Friday, July 13, 2012

New Jobs and Labor Force Growth

To give the monthly employment report a little more precise context, I thought I’d look at trends in the growth of the labor force. The two sources I’ve consulted, both reports by the Bureau of Labor Statistics, present labor force growth projections, thus the age group 16 years old and older. The sources are here (Table 5) and here (Table 4). Very interesting.

Demography rules. What the data show is that the U.S. workforce is growing more slowly as the very large baby boom generation exits the workplace and is replaced by much smaller cohorts. I’ve taken the BLS demographic data and have expressed them as “new jobs needed every month to keep up with the growth of the workforce.” Looking at this requirement decade by decade, we get the following picture:



In the 1980s we had to add nearly 150,000 jobs every month just to keep up with new entrants to the workforce. Each succeeding decade, that minimum has dropped. At the present time, we need to add, on average 87,300 jobs just to keep afloat, as it were.

After a massive recession, such as the one we say in the 2008-2009 period—in which we lost 8.7 million jobs—only jobs above that minimum may be counted as recovery. Therefore, with relatively low levels of job creation, recovery is doubly slow. Here for instance are average monthly data to the period of recovery thus far, 2010-2012. Data for 2012 are based on six months’ results.

Year
New Entrants (Average)
per month
New Jobs Created
per month
Jobs assignable
to the “Recovery”
2010
87,300
78,300
-9,000
2011
87,300
158,800
71,500
2012
87,300
153,700
66,400

Based on these numbers, of total jobs added in the 2010-2012 period (3.8 million), only 1.1 million were actually genuine “recovery.” The rest were just keeping up with a growing labor force—however slowly it may be growing.

The slow-down in the growth of the labor force also means that fewer people are actively working and, by their taxes, supporting the total population: the young and the old. Looked at this way, things look more grim to me. And perhaps the reason why the economy is not spouting like a brand-new, feisty young fountain is because, well, it’s an old fountain and the piping is corroded.

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