Recession Could Lead to Labor-Force Growth in 2009?

January 19, 2014 — Leave a comment

The U.S. labor force could rise considerably in 2009 and 2010. This means the number of people working and the number of people actively looking for work will increase. It means more people competing for jobs in the short term, adding to stress on U.S. job seekers. Increased competition also implies that the U.S. labor force will become more efficient as vacancies are filled by higher-caliber employees.

This scenario runs somewhat counter to recent trends. However, looking at previous forecasts in the light of the present situation does yield some surprising insights.

First, here’s what the data say today:

* The labor force is shrinking. U.S. labor force participation was 65% in January 2009 which was down slightly. This means 65% of the population who were legally old enough to work and younger than the retirement age were either working or seeking work.

* More people are on the periphery of the working world. About 2.1 million people were marginally attached to the labor force in January, about 400,000 more than 12 months earlier, according to the U.S. Bureau of Labor Statistics (BLS). “These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the [four] weeks preceding the survey,” the Bureau reported.

* Discouragement is growing. Among the marginally attached individuals, some 270,000 more workers were identified as “discouraged” than a year before, meaning they did not believe any work was available to them and had not looked for work in the four weeks leading up to the survey. There were 734,000 discouraged workers in the United States in January 2009.

Given these dismal statistics about some very discouraged people, how is it possible that the number of Americans participating in the labor force will stop moving down and instead start moving up? For answers, it becomes necessary to look at what people were forecasting before the downturn, when economic trends pointed upward toward more uninterrupted economic growth.

* Boom times were causing some young people to opt out of the work scene. In 2005 and 2006, during the height of the housing bubble and when employment rates were far better (around 4% during the last quarter of 2005), many young people were actually opting out of the labor force in the United States. If employment was readily available, why were these young people not looking for work?

Claudia Goldin, a Harvard University labor expert interviewed by THE FUTURIST in December 2006, observed that many young people were spending more time in school, getting extra degrees, and just living life, backpacking around the world, etc., before settling down into a steady job, marriage, and the sorts of adult commitments that require labor-force participation.

How has the story changed? The dropoff in easy credit (less money for students to pursue advanced degrees, lower credit-card limits on people without established credit) and worsening economic conditions for baby-boomer parents could force more of these young people into the labor force earlier than they would have wanted to go. This would cause the number of people actively looking for work to rise.

* More 50- and 60-somethings may realize they can’t afford to retire and put it off. Retirees in the United States may also return to the workforce in large numbers. Statistics from 2005 showed that one-third of Americans who retired went back to work two years later. In other words, even in times of economic growth and stability, many baby boomers and pre-baby boomers who had planned to retire but had not actually saved enough for retirement were forced back into the labor force unexpectedly. Now, many may opt to simply stay in their jobs.

In the next few months, a labor force jump means more people looking for work and more people who were going to retire hanging on to their jobs. A larger labor force also implies that job vacancies will go to the best possible job seekers and employers will reap the benefits. For anyone seeking work, however, that consolation may be meager.

– Patrick Tucker

References

Sources: Bureau of Labor Statistics, http://www.bls.gov. Claudia Goldin, Harvard University (interview, December 2006).

Originally published in THE FUTURIST, May-June, 2009

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