The Pardu

The Pardu
Watchful eyes and ears feed the brain, thus nourishing the brain cells.

Tuesday, April 15, 2014

The St. Louis Fed (FRED) and Unemployment and Labor Force Participation

US Unemployment and Labor Force Participation Rates (LFP).  We often hear about both economic indicators.  Sadly, the indicators are very personal to the nation as they related to people not working. They are indicators that often stand as nominal markers without regard for the "how, who and why."

Whenever I find myself perplexed by economic indicators, I follow a habit of digging deeper. When it comes to issues of the economy and employment,  I focus my quest The St. Louis Federal Reserves Bank (AKA FRED) web site. 

Labor Participation is often used by Fox News and Right-wing talking heads as an indicator the nation is losing ground under the Obama Administration 's economic policy. The following FRED pieces seems to dispel such mantra. 

The Rise and Fall of Labor Force Participation in the U.S.

Labor market performance is at the heart of the debate over how to characterize the state of the U.S. economy, wrote Federal Reserve Bank of St. Louis President James Bullard in The Regional Economist. The unemployment rate has generally declined faster than many forecasters anticipated since it hit 10 percent in the fall of 2009, he noted. Along with this development, labor force participation (LFP) has declined substantially, as shown below.

There are two main interpretations of these data, Bullard said. According to the “bad omen” view, the recent declines in LFP are suggestive of a very weak labor market; this view discounts the signal coming from recent faster-than-expected declines in unemployment. According to the “demographics” view, recent declines in LFP are more benign; this view takes the signal coming from recent faster-than-expected declines in unemployment at face value. “Since the Federal Open Market Committee has explicitly tied monetary policy choices to labor market performance, it is of considerable importance which view is more nearly correct,” Bullard pointed out.
It is helpful to review the LFP data over several decades, which are shown in this chart:

The rise in LFP during the 1970s, 1980s and 1990s is often attributed in part to the maturing of the baby boomers, as well as to the increase in the number of women in the workforce. The decline since 2000 has often been attributed to the aging of the labor force. 
Bullard’s view, based on some of the available literature, is that carefully constructed empirical models of the trend in the U.S. LFP rate do a good job of explaining the data. In such models, certain demographic groups have a certain propensity to participate in the labor market. He said that these demographically based models suggest the current participation rate is not far from the predicted trend, which means, in turn, that the cyclical component in LFP is likely to be relatively small. 
“To the extent these models are correct, then, the observed unemployment rate remains as good an indicator of overall labor market health as it has been historically. In particular, the recent, relatively rapid declines in unemployment can be understood as representing an improving labor market. This is the judgment that should inform monetary policy going forward,” wrote Bullard. 
However, he noted that the literature is not completely satisfactory. Including more detailed household decision-making in economic models would allow for a better understanding of what motivates or deters participation in labor markets, Bullard said.
Additional Resources

The political Right has proven over-time "trickle-down" economics benefits the nation's wealthy while relegating vast swaths of the nation to "The Hunger Games" (tm) like reality. Under Bush, their policies eventually took the nation to the logical demise of all things "supply-side:" The precipice of another Great Depression.

Supply-Side Economics led to the following graphic and is at the core of all GOP policy.

Take look at how income disparity experienced a drastic incline tend for people how are considers Top 1% income earners.

If given the opportunity the Right will simply return the nation to austerity measures many economist have posited are detrimental to eventual economic recovery.

We visited GOP handling (administration and management of) of the economy and income disparity in an effort to provide a backdrop for FED data related to Labor Force Participation. My read indicates the LFP will continue to drop as Baby-Boomers move out of the workforce with no correlation infusion of people to level the declining numbers. frankly, as Jobs have declined over time, I am not certain the decline isn't a good thing. Let;s also fact the fact the GOP will do nothing to assist improving development of jobs.

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