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September Employment Report: 368k Exit Labor Pool

Posted by Larry Doyle on September 7, 2012 9:32 AM |

The September employment report was just released. Many analysts, economists, and political hacks will regurgitate the numbers 8.1 and 96k. These numbers represent respectively the current unemployment rate and the increase in non-farm payrolls.

While these numbers are of very real interest, they are not the most important number to gauge the health of our overall economy. What number is most important? 368k. What does that represent?

That number is the decrease in the overall labor force, that is, the number of people in our nation who literally have gotten so discouraged as to have given up even looking for work. With that decrease the overall labor force participation rate now stands at 63.5%, the lowest level going back approximately 30 years.

My description of a “walking pneumonia” economy remains firmly in place. If anything the pleurisy is only deepening.

There remains an enormous gap in level of employment based on level of education. Unemployment for those with college degrees remains below 5% as highlighted by the Bureau of Labor Statistics.

The economy as a whole continues to reflect major structural issues with the bulk of the pain being experienced by those with less than a high school diploma. That fact is clearly very disheartening yet not all that surprising. I do not envision this reality changing anytime soon.

When might America like to start having the discussion of urban education with its ~50% graduation rate, public teachers unions, and all of the major social issues highly correlated with single parent births? Anybody?

Regrettably few in Washington or our state capitols have the stomach for that discussion. Who is happy to highlight this structural issue? Take a listen to Matt Ferguson, CEO of CareerBuilder, who speaks volumes in this quick 2-minute Bloomberg clip.

Navigate accordingly.

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own. I am a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • LD

    How might Ben Bernanke respond to this morning’s report?

    Check this out

    Thanks to the reader who brought this to my attention.

    • coe

      fair analogy – the Fed to the Little Rascals!

  • Andrew

    Sure. With all the free money around, of course fewer people are working for it!

  • coe

    Don’t relent on your education/jobs/social troubles agenda LD…we need the courage to have a non-partisan civil debate about these fundamentals…long past the time for finger pointing – the time is now for corrective action…in the category of all politics is local, I can speak of at least one person who started a new job that I know! It’s a start…

  • fred

    LD, is it realistic to think any change of significance for the less privaledged can occur before the labor force participation rate dips below the expected eligible voter turnout percentage for a presidential election? Otherwise, what’s missing is the collective will of the majority of the people (regardless of means).

    Policy change must be implemented by the top. Can any change favoring the economically challenged emerge as long as special interests control election outcomes via fundraising? Won’t career politicians always choose? In this context, isn’t policy change initiative limited to campaign promises and political payback?

    A second term by President Obama could prove interesting. PO is a passionate, well spoken by-product of the past quarter century liberal adgenda who no longer has to worry about reelection.

    The irony of Obamas’ “fate of choice”, the Dems had control of both houses of Congress during his 1st term when he was more focused on re-election rather than socio-economic progress for the less privaledged.

    Opportunity wasted?

    • LD


      For the reasons you raise I think it is imperative that America has the discussion revolving around the stats and data I have highlighted. Our national situation is getting worse by leaps and bounds and will continue to do so given the current rates of single parent births.

      Carrots and sticks can both be applied to create the necessary changes because the status quo is nothing more than a real life road to perdition for our nation as a whole.

      Let’s have the national discussion and be brutally honest about the good and the bad.

      The conventions and the parties don’t dare touch the specifics of these topics so as not to run the risk of alienating a large subset of our population.

  • Peter S.

    America’s largest banks and non-financial institutions have been sitting on $3.6 trillion in cash for quite some time now. Why aren’t they spending some of the hoard creating the jobs that were shipped overseas this last decade? How come no has been screaming for them to re-invest in America!

    Or have they just been waiting, as millions suffer, for a more banker friendly enviornment?

    • LD


      I personally believe the banks continue to sit on a mountain of non-performing loans/debt and that the global financial system remains strapped for quality collateral. Hence, they will take the easy money provided by the Fed and purchase US Treasury debt and MBS which the Fed itself is purchasing and ride the Fed’s coattails.

    • Would you reinvest under the present circumstances?

      • LD


        When you ask whether I would reinvest, I assume you are inquiring whether I would commit funds to the market at current levels?

        Certainly not aggressively and not at this level.

        Companies are indicating that growth in earnings are declining. The global economy is likely poised to reenter a recession if it is not already in recession. The Fed will almost assuredly implement another round of QE but I believe the impact will merely be one of trying to hold the current market levels. Has QE had truly meaningful and positive impact on our economy? Certainly the QE to date has had some impact but it does not come without cost. What is the cost? It steals from future returns. To that point, I encourage you to review this article in today’s FT, The Long-Term Impact of Low Rates

        There are numerous evils to consider. For a start, the ultra low cost of borrowing removes any immediate incentive for governments to exercise fiscal discipline. Today’s trillion dollar deficits are relatively painless – for now, at least. Mr Bernanke admits that low rates are intended to inflate asset prices and promote consumption. Inflated asset prices result in lower future returns for investors. The S&P 500 is currently very overvalued. GMO models suggest that over the next seven years the real return from US stocks will be close to zero.

        Navigate accordingly.

  • Virginia

    The 86 Million Invisible Unemployed

    The unofficially unemployed

    Last year there were 86 million people who didn’t have a job and weren’t consistently looking for one, according to Labor Department data.

    Older people, ages 65 and over, account for more than a third. Young people between 16 and 24 make up another fifth. More than half don’t have a college degree and more than two thirds are white.

    Many of the teens and 20-somethings may be enrolled in either high school or college full-time. And many of the over 65 crowd are probably retired.

    But what about the other 36 million folks who fall in between?

    The truth is, the Labor Department simply doesn’t know why they’re not in the labor force. Many may be staying home with children or other relatives. Some may have gone back to school or retraining programs. Others could be disabled and unable to work, and some may have retired early.

    “Even in the best of times, there are millions of people who don’t want to work for a variety for reasons,” Hall said.
    But he suspects the number of “disengaged” Americans, like Everett, is higher than usual as a direct result of the recession.

    About six million people claim they want a job, even though they haven’t looked for one in the last four weeks. If they were to all start applying for work again, the unemployment rate would suddenly shoot up above 11%.

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