Sunday, October 16, 2011

American workforce has likely permanently changed

The following chart shows the ratio of employed persons to the total population (from the FRB). The ratio spiked up in the 1970′s as women and baby boomers entered the workforce (with a short plunge due to the major recession of the early 1980′s) and stayed high until the economic crash that began in 2008.




A person born in 1950 would have been 25 in 1975; entering the workforce as part of the sharp spike up in the ratio. That same person would have been 58 in 2008, of course. Losing a job at that age means that they are unlikely to find new employment near their peak wages before reaching 65. A lot of people are in that position now; those with savings will need to spend that cash to support themselves. Dis-saving is taking place.

The size of the boomer group compared to the population as a whole indicates that the employment ratio will remain low for the decades of the boomer retirement years.

2 comments:

ironrailsironweights said...

Note that this is one of those graphs in which the Y-axis begins at (far) more than zero, so changes are greatly exaggerated.

Peter

Vitor said...

The EMRATIO is not a good indicator because there are just so many different factors that could be affecting it over time. Some of which may have nothing to do with chances of finding a job.

For instance, since it uses the total population in the denominator, less children in the population will naturally increase the ratio.

But more importantly, it does not differentiate unemployment from being out of the labor force. You can have a low EMRATIO with zero unemployment and a high EMRATIO with high unemployment.