Older workers working longer; labor-force participation falling
The BLS released its employment and labor force projections for the period 2008-2018. The report highlights a more diverse and slower growing labor force stemming from a falling labor-force participation rate. Some headline findings of the report are (bold font by yours truly):
Total employment is projected to increase by 15.3 million, or 10.1 percent, during the 2008-18 period, the U.S. Bureau of Labor Statistics reported today. The projections show an aging and more racially and ethnically diverse labor force, and employment growth in service-providing industries.
…and…
Projected employment growth is concentrated in the service-providing sector, continuing a long-term shift from the goods-producing sector of the economy. From 2008 to 2018, service-providing industries are projected to add 14.6 million jobs, or 96 percent of the increase in total employment. The 2 industry sectors expected to have the largest employment growth are professional and business services (4.2 million) and health care and social assistance (4.0 million).
…and…
The largest decline among the detailed industries is expected to be in department stores, with a loss of 159,000 jobs, followed by manufacturers of semiconductors (-146,000) and motor vehicle parts (-101,000).
…and more…
Occupations that usually require a postsecondary degree or award are expected to account for nearly half of all new jobs from 2008 to 2018 and one-third of total job openings. Among the education and training categories, the fastest growth will occur in occupations requiring an associate degree.
The last part is very interesting. According to Table 9 of the employment projections, the growth rates of jobs requiring an associate degree or higher are generally in the double digits. In order to work in a top 10 wage and salary growth industries, one must attain a higher degree.
That little fact explains the projected trend in labor-force participation among those aged 16-24 years: down.
The chart illustrates the BLS’ projection of the labor-force participation rate (LFPR) by age group (Table 3.3). The LFPR is the percentage of the population that is either working or seeking employment. There are two important points here.
First, the 16-24 LFPR is expected to fall another 4-points to 54.5% by 2018. This furthers a downward trend that has been underway for some time.
Second, the population is growing older, but that is not the full LFPR story: older workers are working longer. The LFPR for those aged 65 and older is expected to jump 33% to 22.4% by 2018. This trend has emerged more recently, where just one decade ago the LFPR went essentially unchanged from the ten years prior to that.
In spite of their working longer, and with the downward trend in the 16-24 LFPR, the growing baby-boomer population (individuals born 1946-1964) is expected to drag the aggregate LFPR a point-and-a-half to 64.5% by 2018 (the aggregate LFPR is an average of all age groups).
It should be noted that this is a long-term projection. Therefore, the 2007-2009 recession affects primarily the rates of growth toward the long-run values rather than the levels of employment and the labor force per se. According to the forecast, the unemployment rate is 5.1% by 2018, and the average annual rate of GDP growth is 2.4% (slower productivity growth is expected to drag GDP growth).
Rebecca Wilder
Rebecca:
Hi, I see you are touching upon a topic of mine and Guerby’s . . . Participation Rate.
http://js-kit.com/blob/UC6HuyF8MNVXSWMvQH4p_M.png
Can you elaborate on this a tad: “Therefore, the 2007-2009 recession affects primarily the rates of growth toward the long-run values rather than the levels of employment and the labor force per se.”
What I find interesting is a decreased Participation Rate in light of a continued birth replacement (2.03) in the US. At this rate, the population should not shrink which is a plus as long as there is continued job growth which is questionable.
Rebecca,
The 2 industry sectors expected to have the largest employment growth are professional and business services (4.2 million) and health care and social assistance (4.0 million).
Put another way, employment growth will be in nontradeable goods sectors, which suggests we might have to sell a lot of assets in order to pay for imports.
2slugs,
I can’t remember who said it, but something along the lines of the following comes to mind: “we can’t grow our way to prosperity if we’re all doing surgery on each other.”
Could the down trend in the 16-24 yrolds have something to do with the # of years spent getting a degree? Those students working parttime would trend down the fulltime equivalents until they actually graduate. With the cost of a semester going up at way more than the cost of living, students will be priced out ot the market.
nice of you to report on this.
You are doing very good analysis.
I also wondered how many of the older people working, have some of the younger people living at home? “Home is where, when you have to go there, they have to take you in.”
We’re going through a slow series of collapses of different areas of middle-class wealth. My family (mom, dad, five kids) was a fairly well-to-do upper middle class bunch. Three of us are college educated professionals, the other two skilled technicians, but these days there’s nothing you would describe as wealth to split among us.
