June 4, 2018
Unemployment is at its lowest point in 18 years.
So far this year, we’ve been expecting 200,000 new jobs each month. But April only returned 164,000.
Plus, the wage growth rate, meaning how much wages grew, dipped. In March 2018, wages grew 2.7 percent. The next month it was only 2.6 percent.
The labor market appears to be competitive, so wages should be up.
Well, maybe the market isn’t as competitive as we think.
The reason for the unemployment rate drop isn’t that more people are working. It’s that people are dropping out of the labor force.
In April, some 410,000 people stopped looking for work. They’re not counted as “unemployed” anymore.
Digging a bit deeper, if you look back to 2000 when unemployment was this low, you’ll see a big difference in labor force participation, which measures how many people want to work.
In 2000, more than 67 percent of the adult population wanted to work. Today, it’s down to 62.8 percent, according to the U.S. Bureau of Labor Statistics data:
In other words, compared to 18 years ago, more than 25 million Americans are not looking for work. If the participation rate today was the same as in 2000, the unemployment rate would be around 10 percent!
Well, it’s the Baby Boomers, right? They retired.
Yes, many Boomers left the labor force. But the participation rate for those aged 20-24 was 78 percent in 2000. Today it’s 71 percent.
Conversely, the rate for those age 55 and older was 33 percent in 2000, compared to 40 percent today. Boomers are working more, not less.
Read behind the numbers because the headlines are misleading!