Mar BLS jobs +192,000, unemp rate same at 6.7%. New record in private jobs # Info HERE . Jobs since Obama took office? HERE Unemp. rate under Obama? HERE

Thursday, April 11, 2013

90 Million People Are Not in the Labor Force!


Over 90,000,000 people are not in the labor force in this country! 

Why did the number of people not in the labor force increase by 663,000 people in March?    


This must be a horrible thing!  (Or..... not?)   


Breaking down the "Not in the Labor Force" pie:


As usual, whenever the unemployment rate ticks down, the naysayers will point out--- with alarm--- the increasing number of people who are "not in the labor (work) force". The assumption seems to be that the job situation is so miserable that people are dropping out of the labor force, ceasing to look for work, by the droves.

Let me make something clear:  YES, we still do have a problem with unemployment and underemployment in this country.  But misrepresenting the facts and numbers of labor participation and who is or who is not in the labor force will NOT clarify the issues of unemployment one tiny bit.  So let's look at some of those facts and numbers.

First of all, people "not in the labor force" are NOT "unemployed". "Unemployment" has a very specific meaning for labor economists.  It means:


  1. People not working for pay, not for an employer and not self-employed.
  2. People who want a job or some kind of employment.
  3. People who are ACTIVELY seeking (within the last four weeks) a job or some kind of employment.  People who want a job but who aren't looking for work are NOT considered unemployed, which makes sense.  (If you aren't looking for work, how is an employer supposed to find you?  Is the job fairy supposed to sit on your head?)  

The reality of people "not in the labor force" may be different than you have been led to believe.  Considering all of the hullabaloo about "people dropping out of the labor force", this chart may surprise you:

Who Are the People "Not in the Labor Force"?  (Don't miss the breakdown of the additional 663,000 people who are "not in the labor force" in March 2013 at the bottom.)








































Are people really dropping out of the labor force?

Well, first of all, "dropping out" of the labor force for whatever reason, including  despair of not finding a job, is not the definition of "not in the labor force".  Let's explore what it means when someone talks about people "not in the labor force" and people "dropping out of the labor force".   


How do you get to be "not in the labor force"? 

People "not in the labor force" first of all, have to be IN the "civilian non-institutional population age 16+";  in other words:

  • At least age 16, 
  • Not in the military,
  • Not in prison, not in a nursing home or similar institution.
  • There is no upper age limit to the civilian non-institutional population age 16+, so 85 year old grandmas would be counted as "not in the labor force" if they live at home or with family. 
To be "not in the labor force", people are not employed  at all, not full time, not part time, not self-employed.  They can also not be actively searching for work.  If they have been actively searching for work in the past four weeks, they are considered to be "unemployed".  (See the discussion a few paragraphs above:  If a person is unemployed, "actively searching for work" according to the Bureau of Labor Statistics, they have made at least one attempt to find work in the prior four weeks through such means as submitting an application, going for an interview, or talking to a potential employer.)

Let's repeat this:  

  • People in the civilian non-institutional population who are actively, officially unemployed are IN the labor force.
  • People in the civilian non-institutional population who are employed (full-time, part-time, self-employed) are IN the labor force.
  • All other people in the civilian non-institutional population are NOT IN the labor force.

How do people "drop out of the labor force"?


1)  They stop working and they do not look for work.  Or:  2)  They were unemployed and they stop looking for work.  There are a few exceptions:  People who are on temporary layoff from their jobs are in the labor force and are counted as unemployed and do not have to look for work while they are on temporary layoff.  People who are ill or on vacation but have a job and intend to return to work ARE in the labor force and are counted as employed.  

People may leave the labor force if they quit their jobs to stay home with their children, if they become disabled and cannot work, if they retire.  Also young people in high school or college may not be working and may not be looking for work while they are enrolled in school.    

But "dropping out of the labor force" is not necessarily the same as being "not in the labor force".  When young people turn 16 years old, unless they have a job or are actively looking for a job, they are "not in the labor force" by definition.  Since they never were in the labor force, they haven't dropped out.


