Jobs numbers hide decline in workers

January 7, 2012 10:34

[T]he Labor Force Participation Rate (LFP) [ ] may have hit a new 30-year low in December. In November it stood at 64.0%


By Bruce Kasting


Declining Labor Force Participation

Tomorrow, the Non-Farms Payroll numbers will be released. I think this data series is mostly noise. Monthly changes in employment can’t be accurately measured when the (non cell phone) sampling is done with only 0.01% of the workforce.

I will be looking at the Labor Force Participation Rate (LFP). This important number may have hit a new 30-year low in December. In November it stood at 64.0%.


It’s not surprising that the LFP is in decline. After three tough years, people are leaving the workforce. Some are retiring early and getting Disability Insurance/early Social Security benefits. Some just fall off the grid and work for cash in the black economy. Either way, they don’t show up in the survey data so the LFP falls. This is a terrible development for local, state and federal government tax receipts.

The following chart is from 2007, before the SHTF. This was forecast data for future LFP based on the thinking at the time. Needless to say, we missed the estimates. It’s interesting to note that the current LFP of 64% is about where we were expected to be in 2025. That four-year-old estimate got crushed by a four-year recession.


:  I worked on Wall Street for twenty five years. This blog is my take on the financial issues of the day. I was an FX trader during the early days of the ‘snake’ and the EMS. Derivatives on currencies were new then. I was part of that. That was with Citi. Later I worked for Drexel and got to understand a bit about balance sheet structure and corporate bonds from Mike Milken. I was involved with a Macro hedge fund later. That worked out all right, but it is not an easy road. There was one tough week and I thought, “Maybe I should do something else for a year or two.” That was fifteen years ago. I love the markets. How they weave together. For twenty five years I woke up thinking, “What am I going to do today to make some money in the market”. I don’t do that any longer. But I miss it. 

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