Reclaiming Common Sense

The August Jobs Report, or Employment Situation Report, was released the first Friday of September. There is considerable data to analyze. So far this column has produced the following articles:

  There have been some urban legends floating around the news lately. One of the urban legends is a record low teen unemployment rate. Last month this column published an article that explained that the teen unemployment rate is so low because teen participation is at, or near, historic lows. Another economic urban legend is that retiring Baby Boomers have been bringing down the national workforce participation rate. This column has written numerous articles on the 'Red, Gray, and Blue," and our aging workforce. Some age groups have been over-participating and some age groups have been under-participating. What happened during August?

We recorded record August levels of employment in almost all age groups. Teen workers are down from pre-recession levels of over 6 million workers to 5.25 million workers. We also have fewer workers between the ages of 45-49 and 50-54 years of age than we had during 2006. We have more workers over the age of 55 working this August than any August going back to 2005.

What we have is a failure to participate - and some over participation. There is a famous line from "Cool Hand Luke" that says "What we have here is a failure to communicate." Many months ago I published an article where I said that we had a "failure to participate," as a play on words. This column has proposed a measure of unemployment called U-7. This is a relative form of unemployment comparing similar unemployment rates with differing participation rates and similar participation rates with differing unemployment rates. This month we had a non-seasonally adjusted participation rate of 62.74% and a NSA U-3 unemployment rate of 3.89%. The same data was 66.69% and 3.61% during October of 2001. The 3.95% difference in participation rate makes more difference in the unemployment rate than just  the 0.28% in U-3 unemployment. What we have an effective unemployment rate that is much higher than is being reported. If we had the same participation rate as we did during August of 1982, 1994, 2002, or 2010 the overall effective unemployment rate would between 7.97% and 12.52%. It is not under 4%.


We have four age groups over the age of 60 over-participating.  Even though we have record, or near record, levels of unemployment for those over the age of 60 we also have record, or near record, levels of employment for those same age groups.  This means that we have "negative unemployment" for those over the age of 60. We also have "negative unemployment" for those 30-34 years of age.


Our workforce is aging. Older workers are not dragging down participation. Younger workers are pulling down the participation rate. Keep this in mind when the September Jobs Report is released September 7th.


It's the economy.

Unemployment is near record lows, except for those over 60. Unemployment is well off the peak August Unemployment levels of August 2009 or August of 2010. There is a difference by age group. Younger workers peaked earlier than older workers. Younger workers are still experiencing a higher level of unemployment than older workers. There are roughly the same number of 20-24 year olds as there are 55-59 year olds, and there are half as many unemployed workers 55-59 years of age as there are unemployed workers 20-24 years of age. These are people who want to work who can't find work.

Participation was up August to August for most age groups.  The participation rate is down for teens this month as it was last month. Participation is highest among those 25 to 59 years of age. This is not breaking news. Participation is at an August High of 56.95% for those 60-64 years of age. Participation for those 65-69 years of age is the highest it has been since 2005. A study this past May by the Employee Benefit Research Institute shows the same thing.