US Employment Situation Not Looking Optimistic
Jobs is a hot topic these days. After the lockdowns due to COVID-19, many people were forced out of work. While the job situation improved somewhat since the trough, it is not the rosiest of outlooks.
However, this is not a recent situation. In fact, this is something that preceded COVID by a couple decades.
If we look at the following chart, we can see the US labor participation rate.
As we can see, things peaked in the late 1990s and traveled down from there. In short, over the past two decades we did a lousy job of creating jobs.
For those who are unaware, this metric is the number of people working along with those looking for work divided by the total number of working age people. It is considered a better barometer than the unemployment rate which underestimates the true state of unemployment since it omits those who have given up looking for work.
This is a definite warning sign. After the high in the late 1990s, the economy has struggled to keep up with job creation. Even during the run up to the Great Recession, the participation rate dropped.
We saw something similar coming out of the financial collapse, with much of the last decade spent on the downward path. The economy did head up the later part of the decade, only to be zapped by the lockdowns.
Since the bottom, there was a bounce. However, we see the trend starting up again the last couple months.
These are numbers not seen since the mid 1970s.
The Employment-Population ratio tells us the same story.
This is a different metric that is slightly askew. People who are considered over or under the working age, yet are engaged in work activity such as baby sitting or having a part time job are considered for working yet not counted in the population.
With so many people working later in life, since they cannot afford to fully retire, it makes sense why this chart would differ from the first one. As the Baby Boomers are forced to work longer due to a lack of savings, they will continue to grow for some time.
Many hone onto the unemployment rate as something that is telling. Unfortunately, it is a lousy barometer of what is taking place in the labor market. For this reason, we have to look beyond it to truly understand what is taking place.
As both of these charts reveal, it is not a pretty picture. The last decade plus was a time when, so we were told, the economy was doing well. If that is the case, someone forgot to tell the job market.
Of course, anyone who pays attention to automation would think this is not surprising. The threat of automation has existed for the last few decades. The blue collar, manufacturing jobs were decimated over the last 30 years. However, they are not the only ones affected.
The use of software is also working to affect the labor force. Jobs are being eliminated in the white collar arena also. With the advancement of AI, even in a non-intelligent state, we see the ability to handle many repetitive tasks quicker and more efficiently.
What is scary about this proposition is that we are just at the beginning stages of this phase. If the trend over the past 20 years was down, what will things look like over the next 10? There is no way the process is going to slow itself down.
We also have another variable in this equation that is going to radically alter the situation. The population is aging for the most part. The Baby Boomers are going to have to leave the workforce at some point. While they might have to hang in there financially, there simply comes a point for most people where we cannot do it anymore. The body, and perhaps the mind, are not up to the task.
This will place an added burden on society since people tend to cut back their spending as they age. When they are in retirement, their consumption simply decreases. Spread over millions of people, this is an enormous impact.
All of this pushes companies to be more efficient. Automation allows them to do that. While this is great for the bottom line, it is not the most beneficial for an economy, especially one that is 70% driven by the consumer.
At the end of the day, regardless of what is spouted by the media, the job situation in the United States is not looking too optimistic. There are long-term trends in place that were ignored which are only getting worse.
This will only be compounded if we do end up entering a recession which is bound to happen at some point.
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