Is the U.S. Workforce Nearing Full Recovery?

We've updated our monthly workforce analysis to include last week's Employment Report for January. The unemployment rate ticked up from 4.7% to 4.8%, and the number of new nonfarm jobs (a relatively volatile number subject to extensive revisions) surprised forecasts at 227K.

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 4.8%. The age 16+ population dropped by a tremendous 660 thousand, and the labor force (the employed and unemployed actively seeking employment) rose by 76 thousand. The number of employed fell by 30 thousand while the ranks of the unemployed grew by 106 thousand. In other words, the growth in the labor force was mostly attributable to unemployment growth and a small decline in the number employed.

Unemployment Rate since 1990

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 ticked up to 4.1% (to one decimal place) from the previous month. The cohort population dropped by a large 423 thousand and the labor force dropped by a 262 thousand. The breakdown of the growth is a decline of 305 thousand employed, and 43 thousand unemployed. Most of the labor force growth was due to the drop in the number employed.

Unemployment Rate Ages 25-54