The February 2016 employment rates were released on Friday. It was a very good report. The participation rate increased to 62.7%. That is now right at the twelve-month moving average and an increase from January’s reading of 62.5%.
There are two parts of the report I watch closely. The narrative of the recovery has been that older people are staying employed longer or going back into the workforce because their savings isn’t enough to fund their retirement in this low interest rate environment. February was not a kind month to this story line. The participation rate for men and women between 16 and 24 years of age jumped to 53.7% from January’s rate of 52.9%. This was above February 2015’s rate of 53.6%.
Meanwhile, men over the age of 65 increased their participation rate to 23.6% from January’s rate of 22.9%. Women over the age of 65 maintained their participation rate of 15.6%.
Our calendar age may be increasing, but our activity level isn’t decreasing at the same pace as advances in health care can keep us active longer. I hear negative stories about how bad the savings rate was for the oldest section of the baby boom generation. Yet I do not consider it to be a bad thing they are staying in the workforce since it is a positive contribution they are making.
I also hear negative stories about how this increase in the participation rate was accomplished by low-wage jobs increasing at a quick pace. I think these are the same people who complained a year ago when the only jobs being created were very high skill jobs. The current broadening of the employment situation is a very good sign for the strength in the economy and should continue to push consumer based consumption higher in the coming months. I have resigned myself to the conclusion that some people are always critics and they are likely the ones who are not contributing to society.
There were a couple of other indicators that were released on Friday in addition to the employment report. The combination of these indicators caused the Atlanta Fed to raise its estimate of first quarter GDP to 2.2%. This is well above the fourth quarter second estimate of 1.0%. It is well past time to recognize there is a significant recovery happening in the US economy and we are leading the world in the recovery.