By — Simone Pathe Simone Pathe Leave your feedback Share Copy URL https://www.pbs.org/newshour/nation/noisy-data-aside-the-big-question-from-augusts-jobs-report-is-whos-dropping-out-of-the-workforce Email Facebook Twitter LinkedIn Pinterest Tumblr Share on Facebook Share on Twitter Noisy data aside, the big question from August’s jobs report is who’s dropping out of the workforce? Nation Sep 5, 2014 11:31 AM EDT There’s at least one ray of sunshine breaking through an otherwise hazy August jobs report. The number of involuntary part-time workers — those who are working part-time, but wish they had a full-time job — decreased by about 200,000 people. That made our “Solman Scale U7” — a more inclusive alternative to the Bureau of Labor Statistics’ official unemployment rate — drop to 14.23 percent, exactly the same as it was in June. (A quick review of how we calculate the U7: We add the number of unemployed people, plus all the people who say they want a job, plus the involuntary part-timers and divide that numerator by the total of all the people who say they want a job, plus the civilian labor force). Part-timers have long been a focus of ours, especially since their ranks swelled in June. As we reported in our Labor Day broadcast segment, the number of involuntary part-time workers in America has increased by more than 50 percent since 2007. August’s decrease in part-timers would seem to offset their ballooning June numbers. But the headline numbers in Friday’s report are unimpressive: the economy added only 142,000 jobs, the lowest this year, and far below the expected 230,000. “Growth slips,” “hiring slows,” heralded the New York Times and Washington Post, respectively. Even the BLS press release noted the departure in nonfarm payrolls from “an average monthly gain of 212,000 over the prior 12 months.” Payrolls for June and July were also revised downward by a total of 28,000. Of course, as we’ve long pointed out on this page, one month’s data is not a reliable predictor of the job market, and the margin of error for the number of jobs added is plus or minus about 90,000 jobs. As the Brookings Institutions’ Justin Wolfers reminds us on Twitter this morning, there’s a lot that could still change. Here's the good news from today's jobs report: 1. These are noisy estimates 2. They'll probably be revised 3. It could have been worse. — Justin Wolfers (@JustinWolfers) September 5, 2014 The unemployment rate ticked down from 6.2 to 6.1 percent. Well, lower unemployment — that’s good news, right? Not always. In this case, it decreased because there were 268,000 more people not in the labor force. That means they’re not working and they’re not even looking for a job. The labor force participation rate slid back a tenth of a percentage point to where it had been earlier this year at 62.8 percent. So in August, as was the case in much of 2013, the unemployment rate fell because people dropped out of the workforce. The bigger question is, who are these people departing the workforce? There’s a good argument to be made, as Paul Solman has hypothesized on this page many times before, that many of them are baby boomers hitting retirement age and deciding to call it quits. That would explain why the workforce decreased even when the civilian population increased, as it does most months, by about 200,000. Here’s how Paul explained it last summer, when first floating the idea: “Ten thousand baby boomers turn 65 today” has become a demographic cliché (or meme, if you prefer). Barring a mass and age-selective plague, that means that 10,000 or so are also turning 66, their official Social Security retirement age. Many, if not most, baby boomers are retiring. And since 10,000 a day equals 300,000 a month, if two-thirds of them are hanging up their rock ‘n’ roll work shoes, Friday’s numbers would make sense: 200,000 or so retirees offsetting the 200,000 or so new working-age Americans. The more ominous story line, however, is, that some of these people dropping out of the workforce aren’t ready to retire — they still need work; they just can’t get it. In fact, baby boomers retiring, Georgetown professor Harry Holzer says, is only half of the explanation. The other half, he says, are nearly 4 million people below retirement age. Since the population is also rising among that demographic, Holzer says, “you would expect that labor force activity among those people would go up, just like their population’s going up.” But it’s not, and that’s where the really worry lies for the economy. “We still don’t know what their future plans are and why so many of them are leaving,” says Holzer. By — Simone Pathe Simone Pathe @sfpathe
There’s at least one ray of sunshine breaking through an otherwise hazy August jobs report. The number of involuntary part-time workers — those who are working part-time, but wish they had a full-time job — decreased by about 200,000 people. That made our “Solman Scale U7” — a more inclusive alternative to the Bureau of Labor Statistics’ official unemployment rate — drop to 14.23 percent, exactly the same as it was in June. (A quick review of how we calculate the U7: We add the number of unemployed people, plus all the people who say they want a job, plus the involuntary part-timers and divide that numerator by the total of all the people who say they want a job, plus the civilian labor force). Part-timers have long been a focus of ours, especially since their ranks swelled in June. As we reported in our Labor Day broadcast segment, the number of involuntary part-time workers in America has increased by more than 50 percent since 2007. August’s decrease in part-timers would seem to offset their ballooning June numbers. But the headline numbers in Friday’s report are unimpressive: the economy added only 142,000 jobs, the lowest this year, and far below the expected 230,000. “Growth slips,” “hiring slows,” heralded the New York Times and Washington Post, respectively. Even the BLS press release noted the departure in nonfarm payrolls from “an average monthly gain of 212,000 over the prior 12 months.” Payrolls for June and July were also revised downward by a total of 28,000. Of course, as we’ve long pointed out on this page, one month’s data is not a reliable predictor of the job market, and the margin of error for the number of jobs added is plus or minus about 90,000 jobs. As the Brookings Institutions’ Justin Wolfers reminds us on Twitter this morning, there’s a lot that could still change. Here's the good news from today's jobs report: 1. These are noisy estimates 2. They'll probably be revised 3. It could have been worse. — Justin Wolfers (@JustinWolfers) September 5, 2014 The unemployment rate ticked down from 6.2 to 6.1 percent. Well, lower unemployment — that’s good news, right? Not always. In this case, it decreased because there were 268,000 more people not in the labor force. That means they’re not working and they’re not even looking for a job. The labor force participation rate slid back a tenth of a percentage point to where it had been earlier this year at 62.8 percent. So in August, as was the case in much of 2013, the unemployment rate fell because people dropped out of the workforce. The bigger question is, who are these people departing the workforce? There’s a good argument to be made, as Paul Solman has hypothesized on this page many times before, that many of them are baby boomers hitting retirement age and deciding to call it quits. That would explain why the workforce decreased even when the civilian population increased, as it does most months, by about 200,000. Here’s how Paul explained it last summer, when first floating the idea: “Ten thousand baby boomers turn 65 today” has become a demographic cliché (or meme, if you prefer). Barring a mass and age-selective plague, that means that 10,000 or so are also turning 66, their official Social Security retirement age. Many, if not most, baby boomers are retiring. And since 10,000 a day equals 300,000 a month, if two-thirds of them are hanging up their rock ‘n’ roll work shoes, Friday’s numbers would make sense: 200,000 or so retirees offsetting the 200,000 or so new working-age Americans. The more ominous story line, however, is, that some of these people dropping out of the workforce aren’t ready to retire — they still need work; they just can’t get it. In fact, baby boomers retiring, Georgetown professor Harry Holzer says, is only half of the explanation. The other half, he says, are nearly 4 million people below retirement age. Since the population is also rising among that demographic, Holzer says, “you would expect that labor force activity among those people would go up, just like their population’s going up.” But it’s not, and that’s where the really worry lies for the economy. “We still don’t know what their future plans are and why so many of them are leaving,” says Holzer.