January 11, 2014

To Participate or Not To Participate, That Is the Question

“The unemployment rate declined from 7.0 percent to 6.7 percent in December, while total nonfarm payroll employment edged up (+74,000), the U.S. Bureau of Labor Statistics reported today. Employment rose in retail trade and wholesale trade but was down in information”*

This employment release was a negative surprise even for those that follow an in line with estimates strategy. However as with most surprises the elements of defense and offense in the arena of diminishing reality the focus will once again ignore demographic elements within the statistics including the workers that have permanently stopped looking for a job. The question I have is why would they do that? 

The civilian labor force participation rate* declined by 0.2 percentage points in December bringing the annualized rate to 58.6 percent or a decline of 0.8 percentage points over the year. What was curious is that while there is certainty in the decline of participation in the job market, the year over year employment-population ratio was unchanged.  This tells me that while no consolation for the losses experienced by people at every economic level of the economy the total number appear to be slowing. This Leaves room for expansion of the workforce moving forward, but I wouldn't be surprised if the employment rate begins moving back towards 7% during 2014. That would be troublesome for the markets. 

Also, it should come as no surprise that young people have had a very hard time getting work in this economy. While most trends favor jobs in technology that carry a degree of sex appeal, the participation rates are in the 50 to 60 percent range for men and women over 20yrs old suggest to me that a great diversity of jobs would readily pick up the slack, and in fact already has to some degree. In the past year much of the growth outside of IT has been in Healthcare, Retail, Wholesale trade, transportation, financial activities, warehousing and manufacturing. The focus on the dearth of skills also ignores the lost traditions of corporate training programs leaving the need to generate higher profile for the many jobs that have demanded creative, marketing, writing, sales oriented and complementary social and networking skills that will increasingly be needed to meet the needs of the growing of product and service industries that even some tech companies such as Google (GOOG) and Apple (AAPL) have been migrating to for the past few years. 


Today's numbers are part of a longer term trend that begins with baby boomers that have decided the need to work through retirement age. Good numbers or bad as traditionally interpreted are becoming less important if not focused on how the economy is changing. And those changing fortunes and economic circumstances that have touched millions of Americans will untimely create an economy that I believe will require more skills than are currently discounted for and that could produce jobs that are more sustainable if not more socially based. Jobs even your friendly introverted portfolio manager could love.

* Search – BLS Employment Report

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