Jobs Report: The Declining Labor Participation Among White Men

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Posted: Apr 06, 2018 10:30 AM
Jobs Report: The Declining Labor Participation Among White Men

I’m predicting 200,000 jobs and wages +2.7% year-to-year.

While the heads will focus on total job creation and the pace of wage growth, the glaring fault line in the monthly jobs report has seen the absence of young workers, many of whom abandoned the labor force or never entered, particularly young men.

This crisis was addressed by Jamie Dimon, Chairman, and CEO of JP Morgan in his annual shareholder letter:

"Labor force participation – particularly among men aged 25-54 – dropped dramatically. An estimated 2 million Americans are currently addicted to opioids (in 2016, a staggering 42,000 Americans died because of opioid overdoses), and some studies show this is one of the major reasons why men aged 25-54 are permanently out of work.

Even worse, 70% of today’s youth (ages 17-24) are not eligible for military service, essentially due to a lack of proper education (basic reading and writing skills) or health issues (often obesity or diabetes).

Our schools are leaving too many behind. In some inner city schools, fewer than 60% of students graduate, and of those who do, a significant number are not prepared for employment. Additionally, many of our high schools, vocational schools and community colleges do not properly prepare today’s younger generation for the available professional-level jobs, many of which pay a multiple of the minimum wage."

Here are the numbers and trends:

Ages 16 to 19 Labor Force

  • Aug 1978: 9,903,000
  • Feb 2018: 6,048,000

Ages 16 to 19 Participation Rate

  • Aug 1978: 59.3%
  • Feb 2018: 36.0%

A declining participation doesn’t just stop with teens, as we have witnessed labor participation among white men 20 years and older drift steadily to its current level, which is at an all-time low of 72.1% from 88.3 in 1954.

Participation trends are the best pulse of the economy, and it shows what people think about their own personal opportunities.  When lots of folks hit the bricks, it creates a buzz and excitement, and job opportunities materialize. It’s time for folks to get off the sofa and to believe again.

Quality of Jobs

Not only is this a remarkable number, but the composition of job creation also has shifted to higher-paying employment in the service and goods-producing sectors.

  • 176,000 Service Sector
  • 44,000 Professional
  • 40,000 Trade
  • 18,000 Financial
  • 28,000 Leisure

65,000 Goods-Producing

  • -5,000 Mining
  • -31,000 Construction
  • -29,000 Manufacturing

Goods-Producing

After peaking in 2014, goods-producing jobs collapsed. Now, these high-paying jobs are beginning to swell.

  • +31,000 Construction
  • +29,000 Manufacturing
  • +5,000 Mining

Today’s Session

The jobs report released this morning from the government was largely a dud.  That said there were a couple of bright spots we’ll cover on the afternoon note.  More curious is Wall Street built in a narrative that good news would be bad news and a disappointing number has thus far been greeted with slightly more selling.

I don’t think the street is reacting to the back and forth between China and Trump on trade and when the final bell rings it will be comments from Jerome ‘Jay’ Powell today.  If he hints at just three rate hikes we could rally into the close.  Do not panic.