Jobenomics U.S. Unemployment Analysis: Q3 2016
Jobenomics U.S. Unemployment Analysis: Q3 2016
By: Chuck Vollmer
28 October 2016
Jobenomics reports on U.S. unemployment and employment statistics, characteristics and trends. This 70-page Jobenomics U.S. Unemployment Analysis: Q3 2016 report focuses on the unemployed and underemployed, labor force losses, economic sustainability, income inequality, voluntary workforce departures and non-working population, welfare, and the small business creation solution. The 140-page Jobenomics U.S. Employment Analysis: Q3 2016 report focuses on the employed and working population, U.S. labor force gains, economic growth, income opportunity, contingent workforce, education and training, workfare, and city and state initiatives.
Current State of U.S. Unemployment. According to the U.S. Bureau of Labor Statistics (BLS), the U.S. labor force has three statistical categories: Employed, Unemployed and Not-in-Labor-Force. Understanding the dynamics between these categories is required to understand the American labor force and ultimately the U.S. economy.
From an unemployment perspective, policy-makers, decision-leaders and the American public must address three major trends: (1) growing voluntary workforce departures, (2) contingent workforce expansion, and (3) below average wage earner issues that are becoming more pervasive.
Sooner or later, the American public will figure out that it is theoretically possible for the United States to have a zero rate of unemployment while simultaneously having zero people employed in the labor force. The reason for this disquieting statement involves how government measures unemployment. To be classified as unemployed, one must be looking for work. Able-bodied Americans who quit looking and voluntarily depart the workforce are classified in a nebulous and obscure Not-in-Labor-Force category that few people comprehend.
Six unemployment categories (U1 through U6) are reported monthly by the BLS. Each category requires that an individual must be actively looking for work. These categories are calculated as a percent of the Civilian Labor Force (Employed + Unemployed). The BLS also calculates the number of able-bodied adults who can work, but are not looking for work, in a category entitled Not-in-Labor-Force, which is not part of the Civilian Labor Force (159 million), but part of the larger Civilian Noninstitutional Population (254 million), which is a subset of the entire U.S. population (325 million).
The latest BLS Employment Situation Summary [1] reports that 122.6 million Employed Americans work in the private sector versus 109.7 million citizens who are Unemployed (U6, defined as total unemployed and underemployed people who are looking for work) and Not-in-Labor-Force (NiLF, defined as able-bodied adults who are capable of working but not looking for work).
From 1 January 2000 to 1 October 2016, the working population (Private Sector Employed) increased by 11% compared to a 40% rise in the non-working population (U6/NiLF). The non-working population briefly exceeded the working population during the 2007-2009 Recession and is likely to outnumber the working population by 2024 if current trends exist, or earlier if an economic downturn occurs.
The U6 population includes the long-term unemployed (U1), job losers and temporary workers (U2), total unemployed workers (U3), discouraged workers (U4), marginally attached workers (U5) and underemployed workers who work part-time because they can’t find a full-time job. It is important to remember that a person must be actively looking for work to be counted as unemployed in any of the six BLS unemployment categories. In January 2000, the U6 population was 9,953,000. The height of the Great Recession, U6 peaked at 26,440,000 in April 2010, an increase of 166% since the turn of the Century. Since peak through Q3 2016, the U6 dropped by 10.9 million people to 15,551,000 today. Despite all the political fanfare, 15,511,000 unemployed, underemployed and marginally-attached citizens still represent 56% more people out of work than existed 16 years ago.
Able-bodied adults who are neither employed nor unemployed are not in the labor force. Those who have no job and are no longer looking for a job are accounted by the BLS in the Not-in-Labor-Force category. From 2000 through Q3 2016, the Not-in-Labor-Force cadre grew from 68,655,000 to 94,184,000, an increase of almost 26 million citizens who more often than not are dependent on public/familial assistance. Today, the Not-in-Labor-Force exceeds the U6 Unemployed cadre by 6-times (94,184,000 versus 15,510,979) and 12-times (94,184,000 versus 7,995,350) the number of people enrolled in the U3 Unemployment category that is generally referred to as the “officially unemployed”. This great disparity is rarely addressed by policy-makers, analyzed by decision-makers or mentioned by the media’s talking-heads, all of whom focus almost entirely on the “Official U3 Unemployment Rate” that is now at a near post-recession low of 5.0%.
The ability to work should be the determining factor for unemployment as opposed to whether or not a person is looking for work. Jobenomics contends that all able-bodied Americans who can work, regardless if they are looking or not, should be considered “functionally” unemployed. Functional is defined as capable of working. An able-bodied adult who is capable of working but chooses not to work should be considered unemployed for the same reason that “discouraged”, “marginally attached” and “part-time workers for economic reasons” are included in the U4, U5 and U6 Unemployment categories.
