Millennials are not lazy, but actually represent a very innovative and connected cloud-oriented phase of our new world order. According to the data they are needed in our thinly skilled labor pool, but more and more they have chosen to swim elsewhere. Unemployment has fallen to just 4.7% and our Central Bankers perceive inflation inducing full employment is at our doorstep. The Federal Reserve is very anxious to force interest rates higher and apply the brakes to our anemic but somehow overheating economy. However, free market interest rates are falling due to concern about a stalling economy. Central Banks from other countries are still pumping currency into space, but our supreme Fed is ignoring the marketplace consensus.
This has been an unusual economic recovery. How can unemployment be so low and workers so hard to find, yet wage inflation and consumption remain subdued? How can so many workers of all age groups be leaving the workforce with record Job Openings and cries of skilled worker shortages? Since the tech bubble peak in the late 1990’s, participation in the workforce has been in steep decline. It’s estimated that “real” unemployment would be closer to 10% today had all the people who left the labor force since the 2008 crash continued to look for work. “5% or 10% unemployment?” Depending upon your perspective we are at full employment near an economic peak or still in a recession waiting for liftoff. The truth may lie in between as we remain in one of the slowest economic recoveries in history marred by continual slack, but there is no “recession”.
There are many reasons given for this rapid secular drop in worker participation rates. Republicans would like to think it’s due to the terrible economy and lack of high paying jobs. The sharp growth in lower-paying Leisure and Hospitality jobs and elevated “real” U6 Unemployment of marginally attached workers at 9.7% support this claim. Democrats dismiss this as just an ongoing trend exacerbated by aging Boomers entering retirement. The next chart partially supports this thesis as the bulging Baby Boom portion of the population has just entered its normal retirement phase and those leaving the workforce have predictably soared higher. This age group will continue to rise into the 2020’s.
Both theories fail to make sense of the prime working age population that has been increasing its nominal worker exodus and rate of eligible workers opting out. There are brief periods of heightened economic boom when prime age laborers stay and seek jobs, but for decades, this group has been increasingly exiting the workforce with declining participation rates.
An explosion of welfare that has moved to new records during an expansion is one theory, but this only helps explain the last 7 years.
We are also told Millennials are leaving the workforce this decade to stay in college. The Great Recession of 2008-2009 convinced job seekers to delay getting a job and stay in school. Yet after 3 decades of uninterrupted growth in Graduate degrees it appears the college boom has stagnated ? There is certainly no surge of people piling up in college dorms waiting for the hangover to end.
It’s of interest that the age bracket in the mid 30’s to early 50’s has shown some exception to the trend over the medium term. This age segment will remain the most productive portion of wealth creators that is needed to counter the growing drain of consumption only boomers fading into their years of medicated leisure.
There is no simple reason that can explain the declining worker participation rate as it transcends gender, ethnicities, and virtually all age brackets equally. These reports reveal some of the myths and facts pertaining to this hot economic and political topic. There has been no comprehensive report that fully explains the diaspora of prime workers opting out of earning an income when skilled jobs are in very short supply. The well-forecasted worker shortage resulting from the baby boom senility phase has long favored incentives for strategic immigration, education and small business innovation that coordinates closely with the marketplace. We may have to wait for the next deep recession before such wisdom arrives. With the next economic cycle low due around 2020, we may not have to wait long.