It was jobs week for the markets last week. There was some excitement as the economy created many more jobs than expected. Some trends were thrown around about the number of consecutive months of job creation greater than 200,000 (eleven) and the most jobs created in a month since January 2009. I don’t pay much attention to the headline number because it doesn’t have the context I need to determine if the number is good or bad.
To make a judgment like that, we need to see what the is happening to the size of the labor force compared to the size of the population. In other words, I prefer to watch the Employed Percent of Population. I’ve tracked this for a few years on Analytical Road site. For the month of November, the ePOP dropped from 63.0% to 62.8%. Given the number of jobs created, this is a surprising result. I would have thought it would have increased since it has been at such a low level for awhile. But there was a clue something else was happening since the announcement from the Bureau of Labor Statistics (BLS) mentioned the unemployment rate remained at 5.8%.
Diving into the numbers, the increase in the number of jobs created didn’t translate into the Employment level as the number of employed people over the age of sixteen fell to 146,666 thousands in November from 147,936 thousands in October (I am using the non-seasonally adjusted numbers).
Let me make an aside about the number of unemployed people. In order to be classified as unemployed, a person needs to be actively looking for employment. So when the number of unemployed people drops to 8,630 thousands in November from 8,680 thousands in October, that may or may not be good. It could be the case that people have stopped looking for employment.
Okay, back to the employment level. The number of people employed is a subset of the number of people eligible to be employed. That number is titled the Civilian Labor Force. For November, the number in the Labor Force fell to 156,297 thousands from 156,616 thousands in October. At this point, let’s take the difference between the Labor Force and the Employment Level and divide by the Employment Level. This result is the non-seasonally adjusted unemployment rate, which held steady in November at 5.5%.
As the Employment Level is a subset of the Labor Force, so is the Labor Force a subset of the Population Level. For November, the Population Level rose to 248,844 thousands from 248,657 thousands in October. For employment purposes, the Population Level only includes people 16 years and older. The difference between the Labor Force and the Population Level divided by the Population Level is the Employed Percent of Population. The decrease in the Labor Force and the increase in the Population Level is how the rate went down in November.
Okay, let’s break down the components of the Population Level. There are two parts, one of which we already have — the Civilian Labor Force. To get the second part, take the difference between the Population Level and the Civilian Labor Force. The result of 92,547 thousands is an increase from the October level of 92,041 thousands. Since the Employed Percent of Population decreased, this trend result is expected.
Breaking down the numbers of people not in the Labor Force, we can look at three portions. The BLS also publishes the unadjusted number not in the Labor Force 65 years and over. In November, this number was 37,077 thousands, up from 36,912 thousands in October. While this is about 40% of the total not in the Labor Force, the increase of this subset is only 32.6% of the increase in the total.
For the second portion, I would prefer to look at the 16 to 20 year old category, but the BLS doesn’t have that. The closest we have is the 16 to 24 year old group. That will be sufficient. The unadjusted number not in the Labor Force for November was 17,594 thousands, up from 17,247 thousands in October. While this is only 19% of the total not in the Labor Force, the increase of this subset is 68.6% of the increase in the total.
The balance is the 25 to 64 year old group. This group isn’t listed from the BLS, but we can use subtraction to find it. The unadjusted number not in the Labor Force for November was 37,876 thousands, down slightly from 37,882 in October. This amount is 41% of the total not in the Labor Force. Since the number decreased, it took away about 1% of the increase in the total amount not in the Labor Force.
The conclusion to all of this is who is losing employment prospects. Earlier in the year, the news was about the number of people over the age of seventy staying employed at the expense of those between the ages of sixteen and twenty. When that story ran its cycle, attention turned away. It appears the story now is the decrease in the Employed Percent of Population is being borne by the youngest people in our economy. If the story then was the angst over this portion of our future economy, it should still hold. From my perspective, this tells me something about the underlying weakness in the labor market. There are two factors I need to see before I can say the labor market is doing well — the youngest need to see their numbers not in the Labor Force decreasing and the number of older people not in the Labor Force needs to continue to increase. Does that sound harsh? If the oldest aren’t working, then they have enough savings to get by. The graph on the Analytical Road site that shows the employed percent of women over the age of 65 is still increasing. There have been occasional stories about the concern of the savings rate of the baby boomers. It appears that may be happening now.