It’s Friday May 2, 2014 and we get good news on the employment front. The unemployment rate has dropped to 6.3% from 6.7%…the lowest since the fall of 2008. The bad news is that one of the reasons for this precipitous drop is that there was a big jump in the number of people who just stopped looking (i.e. they have stopped participation in the labor force)…they have given up the ghost. This, of course, conjures up the reasoning that the economy is more feeble; ergo, the market is more vulnerable. The markets were lackluster to negative in response to the numbers (although in the case of the, Dow and S & P 500 still hovering very near their respective all-time highs).
Typical lack-of-depth media reaction

“Seemingly terrific April job’s report poses strange puzzle”–May 2, 2014, Capital Report, MarketWatch
This is from MarketWatch’s Jeffry Bartash:
Typically a shrinkage in the labor force occurs when people become so discouraged about finding a job that they give up looking for work. Yet the April surge in hiring would suggest that more jobs – not fewer – are available. “You have drastically different messages offered by the establishment and household surveys,” said Stephen Stanley, chief economist of Pierpont Securities. He called the report “puzzling.”
The big drop in April – to 62.8% from 63.2% – drove the participation rate back down to a post-recession bottom and matched a 35-year low. The rate tells us the percentage of Americans 16 or older who have a job or want one.
It’s Demographics, Stupid!
None of this should be surprising to anyone with just the most cursory grasp of history and demographics. It is the post World War II “Baby Boom” reaching retirement age, the leading edge of which is turning 68 this year. Three hundred thousand plus “boomers” are reaching retirement age every month. Though they will not all retire at that same time, significant portions will as time progresses, maybe leading to the lumpy numbers we have been seeing in the labor force participation rate. Because the “baby boom generation” is so large and somewhat front-end loaded, the participation rate is likely to be depressed for some time.
I am not Pollyanna. There is structural unemployment in our economy. I get it. But, my guess is the labor force participation rate is significantly more effected by demographic issue than the structurally unemployed.
Want something to worry about?

How are we going to pay for all the Social Security and Medicare these old codgers (of which I am one) are going to require in the next 20 or 30 years?
What do you think?
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