Also assuming that people who leave the labor force do so because they are in despair about not finding a job is a very bad, very misleading assumption, as you will see at the bottom of this page in the discussion of labor market "flows".     


What about all of those people dropping out of the labor force in March 2013?
 
Last month, March 2013, the unemployment rate fell to 7.6%, with 11,742,000 people actively looking for work.  Though the number of unemployed people fell, the total number of people employed also fell in March.  As a result, there are about 496,000 fewer people "in the labor force" (either employed or actively looking for work) in March.

Now, any monthly variation should be taken with a grain of salt.  As it is, we have over 1,266,000 more people employed than we did a year ago and about 944,000 fewer people officially unemployed.  The labor force (work force) as a whole is larger than it was a year ago by about 321,000 people.

In any event, as the size of the labor force decreased in March, and the number of people "not in the labor force" increased to 90,483,000, critics jumped upon this increase to surmise that all of these people are leaving the labor force, "dropping out of the work force" in some stage of misery, discouraged because they cannot find work.  They use this number, the number of people "not in the labor force" as evidence of some kind of "failure" on the part of President Obama and the Democrats.      

What we know and don't know about people "not in the labor force"

First, we have no idea WHY most people are not in the labor force; that is, we don't know why someone stopped working, is no longer looking for work,  or never worked or looked for work, which is the definition of  "not in the labor force". Did they retire? Go to school? Stay home with a baby? Become disabled? Did they stop looking for work because they gave up on finding work?  Are they independently wealthy and don't need to work?  We don't have the definitive answer to these questions. 

We DO know, however, how many people not in the labor force (who aren't working or actively looking for work) "want a job", and we have some figures on why those people who "want a job" have not looked for work in the past month. We also have a good idea about how many might be so discouraged that they decided to stop looking for work.  We know more about the 16-24 year old crowd and how many of them are or are not still in school.  

People Age 55+ 

Yep, that big bright pink piece of pie on the chart above represents 46,929,000 people who are 55+ years of age and claim that they DO NOT want a job.  That is over half of the 90,483,000 people in the "civilian non-institutional population age 16+" who are "not in the labor force". 

Notice the relatively tiny slivers of people in this age bracket who want a job but have not looked in the past year ( yellow sliver), and the even smaller sliver of people in this age bracket who want a job and HAVE  actually looked for work in the past year (green sliver).  Over all, 53.6% of the people "not in the labor force" are 55 or over.  That's 48,500,000 out of 90,500,000.  To repeat, of the 48,500,000 people 55+ and over not in the labor force, 46,900,000, or 96.7%, say that they DO NOT want a job.  As we said above, over half of the people "NOT in the LABOR FORCE" are in that one big bucket.


People Aged 25-54

We know less and can surmise less about the 25-54 year olds who are not in the labor force.  Again very few of them "want a job" when compared to the people in this age group who DO NOT "want a job".  We can assume that many in this group are people who are home with their children, but we don't know this from any statistics provided by the Bureau of Labor Statistics.

We know that there are about 23,640,000 people aged 25 to 54 who are not in the labor force and that most of them, 20,841,000 (88.2%) do NOT want a job.  Those people are represented by the silver pie piece.  The smaller slivers of pie represent people who are not in the labor force but want a job and HAVE looked for work within the past year (aqua blue sliver of pie) and people who are not in the labor force but want a job who HAVE NOT looked for work in the past year (coral sliver of pie).  



People Aged 16 - 24


The Bureau of Labor Statistics includes people who are 16 or over, not in the military, and not institutionalized as part of the "civilian non-institutional population".  This includes young people in high school and college.  


It should not be surprising that a very low percentage of these young people,  54.5%, are "in the labor force"; that is, they are either employed or actively looking for work.  Also, most people in this age group who are "in the labor force" are either working part-time or looking for part-time vs. full-time work.  Very few teenagers (16 to 19 year olds) say they want work want full-time work.  Only about 3.4% of 16 to 19 years olds want full-time work.  


