Updated Note on Labor Participation

As constant readers know, I've been tracking the Labor Force Participation Rate for some time, as it seemed to be at odds with some fairly strong employment growth. The lack of correlation intrigued me: how do we tack on millions of jobs, only to see LPR sag, then see even more jobs created, and only see the trend flatline?

Today's (June 5, 2015) job report may have some answers. As I've noted before, the conventional wisdom of "baby boomers aging out of the workforce" was suspect. The data clearly showed that this generation was in no hurry to hang it up, and why not? Many are in great health, they're at the top of their game, and having a good income with the kids grown and the mortgage paid, is kind of.....fun. The issue, as I've charted before, was the opposite. The old weren't aging out, the young weren't aging IN to the workforce.

Well, that may have run it's course. The Bureau of Labor Statistics reported that 76% of the 280,000 jobs created last month went to the age 20-24 cohort. College grads are finding work, and that end of the labor spectrum may finally be holding up its end. This serves to realign the LPR in a more fitting context.

As I've noted, there is a small anomaly in the way the Labor Participation Rate is calculated by the BLS: it includes the age 16-19 cohort, which in my view, is an anachronism: High School graduation rates in this country are at all time high, and I would imagine college education metrics have also trended up, keeping this cohort from even considering a real job. So as of March of this year, the total LPR was calculated at 62.5%.

But the Bureau of Labor Statistics pegged the "20 and over" Participation Rate at 64.7% as of the same month. That's quite a jump up, and I think it's more telling since we're no longer counting people who aren't even thinking of joining the work force. Now look what's happened to the total LPR since March.

As noted before, the zenith of the Labor Participation Rate for the "20 and over" cohort was 68.5%, reached in January 2000. I contacted the Bureau of Labor Statistics, and the LPR for age 20 and over as of May 2015 stands at 64.9%. While its not a long trend, based on the velocity we see in the FRED chart above, we could eclipse the old record in less than two years. I would think its time to retire this often misunderstood complaint. And I'm beginning to wonder if the Fed is noticing this.

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FloMartin Securities, Inc.

Donald R. Davret, Investment Advisor Representative




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