/3 of CNI. That means if you and your spouse work, the 2 of you support one other person, not including your minor children. So if 500,000 stop looking for work and nothing else changes, (and this is why you hear people say the unemployment figures dont include people who have stopped looking for work), the 500,000 is subtracted from from 154,000,000 and 12,500,000, the 500,00 disappears over to the Group 2 side and is no longer included in employment calculations, and unemployment drops about .26% on paper (but is not real,nobody found a job) and the LPR also goes down. But here is a large part of what is really happening, Baby Boomers are starting to retire, about 1,500,000 per month are eligible. If all retire, and nothing else happens, all 1,500,000 move to group 2 and the UR and the LPR go down. The lower UR is not real, nobody found a job. The lower LPR is real. Of course, ALL labor factors change every month, so the January report from the BLS is the only accurate one. But still, the number of people leaving the work force has been bigger than those coming in since the early 2000s. As I said, nobodys fault. Its just the way it works out. So for some number of years, a part of the drop in the UR rate has not been real, but the drop in LPR has been real. The LPR dropped 3% in real terms in the last six years and is now the lowest since the Korean War. Why should you care? If you are in your 30s or 40s, and if the trend continues (and the baby boomers arent getting younger), if you and your spouse work, before you retire you and your spouse will be supporting 2 people, not 1. Too many people not working, not enough working. The people who are not working but are retired on SS are of course paying at last part of their own bills. If you dont work and you dont have a family member to take care of you, should you care? Maybe. More people not working and fewer working means fewer $$$ for the group 2 people, whatever reason they are in the group. Any suggestions, other than have more babies?
Posted on: Sat, 08 Nov 2014 02:32:05 +0000
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