The overwhelming majority of people who are "not in the labor force" in the 20-24 year old age group are people who are in school (red piece of pie).  A much smaller population is not in school and not in the labor force (blue piece of pie).  In this group of people who are not in school and not in the labor force, women outnumber men about 2 to 1, so we can assume that at least some of these people are not in the labor force because they are tending young children.  


The Civilian Labor Force numbers


There are 244,955,000 people in the "civilian non-institutional population 16+" in this country in March 2013.  155,028,000 are IN the civilian work force, meaning they are either employed or actively looking for work.  89,967,000 are "NOT IN the labor force" meaning they are NOT employed or earning money through labor and they haven't looked for work in the past month, though they may have been employed or looked for work in the past year.  (The numbers used in the graph are seasonally unadjusted "raw" numbers, as the breakdown isn't available in seasonally adjusted numbers.  As a result, the total of people not in the labor force is a bit larger in "raw" numbers than it is in seasonally adjusted numbers.)      


Breakdown of those "Not in the Labor Force"
 

The pie represents the breakdown of the 90,483,000 people not in the labor force:

Age 16 - 24:  18,325,000 people



  • In school:  14,817,000  (red piece of pie - 16.4% of pie)
  • Not in school:  3,507,000 (blue piece of pie - 3.9% of pie)
  • (Note:  Some of both groups want a job (2,010,000 in total), with 1,016,000 having looked in the past year.  This is not broken down on the pie chart above.) 
Age 25 - 54:  23,640,000 people
  • DO NOT want a job:  20,841,000 (silver piece of pie - 23.0% of pie)
  • Say they want a job but HAVE NOT looked in the past year:  1,404,000 (coral piece of pie - 1.6% of pie)
  • Want a job and HAVE LOOKED in the past year:  1,395,000 (aqua blue piece of pie - 1.5% of pie)
Age 55+:  48,519,000 people
  • DO NOT want a job:  46,929,000 (bright pink piece of pie - 51.9% of pie)
  • Say they want a job but HAVE NOT looked in the past year:  1,019,000 (yellow piece of pie - 2.1% of pie)  
  • Want a job and HAVE LOOKED in the past year:  571,000 (green piece of pie - 0.6% of pie)  
Labor Force "Flows"

The labor force is very volatile.  Millions of people are hired, fired, or quit their jobs every month.  Millions join and leave the labor force every month.  The monthly jobs reports use "net" numbers, so the number of people employed this month, for instance, is equivalent to the number of people who were working in the last month PLUS the number of people who were hired in the last month MINUS the number of people who were "separated" (quit, laid off, fired, retired) in the last month.  When we have more people hired than people who quit, were laid off, or retired, we have INCREASES in jobs and employment.  When we have more people who quit, are laid off, or retired than we have people who were hired, we have DECREASES in jobs and employment.


The "flows" reports tell us how many people moved from "employed" to "unemployed" or from "not in the labor force" to "employed" every month.  
In March 2013, 4,204,000 people who were employed in February left their jobs and are not looking for other jobs.  Retired?  Disabled?  Taking a temporary break from employment?  As mentioned above, we really don't know, but we do know that they had a job in February and now they aren't even looking for work.  Despair?  If they aren't looking for work?  Not likely, as they were working last month!

Meanwhile, this group is offset by 3,724,000 people who were not in the labor force in February who looked and found jobs.  We have 480,000 MORE people "net" who were employed in February but are now not in the labor force.

Meanwhile, 2,745,000 people who were unemployed (actively looking for work) in February 2013 stopped searching for work for some reason, perhaps including despair, but we don't know that for sure.  This group was offset by 2,685,000 people who were not in the labor force in February but started looking for work (and thus became officially unemployed) in March.  So we actually had 60,000 fewer people in the labor force and looking for work in March than we had people not in the labor force who started to look for work.

What's the bottom line with this "flows" stuff?
The bottom line of "flows" is that the biggest increase in people "not in the labor force" came from people leaving EMPLOYMENT, NOT from people giving up job searches for whatever reason, including despair.

