Is the U.S. Workforce Nearing Full Recovery?
We've updated our monthly workforce analysis to include last week's Employment Report for December. The unemployment rate, as expected, ticked up from 4.6% to 4.7%, and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) was below forecast at 156K.
The Shrinking Unemployment Rate
The closely watched headline unemployment rate is a calculation of the percentage of the Civilian Labor Force, age 16 and older, that is currently unemployed. Let's put this metric into its historical context. The first chart below illustrates this monthly data point since 1990.
In the latest report, this indicator rose to 4.7%. The age 16+ population grew by 202 thousand, and the labor force (the employed and unemployed actively seeking employment) rose a somewhat smaller 184 thousand. The number of employed grew by only 63 thousand while the ranks of the unemployed grew by 120 thousand. In other words, the growth in the labor force was about one-third attributable to employment growth and two-thirds attributable to unemployment growth.
Unemployment in the Prime Age Group
Let's look at the same statistic for the core workforce, ages 25-54. This cohort leaves out the employment volatility of the high-school and college years, the lower employment of the retirement years and also the age 55-64 decade when many in the workforce begin transitioning to retirement ... for example, two income households that downsize into one-income households.
In the latest report, this indicator remained unchanged at 4.0% (to one decimal place) from the previous month. The cohort population grew by a tiny 5 thousand, but the labor force grew by a substantial 119 thousand! The breakdown of the growth is 42 thousand employed, and 77 thousand unemployed, like the broader cohort, about one-third of the labor force growth was in employment, two-thirds in unemployment.