The booming non-labor force in the United States: Those not in the labor force surged by nearly 1,000,000. A large portion of added jobs were in low wage sectors.

MyBudget360
November 9, 2013

Any job is a good job for the headlines.  While one part of the BLS survey showed that US payrolls increased by 200,000 last month, another survey finds that nearly 1,000,000 Americans dropped out of the labor force.  That is right, a stunning 932,000 Americans simply dropped out of the labor force last month bringing our labor force participation rate to a new 35 year low.  More importantly, a large part of those200,000 added jobs were in the form of low wage retail and food sector jobs.  For the headlines anything is good news and the stock market continues to rally (even though most Americans don’t even own stocks because they are too broke once all bills are paid).  The drop in the labor force participation rate was not unforeseen but the current rate of growth is very troubling.  Of course, the Fed now “hints” at tapering but the evidence shows that the Fed is in soft default mode.  We have a boom in the non-labor force segment of our economy.

Those not in the labor force

A whopping 91.5 million Americans are not in the labor force (close to one-third of the country):

Source:  BLS

The big drop from last month of 932,000 is the largest one month drop ever recorded.  This new data plunged the employment population ratio down to a new 35 year low:

Source:  BLS

Of course, the media is merely focused on the 200,000 jobs that were added.  What about the nearly 1,000,000 drop in the labor force participation rate?  Will these people maintain their consumption power without work?  It is unlikely they are independently wealthy given retirement figures.  To the contrary, these are broke households.  This all fits in line with a record number of Americans on means-tested programs like food stamps and disability.

Low wage jobs

The US is disproportionately adding low wage jobs.  Even in the latest report, 1 out of 4 jobs were added in the very low wage (and temporary) retail and food sectors.  This is why the top occupations in the US do not pay what you think:

Out of our top jobs only one has a decent salary.  Even 50 years ago, top jobs were in blue collar work that actually paid a living wage.  Today, the jobs are coming from cashiers at Wal-Mart or food workers at Burger King.  Not exactly enough to send your kids to the expensive world of college.  Yet to escape this fate, many young Americans roll the dice withmaximum levels of student debt to give themselves a fighting chance for a job.

Also, we need to add at least 200,000 jobs per month merely to keep up with population growth.  If anything is happening, we are simply treading water but the problem on those dropping out of the labor force is that our costs are accelerating at a growing speed.  The burden of retiring baby boomers and other programs is largely falling on a young and poorer work force.  It isn’t all too clear whether this strategy will work.

Unfortunately the media is catering to this massive run in the stock market while the economy is actually not as hot as it appears.  For the next couple of months it is important to examine what jobs are being added given the very seasonal holiday season.  Early 2014 will shed some light on where things truly are.

The rate of those marginally attached to the labor force U6, the broadest measure of employment also increased last month:

This report wasn’t as strong as it is being made out to be especially when you have close to 1 million Americans dropping out of the labor force.