The Arithmetic of 663,000 Additional People Who Are "Not in the Labor Force":


  • 480,000 people left employment and are NOT looking for work.
  • 60,000 people who were looking for work STOPPED looking for work.
  • 124,000 people who joined the "civilian non-institutional population 16+", mostly young people turning 16, (315,000MINUS the number of people who died, went into the military, were institutionalized, or otherwise left the "civilian non-institutional population 16+" (191,000).
  • Those numbers do equal 664,000.   

More information about people "Not in the Labor Force" and the Labor Participation Rate HERE.
The numbers for this article were taken primarily from these two Bureau of Labor Statistics charts:  Persons not in the labor force by desire and availability for work and Employment of the civilian non-institutional population 16 -24 years of age.



9 comments:

  1. WOW .. talk about a spin on numbers .. I WON'T even go into the obviouse issues here.. But let me just say . the someone WHO WANTS A JOB and hasn't looked in a YEAR really DOESN'T want a job OR there JUST AREN'T ANY JOBS.. .. and to say people DON'T WANT TO WORK. so we won't 'count' them really cuz they don't want to work.. well that would be 98% of the workforce out there that DOESN'T want to work.
    and HOW about that awesome statement:
    First, we have no idea WHY most people are not in the labor force.....
    Okay umm let's try CUZ THEY LOST THERE JOBS thats why they are NOT in the labor force. they LOST JOBS companies laied off 1000's of employees. BIG computer companies. etc.. they can't FIND a job. that is WHY they are NOT working..
    Now I realilze you are an Obama supporter. and Democrate. But don't you think all these SKEWED numbers to make up a report that WORKS for you.. sure there acurate to a point. but missing details. that you can't fill in. LIke the 100's of thousands of people who are unemployeed and aren't recieving benifets anymore cuz theirs Ran out. and aren't being tracked . NO ONE has that number. and therfore ALL information is INCOMPLETE without those numbers which would/could change the entire schematics of your information.. making most of it Moot without the correct number of folks unemployeed.. all I can tell you is that I PERSONALLY KNOW more poeple OUT OF work since 2009 and STILL out of work. finding part time side work here and there for a few weeks/months at a time.. this is 2013 and there still out of work. Obama has had 5 years to fix the economy and it is NOT FIXED.. BUT he has managed to damn near DOUBLE the DEBT of this country.
    He's MORE concerned with IMMIGRATION then finding american's jobs and working on the economy..

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    1. Do you know how to read charts and graphs? If so, please tell me whether or not the people who are not in the labor force by and large want a job and what the biggest slice of the pie represents. If you can tell me that, I'll address the rest of your questions.

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  2. Molly, I'm afraid that you are still putting the rose colored spin on those "not in the labor force".

    I can't post my own chart here, but you can look at one yourself .... and that would be the labor participation rate graph. It shows a sharp decline since the beginning of the Obama presidency (actually started late in the last year of Bush's term). You ask this poster above .... and it's not me by the way, .... do you know how to read charts, and do you know what the slices represent? Don't know about him/her, but I can read, and I can also see clearly.

    First of all, the chart is smoke and mirrors. It would be like having a chart of all the people in America that don't have cancer. That would be a real big slice of that pie, and those that did have cancer would be a really small slice. So I ask you, will those that have cancer (the small slice), feel better about their impending death because there is a really big slice of America that they aren't in? Well the same with those looking and needing work. How many people retired, how many are in school is not relevant to them. And that gets us to the point I want to make.

    It's this: The labor participation fell off a cliff so to speak since the beginning of the recession, and you explain it away as a fluid number and it's only because more people are retiring and going back to school now. So weren't people retiring and going to school while Bush was president?

    I looked at the college enrollment statistics back to 2000, and they have been increasing each and every year through both the Bush and Obama administrations, and yet the labor participation rate stayed level, until the recession and Obama. You have a big 55+ area of the chart, so I went back 55 years to 1958. Well when I looked at births in America, the rate stayed virtually the same through all of the 50s decade. Between 1950 and 1960 the birth rate never wavered more than 1 birth per thousand, and stayed between 24/25 births per thousand of population. And yet you say more people are retiring, where did they come from?

