Made you look. Made another chart showing the change in the number of people claiming disability benefits. Now, this one REALLY perplexes me...

This is a follow up to my last post showing the change in Social Security claims by "Retired Persons" from 2005 to 2013 and how it impacts the labor force participation.  See that HERE.

Another variable that affect the participation rate is the number of people that exit the labor force via disability. Using the data base from the Social Security Administration (HERE) I charted the quarterly claims for disability benefits from January 2005 to December 2013.

The RED BARS represent the 1st quarter of each year. The YELLOW area represents the official time span of "The Great Recession".

Observations:

(1)  The large spike in disability claims in the midst of the recession was not unusual.  You can see similar one time increases took place in prior years when the economy was doing well.

(2) Post official recession (after June 2009) there was a consistent average quarterly increase up to the 1st quarter of 2012.

(3) After the 1st quarter of 2012 up to December 2013 the average decrease significantly.

(4) If you look at the averages pre-recession and post official recession you will see they are similar, 74,020 versus 74,020.  There was approx a 12% increase in average quarterly claims during the official recession.

There are STILL more people exiting the labor force than we can account for with disability claims and workers retiring.

The puzzle remains.  Where are those 100's of thousand ADDITIONAL people?

Looky here at the chart I made. Might help in understanding the role of retirements in the changing nature of the US labor force. Must know the problem before we can address it...

One of the major contributors to the declining labor force participation rate in the US is the aging of the Baby Boom Generation.

Using the database from the Social Security Administration I put together this chart which shows, by quarter from 2005 to 2013, the number of people claiming Social Benefits for retirement.  There are several categories for which people can claim SS benefits but I just used "Retired Workers" for this chart.  The assumption is these are people exiting the labor force, whether they were employed or not.

A couple of observations.

(1) the RED bars are all the first quarter of the respective year (January to March).  Notice the surge EVERY 1st quarter of the year to claim benefits. In general the low quarter is the 4th quarter (October to December) of the year.

(2) The 1st quarter of 2009 seems to be a major inflection point (the HIGHEST bar).  Retirements surged that quarter and stayed elevated on average thereafter. I inserted a horizontal GREEN bar to show the quarterly average BEFORE 2009 (145,000) and AFTER (280,294).  That is a significant difference of 135,294 per quarter in new retirements (a 93% increase!).

This is not the whole story of the decrease in the Labor Force Participation, but as you can see it is not small part.

I hope this helps you in visualizing this important issue. If we don't know the facts, then we cannot address the issue with good policy.

Are people exiting the Labor Force because they are giving up looking for work or because they are retiring?

One of the variables cited as the reason participation in the labor force has been contracting is "Demographic".  Specifically, baby boomers are retiring and exiting the labor force. No doubt this is happening.

With the latest report (Dec 2013) the Labor Force Participation Rate (LFPR) did take a significant plunge.  This helps to artificially decrease the Official Unemployment Rate.  Even though an inadequate number of new jobs were created, the unemployment rate decreased, mostly because of the decline in the LFPR.

Ok, fine.  I get it.  I am sure we will hear in the coming days one of the major reasons is as I stated above.

The Social Security Administration keeps VERY current data on claims for benefits. So, I went there.

Below is a snapshot, by month for 2013, of the number of people classified as "Retired Worker" who claimed benefits.  In YELLOW I highlighted the last few months.  In RED I calculated the change in claimants from month to month.

Notice the numbers actually DECREASE starting in August 2013.  Surprised?  I am, quite frankly.

Not sure how this contributes to the debate BUT, well, it somewhat calls into question the emphasis the exiting of "the olds" have on the Labor Force Participation Rate.

What do you think???

Your first look at the latest JOBS REPORT and where the jobs were created (or not). This was NOT a good month for employment!

The latest jobs report for December 2013 is out and it is not good by any measure.  My very informal survey of various economics blogs (Left and Right) had guesstimates of between 175,000 to 235,000 new jobs projected. The official measure from the Bureau of Labor Statistics as a net 74,000.

Here is the section of the report that shows the major sectors of the economy and the number of jobs businesses have reported to have created in December. There is also the prior two months AND the jobs created one year prior.  This helps give perspective to the current number.

I highlighted in RED the areas where there was significant job LOSS(!) and in YELLOW the areas of significant job gains. In BLUE is "Health care and social services". This one is unusual because in prior periods this category of employment has been most always positive. For it to turn negative is unusual.

The increase in Retail jobs is not unexpected. What is worrying is that the 55,000 new jobs in this sector are relatively low-paying jobs.  The same can be said, for the most part, of the 40,000 in "Temporary Helps Services".

These jobs are certainly good for the people who got them.  However, no one can claim the quality of these jobs are ones that are going to significantly boost the economy.  Certainly they are not going to address the issue of inequality.

 Significant shrinkages in Construction, Information and Government were a drag on employment market.

One notable area was the very small decrease in "Healthcare and social services" (In BLUE).  This area of employment has been the workhorse for job creation for many years.  Seldom does it go negative!

January has to be better...RIGHT???

What motivates you more to do something that produces a predetermined desired outcome---The threat of losing $10 or the enjoyment of gaining $10? See here why the answer is not so easy...

