Fall in the unemployment rate is a mirage, participation rate at lowest since 1978

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At 63.2%, the US participation rate hasn’t been so low since 1978.

To give you a sense of how bad that is, disco was all the rage and housewives were still common because a large portion of women still hadn’t chosen to enter the workforce. Good luck raising a family on a single income in 2013.

The participation rate has been forecast to fall for a decade because of aging baby boomers but not at this pace. It’s clear that a large portion of unemployed in the US have simply given up looking.

US labor force participation rate since 2002

US labor force participation rate since 2002

To give you a sense of what a healthy market might look like. Here’s Canada, which has very similar demographics compared to the US but has 3.4 more workers per hundred people.

The drop off since the crisis has also been much less pronounced.

Canada labor force participation rate since 2002

Canada labor force participation rate since 2002

The Fed has done all it can on its employment mandate but it’s clear at this point that some massive, structural shocks are needed to change the US workforce. Only the government can do it and this Congress is hapless.

To further add to the case, look at this chart that breaks down labor force participation by age. Older people are actually joining the workforce while it’s young people, especially those below 25 that are giving up on finding work. It’s quite literally old people taking away jobs from young people and forcing them to give up.

participation rate by age

Wal-Mart greeter is the last job left in America.

Author: Adam Button

Adam Button is the managing editor of ForexLiveâ„¢. He was previously the chief currency strategist at XForex and has also worked with Intermarket Strategy. Adam believes there's an edge in knowing every tidbit of news. He was formerly the head of the markets team at the Canadian Economic Press and is a graduate of Ryerson University. Adam lives in Montreal, follow him on Twitter: @FX_Button.


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labor force|participation rate|Unemployment

Adam Button


  1. Adam, what impact do you think the very large (and growing annually) American households on some kind of government assistance/subsidy plays into this? 4 years out of a recession and welfare, food stamps, disability continues to explode annually. Why work?

  2. i thought that’s what all the monthly data has been pointing to…weekly jobless claims dropping because people simply stopped looking for jobs. I seriously think they won’t taper in september…what reasons do they have to taper? Tapering towards the end of the year in Nov seems more likely

  3. Jobless claims can’t drop because people give up looking. They’re claims for govt money you make when you lose your job.

  4. Amazing stats. I’ve told you about the job situation over here in the NY metropolitan area.


  5. 22 years ago I got out of the Navy and we were in a sharp recession. I was from modest means and was willing to take any job..couldn’t find any job immediately. I was on unemployment/welfare for a couple months at about $700/month total benefits. I can assure you poverty sucks. I said “forget this”, found a job cleaning stables (yes…the old cliche of shovelling shit) and went back to school…never looked back. Now I read welfare is equivalent to $12-15/hr job with bennies. Work under the table for some money and you’re getting $18/20-ish an hour. And there are absolutely NO entry level jobs around that pay that much. Talk about disincentive! We’re creating a zombie level of young persons. No wonder the gov’t is itching for war….war has always been good business. Sad, really.

  6. adam,
    still holding the XAU@1389 from the other day..we said we’d wait til after nfp report…thoughts??

  7. JP Morgan’s posted Mortgage rates on their website exceeded five percent for 30yr refi yesterday. Home builders are laying off construction workers and bankers are shuttering mortgage divisions and laying off tens of thousands.
    Oh, yeah, and the largest bank, they quietly exited the student loan business. Student debt is the second largest source of credit in America after mortgages. Boom times

  8. its time for long bond to the tell the markets something is wrong.

  9. Recovery, what recovery?
    Those in the top 5% who owned stocks and did some real estate speculation at the bottom have done well.
    The other 95% of America are still in Limbo. The USD Bull case is diminished considerably by this report.
    Should take some rework by the economic teams of investment houses, but then the order flow is subject to change.

  10. @adam .. maybe all these people not participating in the labour market are day trading?

    adam … im confused about what is most important … overall employment rate, new claims or participation rate? cant get my head around it … whats benanke going to view as important?

  11. Only the government can do it. That is the problem.The healthcare mandate has caused lack of hiring in full time jobs.Several employers have cut the number of hours to less than 29 hours per week not to deal with the health care issue. In the last reporting period ,part time jobs outnumbered full time jobs by a large margin.The largest employer outside the US government is Wal Mart ,the next one after that is a temp agency.This tells you about the overall quality of jobs in the US.The fake job numbers are all smoke and mirrors .There is a record 90.5 million out of the job market.Not a good sign.

  12. missed your post on that subject, Ryan Latorre. possible to get your view on it again?

    picked up 88 on the gbp/cad short last night……..

    short some usd/chf just over 0.94 with a stop above the high

    also shorted some nas100s (mixed feelings on that given the setup into mid month)

  13. It’s a bit of everything. The main jobs number is most important but it all factors after that.

  14. Kramer, that is the most contrarian call in the world right now. Long bonds and short equities is considered completely crazy as 99.999% of traders think that the dollar is going up, rates are rising, the economy will improve and that stocks will correct 5% and then continue their record long rally up for the rest of the decade. The central bank forecast charts layout the plan and those rational expectations of the current trend continuing forever. Wish I had a crystal ball and could predict when some straw of data breaks the camel’s back.

  15. Im out of gold because of the buy orders hit at 1360. Small profit but maybe next week start buying.

    @Ron, you cant expect these guys to update your trades at each moment. You have to do some of the work and take ownership.

    I bet this is how Adam feels when he gives out trading advice – http://i.imgur.com/GdWH2.png

  16. And mtg rates were in the low to mid teens, with cd rates not far behind. I am hoping Adam meant govt needs to do something by easing up on all the regulations, red tape, etc. to let the free market system work similar to what Regan did.

  17. I recommend subscribing to free Mauldin Economics weekly letter and reports. All this stuff has been covered months ago by John Mauldin and his various cronies. Well worth keeping ahead of the curve for no cost !


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