    So I have to ask myself, and you should as well ...... why? Honestly Molly, I cannot think of one reason that more people would want to go to school or want to retire now than when Bush was president, when the numbers show no difference in the demographics (college age or retiring age U.S. population), except for this reason, because they cannot find a job, or a good paying job, or a full time job. Small fluctuations or gradual fluctuations are expected in the labor participation rate and would be explained by changing demographics, but a sharp decline must be caused by other factors, and I believe that to be this 4 year long continuing weak job environment.

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    1. "First of all, the chart is smoke and mirrors. It would be like having a chart of all the people in America that don't have cancer. That would be a real big slice of that pie, and those that did have cancer would be a really small slice. So I ask you, will those that have cancer (the small slice), feel better about their impending death because there is a really big slice of America that they aren't in? Well the same with those looking and needing work. How many people retired, how many are in school is not relevant to them. And that gets us to the point I want to make."

      I really don't think you understand what this chart is showing. I would suggest you go back to the top and read through the whole article again.

      I cannot for the life of me understand your comparison to a chart of people getting cancer. I have read dozens of reports and complaints over the past few months about how horrible it is that people are "not in the labor force" and that the number of people "not in the labor force" is increasing.

      What I have done here is simply to break down that big chunk of people who are not in the labor force. What that isn't obvious to you is unclear. No smoke and mirrors, mere numbers. This chart does not include the unemployed... the people who are looking for work. What the chart does show is that the "want a job" (but not looking for work) crowd is a miniscule part of the "not in the labor force" population. And of that population, the number of people who actually looked for work in the past year is even slimmer!

      People have no choice as to whether or not they get cancer. People have complete choice as to whether or not they are in the labor force. Look for work, in the labor force. Don't look for work, not in the labor force. No comparison with cancer in any size,shape, or form.

      You have mentioned many other things, not sure if I should waste my time replying to someone who doesn't seem to have read this article.

      So.... if you are serious, please come back and answer this one question:

      What is the difference between people who are "unemployed" and people who merely "want a job"? If you get that right, then maybe we can have a conversation.

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    2. Molly Molly, that's just a little bit pompous of you to require a test in order to have a conversation with you, don't you think? But then again it is your website.

      It is you that is making the assumption of why somebody is unemployed and why somebody merely wants a job. The reason that somebody wants a job and why somebody is unemployed and wants a job changes as time goes by. I will have to make my own guesses, as do you as to why? I would assume that there might be many that had a decent job, became unemployed, could not find a job commensurate with their experience and abilities, and then after a time decided to go back to school to further their education or learn a new skill. Also I would assume that there might be quite a few that after almost a full lifetime of work, and being in the 55 to 65 year old age bracket lost their jobs due to the recession with the massive job losses. Did they want a job ..... most likely, but perhaps after looking for a year or so and not finding anything fulfilling, meaningful, with a decent paycheck, retirement, though not on the persons mind before the job loss, now became an option taken. What category were they in then and now Molly? It changed didn't it?

      I would read the other comment I made on the May 5th update on your site titled "What was the unemployment rate when Obama took office, (March 2013 update).

      In that comment I took on the "why" people are unemployed, why people are not looking for work. Read that and then answer, why is the labor participation rate so different now than when Bush was president. If you can answer why, then maybe we can have a conversation.

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    3. Truth Guy, I don't want to discuss things with someone who doesn't know what they are talking about. If the person understands or wants to look up whatever the concept is, well, then perhaps we have room for a conversation.

      My question to you was actually a more technical question. The BLS has a specific definition of "unemployed", a definition that is about the same in all developed countries, and a definition that is understood by labor economists.

      I'll have to finish this tomorrow.