IF the private or public sector is going to design policies that will elicit a specific response from consumers (or citizens) then sometimes they have to go against conventional thinking.

One such example comes from a new study (GO HERE FOR THE STUDY) on consumer behavior in regards to the use of plastic or reusable bags for buying groceries.  Stores are trying to GO GREEN and reduce the use of plastic bags for environmental reasons.

There are 2 real life options the study looked at from grocery stores in the Washington D.C and Montgomery County (VA) area: (1) a 5 cent TAX on the use of each plastic bag OR a (2) a 5 cent CREDIT (or Bonus) from the store for each reusable bag the shopper brings and uses for their groceries.

Keep this in mind when you read the following from the WSJ: With the per bag TAX the consumer is GIVING UP 5 cents when they use a plastic bag.  With the CREDIT/BONUS they are GETTING 5 cents (or reducing the total of the grocery bill) when they bring their own reusable bag.  In other words, in one instance you PAY the tax and the other they pay YOU to bring a reusable bag.

"...Observing 16,251 shoppers at 16 grocery stores in Washington, D.C., neighboring Montgomery County, Md., and northern Virginia and data from grocery store scanners, she found that a 5-cent tax on disposable bags substantially decreased disposable bag use while a 5-cent bonus for using a reusable bag did not. 

Before the tax, several stores offered a 5-cent bonus to shoppers who brought their own bags. In stores that offered no incentive, 84% of shoppers took at least one throwaway bag per shopping trip; in stores that offered the nickel lure, 82% did. 

In contrast, some 82% of Montgomery County shoppers used at least one disposable bag per shopping trip before the bag tax was imposed; 40% did afterward...."

So, the possibility of losing 5 cents with a tax had a stronger effect on consumer behavior than the prospect of gaining 5 cents with the credit/bonus.  So much for the "a little sugar goes a long way" method of persuasion.

The study notes that this is an established and observe behavior called "Loss Aversion".  

"In economics and decision theory, loss aversion refers to people's tendency to strongly prefer avoiding losses to acquiring gains. Some studies suggest that losses are twice as powerful, psychologically, as gains." 

The study includes this bit of advice for private and public policy makers by using a couple of examples where they can "motivate" consumers to produce the desired outcome:

"These findings suggests the importance of accounting for behavioral insights when designing a wide variety of environmental incentives. 

For example, Starbucks Coffee rewards customers who bring their own coffee mugs with a ten-cent discount. My results suggest that this policy might be more effective if Starbucks instead reduced the price of coffee by ten cents, but charged for using a paper cup. 

Similarly, the federal government awards a tax credit to customers who purchase environmentally-friendly Energy Star products. This policy might increase consumption of these products if they were taxed for purchasing energy-inefficient products."

Sometimes the counter-intuitive is the most effective, but hardest to implement because, well, it is counter-intuitive.  

Guess that is why I LOVE reading stuff like this! :)

The US has the SAME number of manufacturing jobs as it had in 1960. Why don't they mean as much as they did back then?

Here is a graph from NPR that shows, over time, the number of jobs classified as either manufacturing and service.

A few observations:

(1) One problem I have with it is the numbering on the vertical axis.  The red line representing manufacturing jobs hugs the 20 million mark but it does appear over it more than under it.  Because the measurement scale is small it is hard to see that even small changes represent 100's of thousands and/or multiple millions of jobs gained or lost in a given time period.

(2)  The sum total of manufacturing jobs has stayed within a pretty constant/consistent band over time, with the exception of the Great Depression and Great recession. It has had its ebbs and flows.

(3) Look at the two historical points I put on the graph (1960 and 2009-ish). Both are at 20 million manufacturing jobs.  However, in 1960 the civilian labor force was 69.63 million so those 20 million manufacturing jobs represented 29% of the labor force.  In 2009 the civilian labor force was 157.7 million so those 20 million represented 13% of the labor force (data source HERE).

Politicians and Policy Makers focus a lot of attention on the manufacturing sector in terms of how to promote jobs.  Given the history of the nominal number of jobs in this sector, is this a proper focus or a misplaced one?

In 10 short years the US has gone from being #1 in college attainment (age 24 to 34) to 14th compared to the rest of the developed world. What happened? See the numbers here!

Below are historical data on the percentage of the population of select developed countries that have attained at least a bachelors degree.  I high-lighted in yellow the year and age group I was interested in.  The US is high-lighted in BLUE-ish at the bottom.

In 2001 the 29.9% of the US population, age 25 to 34, had attained at least a bachelors degree.  That percentage ranks #1 on the list in 2001.  Look at that again!  WhooHooo!  Our percentage is statistically much larger than the closest countries.

Fast forward just 10 years to 2011.  The US percentage increased to 33% for that age group BUT now we rank 14th.  Look at that again! Whoo, ummm, Whoops.  Our percentage is statistically much SMALLER than many that are ahead of us

If you look at 2007 (just prior to the recession that started in Dec 2007), same age group, the US falls to 7th place BUT the percentages are statistically small and not that much above he US.  An inflection point, it seems.

The countries ahead of the US appear to have done a better job in getting students through college during the downturn.

What lesson can we learn from this??

Source: National Center for Educational Statistics

The National Center for Educational Statistics have some really terrific data on a wide variety of education related topics. Check it out!