The oxymoron of the labor force when labor means not working

My Budget 360

This week we will be getting the employment numbers.  The unemployment rate is expected to stay steady or even drop which is comical given that we have 92 million Americans not working today and another 19 million that are fully unemployed.  Those not in the labor force continues to grow beyond the basic changes in demographics.  This topic rarely receives any coverage since those not working largely have no funds to back lobbying groups or to put ads out in the media.  Yet we can see this dissatisfaction when Americans are asked about their views on the economy.  The majority think the economy is doing poorly and this is expected given the underlying numbers.  You have young Americans going to college and many are coming out to low wage jobs and hefty student loans.  In the last 4 years alone we have added 12 million Americans to the not in the labor force category.  This measure is used to calculate the unemployment rate and given this group is not factored in, the unemployment rate looks much better than it truly is.  The oxymoron that we have is we have a labor force that is largely not doing labor.  

Labor force not working  

The biggest startling fact most Americans are unaware of is that one out of three Americans support the other two-thirds of the nation.  First, you have the massive 92 million not in the labor force.  Another 19 million are labeled as unemployed.  Then you have over 32 million working in government jobs.  When we look at the actual private sector workforce, we then begin to see that our employment numbers are not as great as many would like you to believe.

Take a look at these figures:


I love this graph since it breaks down the true numbers of the employment force.  Beyond the 92 million not in the labor force, we have 19 million that are simply unemployed.  This is usually the numbers we hear about when we turn on the news.  Yet we have many Americans now falling into transfer payment program like Social Security, Medicare, or disability payments that are big transfer payment programs.  These are pay-as-you-go type systems.  The bigger problems occur when you have a younger workforce that is earning less and is deeply in debt.

You can see that young Americans are taking on the brunt of this change but older Americans are also feeling it:


What this graph highlights is the new retirement model of never retiring.  The workforce is getting older as many Americans need to work to make up for a lack in retirement savings.  The numbers for younger Americans are not all that great.  Labor force participation has dropped including the 25 to 54 year old category range which is the prime working years for most adults.  For the younger groups, many are simply going into college at a time when we are seeing peak tuition costs.

Those not in the labor force has ballooned in the last four years.  In fact, we have added 12 million to this category in the last 4 years alone:

not in labor force

This growth rate far surpasses our population growth rate and also goes beyond accounting for the aging of the nation.  The labor force is largely counting many that aren’t even in the act of “labor” so seeing the unemployment rate factoring out so many people is deceptive.  In fact, according to metrics like the unemployment rate and stock market, we should all be partying in the streets of this grand recovery.  Yet what we have is an army of low wage workers and massive gains to a very small subset in our population.  In the end, we are seeing the continuation of a shrinking middle class and with elections coming up, the polls are going to be driven by anger and not by people feeling this as some sort of glorious recovery.  You can see above with the labor force figures, there is some funny math going on.

One thought on “The oxymoron of the labor force when labor means not working

  1. As JD often says, “Under the Communist model, if no one was working, then that would mean 0% unemployment.”

    Oh the insanity of Communism!

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