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    4. Part 1

      I have read the BLS definitions and explanations of the meanings and methods of determining Labor Force and Employed and Unemployed more than once, and went back and re read parts again so that I qualify to have a discussion with you, hope I pass my test.
      Rather than get into the technical details of what questions are asked to whom and who might be included and who left out of the employed and unemployed data that is compiled to get to their monthly published statistics, let me just say I get it, I understand OK? And I also understand that the labor force includes retirees and stay at home moms and dads, I get it all. But it is exactly because I get it all that I believe something is amiss. I’m not a conspiracy theory nut, but I have a critical eye and an inquisitive mind and want to understand and dissect what I am fed statistically by any public or private agency.
      So let’s get back to my comments regarding the “why” of the Labor Participation and employment/unemployment rates. You make the comment that I am unknowledgeable about these government statistics and so then can discount what I have to say. I on the other hand believe my comments and statistics about the why are quite valid and you have not addressed or answered them. I will ask again; since statistics show that neither college enrollment nor people reaching retirement age changed statistically over the Bush/Obama presidency’s, how do you account for the rapid drop in the Labor Participation Rate that started a hard fall in 2008 without any meaningfully recovery? In the past you said that more people are going to school and more people are retiring ….. Statistics don’t show why, and changing demographics does not explain it. According to census estimates, at the end of 2008 the U.S. population was about 305,500,000 million people. As of today the estimate is 315,800,000. That’s an increase in our population of about 10,300,000 people since Obama became president. Now one would think that everything being balanced, 10 million in population growth under Obama would have about the same demographics as the 20 million in population growth under George Bush (Bush 8 years vs. Obama 4 years), and would include those that immigrated and became part of the labor force, those that turned 16 and were then counted in the statistics, about the same number retiring (we already went over the aging demographics and they haven’t changed), everything being equal we would expect the labor force to continue its natural progression, whatever that was by the way, up down sideways, nothing abrupt, just continuing, even slowing or speeding is OK, the only thing we wouldn’t expect is a complete stop …. But that is almost what happened. We are unable to adequately account for 10 million new Americans since Obama became president ….. Where did they go?

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  3. Part 2

    When Bush became president in January 2001 there were 285,000,000 people in America, at the end of his presidency and when Obama took over there were 305,000,000, a 20,000,000 person increase. After Obama's first term there were an additional 10,300,000 more people which is what we would expect since population growth is fairly steady. Bush 8 years equals 20 million in population growth, Obama 4 years equals 10 million in population growth. When Bush became president in January 2001 there were also 143,800,000 people in the labor force. At the end of his tenure in January 2009 there were 154,232,000 in the force, an increase of 10,400,000 people.

    So under Bush we had about 20 million in population growth and that equaled about 10 million new people in the labor force, and we would expect that to remain fairly constant for population growth vs. labor growth since the demographics have not changed over the past 12 years. But that’s not at all what we find. One would expect to see with 10,500,000 new people in our population, upwards of 5 million new people in the labor force, the same 50% labor force vs. population growth that we had under Bush. But as of April 2013 the Labor Force was 155,238,000, only 1 million more than January 2009 when Obama took the helm. Where are the 4 million missing people that we would expect to see in the labor force? And that Molly is my “why” question. What changed to make at least 4 million more people not be counted? Sure makes the U-3 number look better, but where did they go?

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  4. This is true! I encourage anyone to go to bls.gov and you will find this information. It is not in the federal governments best interest to lie about this sort of information. The problem when politicians bring up statistics, and say that 90 million or more of Americans don't have jobs, they are telling the truth. having said that it is most definitely a partial truth. The civilian non institutional population includes people of sixteen years of age and up. This is what these statistics tend to count, people who could legally work if so desired. An eighty five year old man could work if he wanted to. Most do not and there is not anything wrong with that, people go to school, people retire, people are stay at home mothers or fathers, and then there are another twenty to twenty five million who probably should be working and most want to be working. But that is the problem, politicians should be talking about that fraction of people, rather than this outrageous and horrifyingly gargantuan ninety million people. cyclical unemployment is a problem in this country and it should be addressed, having said that some unemployment such as structural or frictional unemployment are completely natural, meaning that sometimes people quit there jobs and find new ones. Very few people work every week from the age of sixteen until the day they die. Even a healthy economy will have unemployment hovering around three or four percent. This means that even if the economy where healthy still about twelve million people will be unemployed. I encourage people who are arguing against the facts in this blog to do some independent studies on nonpartisan websites and you will find that unemployment is an issue in this country but not as much as some would have you believe.

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