The April's Jobs Report: More A Story Of Giving Up Looking For Work

According to the Bureau of Labor Statistics, the unemployment rate dropped from 6.7% in March to 6.3% last month.  It did so by adding only 288,000 jobs.  Of course the relative math here, doesn't make a whole lot of sense. 

If you have a labor force of 156.2 million workers in March going into April and, you multiply that by the four tenths of a percent drop in the unemployment rate, you come up with 625,000.  That's how many workers would have had to actually find work in order for the unemployment rate to drop to 6.3%.  So, obviously, something else happened in April.

That something else is the fact that 806,000 workers simply dropped out of the labor force.  Of that number, 783,000 where considered to be discouraged workers; with the remaining  23,000 being actual retirees.  By definition, a discouraged worker is a person of working age; capable of work; wanting to work; but, in the frustration of not finding a job, has just given up looking.  Because of this, the Bureau of Labor Statistic no longer considers them part of the workforce and, as a result, they are the primary reason that the unemployment rate dropped so dramatically.  In other words, twice as many workers stopped looking for a job as those who found one. 

For those who would believe that baby boomers, who are retiring at a rate of 10,000 a day are responsible for the lowering of the workforce, the so-noted 23,000 retirees hardly squares with this false belief.  The reality is that we had a true unemployment rate of 12.3% in April when that month's 9.5 million discouraged workers are taken into account.  All told, we actually have 19.2 million unemployed Americans.  Not the published 9.7 million.  This is horrible.  Especially, considering the fact that we are closing in on a day when more people will have given up looking for work than there are those who are actively pursuing it.  This has not happened since the Great Depression.  This despite the fact that the recession ended nearly 5 years ago.

References:

April Employment Situation Report Overview: http://www.bls.gov/news.release/empsit.nr0.htm

Definition of Discouraged Worker: http://www.investopedia.com/terms/d/discouraged_worker.asp

April Employment Situation Report: Table A-15: Alternative Measures of Labor Underutilization: http://www.bls.gov/news.release/empsit.t15.htm

The Big Lie: Workforce Contractions Are Due To Baby Boomers Retiring.

It seems like, every time there's another one of these head-scratching and really questionable employment reports -- where the only reason for the unemployment rate falling is a shrinking workforce -- a bunch of talking-heads crawl out of the woodwork to justify the declines on the basis of a well-worn lie that 10,000 "Baby Boomers" are retiring every day.

This time around, the "Baby Boomer" spin is in defense of the December report where only 74,000 jobs were created; yet, the unemployment rate fell three-tenths of a percent to 6.7%.  A feat that could only have happened because, in addition to the 74,000 new jobs, 347,000 previously unemployed workers left the workforce; resulting in a net benefit of 421,000 jobs.  Which, by the way, is close to, but still well short of the 462,000, truly needed to lower the unemployment rate by three-tenths of a percent.

The 10,000 a day number is simply based on the fact that, during the Baby Boom years (1946-1964), a near average of 10,000 babies were born each day; starting with 7,700 babies being born per day in 1946 and rising to a high of 11,800 babies in 1961.  But, this number wrongly assumes that every "Baby Boomer" will live to retirement; or, that no "Boomer" will work beyond retirement; or, that, somehow, no one is standing in line to replace these retiring workers.

According to Life Expectancy Tables and Actuarial Life Tables, a person born in the Baby Boom years  had 29.5% probability of dying by age 65. Therefore, in reality, only about 7,000 workers a day are actually retiring; not 10,000. At the same time,  almost 11,000 youths per day, age 16 and older and born in the 1990's, should be entering the workforce.  This based on the fact that, since 1989, an average of more than 4 million babies per year were being born. What this means is that the workforce should be growing by a minimum 120,000 a month; not declining by 347,000 as in the December employment report.  On top of that, because this recovery has been the worst in history and because personal wealth (value of homes) has declined, many seniors are being forced to work well past retirement age.


References:

December Employment Report: http://www.bls.gov/news.release/empsit.toc.htm

Births Per Year: http://www.infoplease.com/ipa/A0005067.html

United States Life Tables And Actuarial Life Tables: 1939-1941, 1946: https://archive.org/details/unitedstateslife1940unse

Actuarial Life Tables 2009:  http://www.ssa.gov/oact/STATS/table4c6.html

Life Expectancy By Year: http://demog.berkeley.edu/~andrew/1918/figure2.html

January 2009 Employment Report: http://www.bls.gov/news.release/empsit.a.htm