San Francisco Fed: ease of finding a new job is driving improved labor force participation
San Francisco Fed: ease of finding a new job is driving improved labor force participation
This is a surprising result that is worth noting: the San Francisco Fed found that the increase in prime age labor force participation in the past five years has not been due to new people being drawn into the labor force, but rather by a very large decrease in people leaving it:
[Note: keep in mind that prior to the early 1990s, both inflows and outflows are increasing due to the secular trend of women entering the workforce.]
Why is this surprising? Because you would think that increased wages would draw people on the sidelines into the workforce. This is something I’ve looked at a few times in the past several years, and the pattern has been clear:
1. The unemployment rate declines
2. Once the unemployment rate declines enough, the decline in labor force participation decelerates, but nevertheless continues.
3. Average hourly wage growth starts to improve.
4. Labor force participation starts to increase.
Here’s a graph showing this relationship since 1994:
The San Francisco Fed says that the reason for the big decline in outflows has been the ease of finding a new job, although that appears to be speculation. It might be that improved wage growth is something that is noticeable to people already in the labor force, rather than those presently outside of it.
Anyway, a counter-intuitive result worth noting.
All my life I was told the best time to get a new job is while you still have the old one. Still true, apparently.
When the red and green lines converge, they then one of those blue bars appear. After the blue bar appears, the blue line drops permanently lower.
‘We would like to have thinner blue bars happening more often so we can set the blue line in a more timely fashion.. If we did that, the velocity equations would be more accurate yielding better planning accuracy.
Your forgetting the Boomer withdrawal like they all do. It just wasn’t women, it was men AND women from the biggest demographic surge since the early 1900’s. Retirements is a job creation piece of profit destruction. It isn’t created by growth, it is created by loss of skill. The myth there is a labor shortage is indeed, a myth. There is no labor shortage and no, full employment was not reached last year as things have leveled off this year.
The U-series was built for a flat LFPR. Both the 70’s and 80’s had overly high U-series results despite them being lower in a 0 population growth forumla’s. Likewise, the mid-00’s to the mid-20’s will have unemployment raised from the baseline. It really should be a a large undertaking by a bold President to completely revise all unemployment since 1948.
Bert,
It is a percentage of people 25 to 54 years of age. Not directly related to Boomers.
Arne:
I believe you are referring to Prime Age PR or anyone under 55. Your interpretation is correct.
I don’t think these data reveal anything about people who are underemployed finding more suitable employment or people who choose a partially employed lifestyle finding it easier to move around, or other aspects of a hot job market I have not thought of.
Yes and the that version of the LFP is what I meant. In 1999 the Baby Boomers were at their earnings peak and it showed. Now Gen X is at their earnings peak………and its shows.
In the 50’s: full employment was 4.5%
By the mid-60’s it was 4%
By the late 70’s it was 4.5%
By the late 70’s it was 5.0%
By the mid-naughts it was probably 4.6-7% down to 4.5% by decade’s end
By 2019, it is probably 3.5%.
There is no fixed arrangement. But the telltale demographic issues must not be forgotten. They drive the machine.
Correction, in the 50’s it was 4.0%