Tag Archives: larbor market

Some finding of labor market changes

There are something interesting issues about labor market that I didn’t mentioned in my last post. Last time I talked about my guess about the reason why participation rate has been increasing in recent months. In fact, I believe those increases in participation were temporary, compares to the total downward trend of labor market participation.

From FRED, I found something more data related to this topic, below is the historical graph of different gender’s participation rates:

participation f m

We can see clearly that male’s participation rate has been declining ever since 1950, from nearly 90% to today’s below 70%. While the participation rate of female is different, is had been increasing before 2000 and stayed at 60% level until the 2008 recession. Ever since then the female participation rate started declining at the same rate as that for male, that is to say, these two lines are parallel after 2008. This is to say that same amount of female and male quitted job market over those years, so the recession has the same effect on male and female who gave up searching for jobs.

However, one remarkable thing is that female are suffered less from unemployment problem then male in this recession. The following graph depicts the unemployment rate for male and female: fredgraphWe can see that the line stands for women is always below the line for male, and the gap between two lines was maximized during the recession, so from this point of view, actually female workers were not suffered from employment discrimination in this case. Compares to male workers, female workers were far more likely to find and keep their jobs.

Beside that, I also want to refer to the actual impact of this recession on unemployment, from my point of view, this recession is far more destructive then we thought before.

As showed in the above two graphs, we can see that both female and male unemployment rate hit their historical apexes. And from the graph below: fredgdfraphthe unemployment period is extremely long compares to previous recessions. Before this recession, the average unemployment duration was about 15 weeks, however, the duration period of unemployment of 2008 recession hit astonishing 40 weeks. This is to say that in former recessions, people on average speed about 3-4 months to regain their jobs while now, they must spend almost a year to find a new job. I think this must be one main reason why we witnessed lower participation rate according to WSJ, pathetically, people lost faith in finding jobs so more chose to quit rather than stay.

So what about those who stayed in job market? Many of them who found a job actually got only a part-time instead of a full-time. From the graph below: p and fwe can see the different between 2008 recession and former recessions: in the past, the part-time unemployment rate would surpass the full-time unemployment rate, but this time we see a surging full-time unemployment rate and a very low part-time unemployment rate-far lower than full-time unemployment. So, even some people found a job, it more likely to be a part-time rather than a full-time, which suggest that he/she will earn less and has more risk to loss the job again. Also, this suggests getting jobs are not so profitable, no wonder people are quitting job market.

From the data, the labor market is far away from healthy, actually it is way more deformative than we expected.

Pros and cons in Larbor Market’s update for March

The labor market has its track on a gradual improvement. According to the Labor Department’s address yesterday, nonfarm payrolls rose a seasonally adjusted 192,000 in March and figures for the prior two months were revised up by a combined 37,000, and the unemployment rate stays at 6.7%. Even though many expected strongly a sharp upward trend in labor market early this year, the sheer number of new-added payrolls were not performed as so.

Ever since the recession start from 2008, the job supply was struck down to a low point where over 8.8 million positions were lost during the crisis. It is said that the private part jobs hit a level that surpass the apex before recession, while the government positions still remain well below the peak.

The moderate growth in jobs addressed by Fed chairwoman Janet Yellen as a cause for pausing the plan of raising interest rate. She seems to worry that those signs of softness in labor market imply the economy is still on its way toward positive. Her points suggest that the figure of unemployment rate cannot work as a mere criteria to evaluate market’s health.

Besides that, we already knew that there is a big reason behind the declination of unemployment rate, which is more and more jobless people are giving up on seeking new positions. Those people’s quit shrank the denominator and narrowed the unemployment rate. According to CNN, 347,000 people dropped out of the workforce last December and drag down the participation rate for men alone matched a record low dating back to 1948. If add up the share for women, the number still weaker than is was in 1978.

This March, only 63.2% of Americans 16 or older are participating in the labor force, a number even higher than past months. In fact, the participation rate has been declining since the year 2000, but the 2008 recession accelerate this progress. There is a substantial question raised after all this: Where Have All the Workers Gone?

One possible explanation given in this article in WSJ is that the expansionary monetary policy raises the risk of inflation and shrinks the paycheck, thus subdues their inspiration of job seeking activities. This could be the reason for those who earn few from hourly work but may be irrelevant for those who get high paid. However, I think people who quit pursuing a job must earn their lives somewhere else, in this case, I think investment in stock market could be the new source of income for them. The rumor about minimum wage policy could also play a role in this. Millions of American are working part-time. Those jobs could be affected severely by a bit raising in minimum wage. But mostly, I think the long-last softness in labor market caused more people to lost faith and choose to quit.

It’s been a long way to go before reaching the normal economy level and get unemployment rate back to its healthy situation. However, the participation problem is becoming severely and required for more attention.