Wednesday, January 8, 2020
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His favorite labor market theme in one chart
The December jobs report is due out in just two days.
The report is expected to show U.S. workers had another decent month to finish 2019, with economists estimating 160,000 were created last month while the unemployment rate holds at 3.5%.
The 50-year low in the unemployment rate and the length of this economic recovery has had the phrases “late cycle” and “full employment” on the tip of every investor’s tongue for years.
But often-overlooked data on labor force flows show how deeply the financial crisis scarred the U.S. labor market. And this data reveals where the current expansion continues to draw resources from: those who had been out of the workforce altogether.
Nick Bunker, an economist at the Indeed Hiring Lab, noted Tuesday that in November just under 75% of all employment gains accrued to those who had been outside the labor market.
“This recovery has steadily pulled workers back into the labor force and moves straight into employment from the sidelines have been an important part of that story,” Bunker said.
“The labor force participation rate of prime-age workers is still more than a percentage point below its peak back in 2000, suggesting that roughly 1.5 million prime-age workers are currently out of the labor force and could move into employment.”
Since hitting a generational low of 80.7% in August 2015, the labor force participation rate among prime-age workers has now hit a 10-year high of 82.8%. And as Bunker notes, this prime-age participation rate still indicates plenty of slack in this labor market remains.
Those who hadn’t been working or looking for work moving right into the ranks of the gainfully employed is a part of repairing this participation dynamic. And these flows also speak directly to one of the biggest labor market themes Federal Reserve Chair Jerome Powell has hit on during recent press conferences. Which is disenfranchised workers finally getting a look.
“People who live and work in low- and middle-income communities tell us that many who have struggled to find work are now finding new opportunities,” Powell said in December.
“Employment gains have been broad based across all racial and ethnic groups and all levels of education. These developments underscore for us the importance of sustaining the expansion so that the strong job market reaches more of those left behind.”
As this longest-ever economic expansion continues and economists and investors marvel at monthly headline job gains, data underneath the surface makes these gains more explicable.
And at least in part reveals why the Fed likely won’t be tempted to change its policy stance anytime soon.
What to watch today
8:15 a.m. ET: ADP employment change, December (160,000 expected, 67,000 in November)
4:15 p.m. ET: Bed Bath & Beyond (BBBY)
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