But as we five kids enter our retirement years, there will be no inheritance awaiting us. The so-called “death tax” has actually been enacted on us already, with our inheritances being used up to pay for health care, raise grandchildren, and otherwise make up for flat or falling income levels and rising core expenses. The jaunty bumper sticker “I’m Spending My Kids’ Inheritance” has gone from being a joke to a grim truth.
As my mother’s executor, I won’t be passing around slices of an estate – there isn’t one. I imagine we’ll distribute photos and nick-nacks, and chip in to pay for the funeral. Yet, we are among the prosperous ones.
Noni
I also wondered how many of the older people working, have some of the younger people living at home? “Home is where, when you have to go there, they have to take you in.”
We’re going through a slow series of collapses of different areas of middle-class wealth. My family (mom, dad, five kids) was a fairly well-to-do upper middle class bunch. Three of us are college educated professionals, the other two skilled technicians, but these days there’s nothing you would describe as wealth to split among us.
But as we five kids enter our retirement years, there will be no inheritance awaiting us. The so-called “death tax” has actually been enacted on us already, with our inheritances being used up to pay for health care, raise grandchildren, and otherwise make up for flat or falling income levels and rising core expenses. The jaunty bumper sticker “I’m Spending My Kids’ Inheritance” has gone from being a joke to a grim truth.
As my mother’s executor, I won’t be passing around slices of an estate – there isn’t one. I imagine we’ll distribute photos and nick-nacks, and chip in to pay for the funeral. Yet, we are among the prosperous ones.
Noni
Hi run75441,
I thought of you when I was writing this – I am aware of your reporting on the participation rate. To expand on my comment, the BLS assumes that the economy will be at full employment (5.1% unemployment rate with roughly 167 million jobs) based on population dynamics – a long run projection that remains intact despite the recession. Therefore, base effects imply a quicker growth rate of employment to the long-run level than had the recession not occurred.
However, the recession can alter the composition of total employment in so much as the recession changes the composition of GDP (consumption, government spending, etc.). For example, the BLS assumes that the consumption share remains intact (70.2% by 2018), while the export share rises from 13% to 14% of nominal GDP by 2018. You can see their economic assumptions at the bottom of the webpage here (although they really are a bit hazy on the details of their, rather Macroeconomic Advisers’, forecasting model).
What I struggled with is offering a rational for the sharp increase in the older populations’ LFPR – improved health? My mother (I was visiting for Christmas) suggested that it is more common for older people to take part-time employment during retirement. According to both the establishment and household surveys, that would be “employed”. Seen anything?
Best and Happy New Year! Rebecca
Hi run75441,
I thought of you when I was writing this – I am aware of your reporting on the participation rate. To expand on my comment, the BLS assumes that the economy will be at full employment (5.1% unemployment rate with roughly 167 million jobs) based on population dynamics – a long run projection that remains intact despite the recession. Therefore, base effects imply a quicker growth rate of employment to the long-run level than had the recession not occurred.
However, the recession can alter the composition of total employment in so much as the recession changes the composition of GDP (consumption, government spending, etc.). For example, the BLS assumes that the consumption share remains intact (70.2% by 2018), while the export share rises from 13% to 14% of nominal GDP by 2018. You can see their economic assumptions at the bottom of the webpage here (although they really are a bit hazy on the details of their, rather Macroeconomic Advisers’, forecasting model).
What I struggled with is offering a rational for the sharp increase in the older populations’ LFPR – improved health? My mother (I was visiting for Christmas) suggested that it is more common for older people to take part-time employment during retirement. According to both the establishment and household surveys, that would be “employed”. Seen anything?
Best and Happy New Year! Rebecca
2slugs,
You bring up a good point. In replying to run 75441 above, I looked at the composition of GDP in 2018. The consumption share remains unchanged (70.5% in 2008 vs.70.2% in 2018) – where’s the rebalancing of global current account imbalances? The BLS is essentially forecasting that China and Japan will buy US assets over the next 10 years in order to fuel US import demand. You know, I would really like to see the assumptions of their the forecasting model – but unfortunately, that is proprietary information since they use Macroeconomic Advisers’ model.
Rebecca
Makes for an interesting graph and main post.