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Contrarian: US Job Market Recovery Is Much Stronger Than the March Numbers Suggest


Boomer retirements and a number of other overlooked statistics continue to suppress the true employement picture.

If a million baby boomers retired tomorrow, what would constitute a strong reading for April nonfarm payrolls?

That's an exaggerated version of the question Americans, economists, and policymakers need to ask in light of the complex labor picture we've gotten over the past several months. Should we be measuring job market strength by net gains in aggregate payrolls, an indicator of the increase in national labor output, or something else to reflect the surge in the number of Americans not in the labor force?

There remains way too much talk about how people are exiting the labor force because they are discouraged. Nouriel Roubini tweeted this view out on Friday. He's wrong.

According to the household survey, the number of Americans unemployed because they left (quit) their job rose by 86,000 in March to 1.117 million. People in the labor force don't quit their jobs if they don't think they can find another. Job leavers as a percentage of the total unemployed has skyrocketed in recent months, an indication of a rapidly improving job market if you're someone looking for work.

The number of Americans unemployed because they lost their jobs or completed temporary ones fell by 189,000 in March to 7.02 million, the lowest since December 2008. In the last two years, the number of people in this bucket has fallen by 2.5 million, and job losers as a percentage of the total unemployed is plunging.

What other interesting tidbits were lost in the jobs report beneath the "disappointing" headline number? The number of Americans unemployed for over 27 weeks fell by 118,000. The number unemployed between 15 and 26 weeks fell by 104,000. The real story, though, was about those not in the labor force and what they represent.

As the chart above shows, the number of Americans not in the labor force (red line) has been increasing since 2007. The blue line shows the number of Americans not in the labor force who want a job now – these are the discouraged workers Roubini tweeted about. However, for all intents and purposes, this group of people hasn't risen since September 2010, which at this point is 18 months ago. Since that month, the number of people not in the labor force has risen by 3.5 million, while the number not in the labor force who want a job now has only risen by 39,000. And in fact, in March, while the number not in the labor force rose by 333,000, the number not in the labor force and wanting work actually fell by 79,000.

What's going on? I wrote about it last month in It's Time to Worry About the Looming US Labor Shortage – the demographics of boomer retirements are having a huge impact on the job market data. In fact, in March the number of employed Americans age 55 and older fell by 47,000, while the number of employed Americans age 25 to 54 rose by 211,000 – given all the other stats I've mentioned, I'm pretty sure this is due to boomer retirements.

At the end of 1983, the unemployment rate was at 8.3%, but the prior six months in the job market had been very strong. It's the same story today. But look at how the prior five years played out then versus now.

Click to enlarge

The increase in the working age population wasn't all that different then versus now, but look at how it was apportioned – during that five-year period, 72% of the population increase went into the labor force, whereas in the past five years, only 14% has. Back then women were still entering the work force, and the youngest boomers were hitting their early 20s. Today women have joined men in gradually exiting the labor force, and boomers are retiring.

We're past the point where it's easy to give a 140-character summary of the job market. In 2008 and 2009, everything was terrible. In 2010 and the first half of 2011, "muddle through" was fairly accurate. At the moment, the picture is complex, with some sectors booming (tech, exports, restaurants and bars), some are growing at a fairly moderate clip (health care, education, and yes, even manufacturing), while others continue to struggle (construction, government, possibly retail). Cities and tech hubs are taking jobs from suburban and rural areas. Millennials are getting hired,and boomers are retiring. A generic comment like "the job market is [strong/sluggish/weak]" is meaningless.

If you're someone looking for work, I argue the job market is recovering strongly and should get even better over the coming months now that state/local job cuts have slowed to a trickle and construction spending looks poised to grow. Gallup's Daily US Job Creation Index hit a new post-recovery high over the weekend. For most of us, that's what really matters.

Twitter: @conorsen
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