Friday, August 3, 2018

The workforce is doing well

The Bureau of Labor Statistics (BLS) today released its “Employment Situation Report” for July, 2018.   It is a very positive report that continues to reflect an improved workforce environment.
Workforce health is related to the overall health of the economy: Gross Domestic Product (GDP) reportedly increased 4.1% in the second quarter of this year – a high growth rate;   measures of business and consumer confidence are high;  wages may finally be rising in a tight labor market;  inflation is holding at about 2%; the stock market remains at very high levels.

As the economy expands workforce health improves.  The economy not only produces more jobs and maintains a low overall unemployment rate, but also moves workers who were trapped in part time jobs to full time.  It pulls millions who were considered no longer part of the workforce back to rewarding jobs.   Secondary effects are also observed – SNAP (aka Food Stamps) enrollment is declining and Social Security Disability Income (SSDI) applications continue a steep decline.

The Bureau of Labor Statistics (BLS) official unemployment rate (BLS U-3) dropped below 3.8% in April and remains in record territory at 3.9% in July. 
Black unemployment dropped to a historically low 5.9% in April. Though it remains historically low it has increased suddenly to 6.6% in July without any explanation from BLS.  As important, the delta (or gap) between White and Black unemployment as reported by the BLS is shrinking to historically low levels.  Hispanic unemployment is at a record low of 4.5%. 

An alternative BLS statistic (U-6) that measures people marginally connected to the economy or in part time work (and may be the best indicator of workforce health) who want full time jobs has also improved dramatically.   For the first time in nearly two decades U-6 has slipped under 8% and is in July 7.5%.  At the peak of the 2009 economic collapse the delta between U-3 and U-6 was 7% points.  Today that delta is 3.6%.

These exceptionally bright unemployment numbers get even better.

The Labor Force Participation Rate is a measure of the percentage of Americans 16 and older who are working or looking for work.   That rate is currently stable at 62.9% with a record 155,965,000 people employed.

This is highly significant because it defies what was an accepted inevitability of a downward trend in labor participation.   The BLS had projected the Labor Participation Rate would be 62% at present and decline below 61.5% by 2022.  Demographics trends (e.g. Baby Boomers leaving the workforce) were the basis for such projections.

What does that difference of .9% between what BLS projected and what it actually is at present mean:  nearly 3 million people that were not expected even to be interested in working are now active in the labor force.

These labor statistics reflect an employment market that is beneficial to both the top and bottom of the employment ladder.  Graduating college students in 2018 have better prospects than they have had in a decade.  Non-college graduates too have opportunities in construction, labor and other areas.  For example, housing starts are down in part because construction companies are having difficulty finding labor.

These trends are reflective generally of an economy that has 6.7 million job openings and only 6.4 million workers available.   There are more jobs than people to fill them.  As a result, some companies are reaching out to traditionally undesirable prospects such as people with criminal records.  Other companies are providing for addiction treatment for employees to retain them.

Wage stagnation has been a continuing issue since the 2009 downturn.   Finally, wages are beginning to rise in the tight labor market – wages and salaries rose 2.8% in the past year according to the Labor Department.

There are secondary impacts to increased employment.  SNAP (Food Stamps) enrollment is down from 43.6 million in October 2016 to 39.6 million at present.  It reached a high in 2014 of over 46 million.  The number of Social Security Disability Income recipients has declined by nearly 500,000 from what was a sustained level between 2012-2016 of just under 9 million.   New applications at SS offices are down nearly 50% since 2009.

By most every measure, the economy is booming and the workforce is benefiting.  That is a fact. Everyone should celebrate.  

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