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A Labor Force Participation Rate Update

I wish I could say there is good news in this report. But the best I can offer is that some trends seem to have leveled off. At this point, however, it’s safe to say the U.S. economy has lost a substantial number of young potential workers who will never make up the ground they have lost.

In some of my other research I’m exploring the possibility that these younger people may actually be working in the “informal sector” (also called the underground economy or hidden economy). It’s possible that the growth of this sector has absorbed some young people, meaning that the reported LFPR’s are lower than the actual participation rate. … Consider the Affordable Care Act. This plan fundamentally requires young people to subsidize health insurance for older people. One way to avoid this tax is to not report any income (and therefore not file any tax returns). Working off the books for cash probably looks like a pretty good deal to some of these folks. Continue Reading →

Where the Vanishing Students Are Going

My guess is that these students have entered the informal sector (formerly known as the underground economy). They get paid in cash (actual currency), do not file income taxes and (important) remain invisible to Obamacare. Since many of the Obamacare taxes and restrictions will be implemented by the Internal Revenue Service, not filing a tax return is an excellent way to avoid the whole train wreck. Continue Reading →

January Unemployment

That means the gyrations between employment, unemployment, and labor force dropouts are just about offsetting each other.
When the unemployment rate drops mainly because an additional million people have left the labor force and population estimates are revised … well, let’s just say this report is not the sign of a healthy economy.
Continue Reading →

December Unemployment Rate

A good part of this drop was caused by the ongoing decline of the number of workers in the labor force. The labor force participation rate dropped sharply to 64.1%. This is the lowest participation rate since 1983’s 64.0%. Anyone who argues that the drop in the unemployment rate signals an improving economy should be forced to recycle their Ph.D. in economics into aluminum beer cans. Continue Reading →