In order to achieve a sustainable economy and labor force, U.S. policy-makers and decision-leaders must shift their attention from U3/U6 unemployment to include understanding the reasons that able-bodied Americans, who are capable of working, are no longer looking for work. When as many people drop out of the labor force as enter it, the U.S. economy cannot grow as it should.
Most economists believe that economic growth depends on job and GDP growth. The ideal rate for U.S. GDP growth is 2% to 3%. For the United States, a mature economy, sustained GDP growth significantly over 3% tends to led to overheating and bubbles. Anything below 2% is considered sclerotic growth and makes the economy vulnerable to financial downturns. During the post-WWII recovery, U.S. GDP grew at an average rate of 3.5% which created tens of millions of new jobs each decade. Since 2000, U.S. GDP averaged 1.76%. During the post-recession recovery period from Q1 2010 through Q3 2016’s “advanced” estimate, U.S. GDP averaged 2.1%.
In Q1 and Q2 2016, U.S. GDP grew by an abysmal 0.8% and 1.4% respectively. The Bureau of Economic Analysis (BEA) “advanced” estimate is 2.9% for Q3 2016. Per the BEA, the Q3 2016 “advanced” estimate is based on source data that are incomplete or subject to further revision. The “second” estimate for Q3 2016, based on more complete data, will be released on November 29, 2016. [2] The Federal Reserve has been continually downgrading Q3 2016 GDP over the last several months from a high of 3.8% and is currently forecasting Q3 2016 GDP at 2.1%. [3] On the current trajectory, 2016 GDP is likely to be around 1.4% (sclerotic growth) assuming no major financial or major international crises, which is a bold assumption considering today’s turbulent environment.
As far as the future, many economists feel that a recession (two quarters below 0% GDP growth) is likely. The United States averages 3 financial downturns and 1.7 recessions per decade over the last 7 decades. This decade (2010s) has been recession-free largely due to government deficit spending, increasing money supply, low interest rates, stimulus packages, bailouts, buyouts and foreign investment. Now that the era of easy money is coming to an end, an anemic U.S. economy will have to operate under its own steam.
The period of frail GDP growth from 2000, has dramatically impacted the American middle-class and the U.S. labor force that gained 13,967,000 workers but lost 25,529,000 through voluntary departures. To make matters worse, the U.S. population grew by 44 million citizens since year 2000, which places a greater burden on taxpaying workers. For most American workers, real wages (purchasing power) have not increased for decades and are not projected to improve soon.
Another alarming trend involves the dramatic rise in the contingent workforce, which now stands at 60 million employed workers, or 40% of the Private Sector Labor Force. The BLS defines the contingent workforce as the portion of the labor force that has “nonstandard work arrangements” or those without “permanent jobs with a traditional employer-employee relationship”. The Jobenomics U.S. Contingent Workforce Challenge Report estimates that the contingent workforce could be the predominant source (over 50%) of employed U.S. labor by 2030, or sooner, depending on economic conditions and seven ongoing workforce trends that are addressed in detail in the Jobenomics Contingent Workforce Challenge report. [4]
The contingent workforce is comprised of two general categories: core and non-core. Core contingency workers include agency temps, direct-hire temps, on-call laborers and contract workers. Core workers generally represent low wage earners that have nonstandard work arrangements out of necessity, often subjected to exploitation, and usually not entitled to traditional employer-provided retirement and health benefits. The non-core category includes independent contractors, self-employed workers and standard part-time workers who work fewer than 35 hours per week. Non-core workers generally seek nonstandard work agreements as a matter of choice.
Jobenomics views the non-core workforce as a positive economic force that will grow significantly via the emerging digital economy. On the other hand, Jobenomics views the core contingency as a major labor force challenge as more and more citizens work for substandard wages, become frustrated, and seek alternative sources of income. The contingent workforce is addressed in this analysis from a Not-in-Labor-Force perspective and discussed in detail from an overall employment perspective in the Jobenomics Employment Analysis.[5]
Contingent work, low wages and the attractiveness of the U.S. welfare/means-adjusted earnings programs are fueling the rapid and increasing exodus of citizens from the U.S. labor force. In 2014, 86% of all Americans (including workers with earnings, Not-in-Labor-Force and those that cannot work, such as children, caregivers, disabled, elderly, etc.) made below average income.
A major reason for Not-in-Labor-Force growth is due to the growing attractiveness of welfare and entitlement benefits. The U.S. federal government funds 126 separate programs targeted at low income people. State, county, and municipal governments offer additional $400 million worth of welfare and healthcare programs. Combined welfare benefits pay more than minimum wage jobs in 35 states—in many cases, significantly more. 35 U.S. states offer welfare packages (not including Medicaid) more generous than the most lavish and liberal European countries. 39 states pay welfare recipients more than the starting wage for a secretary and in 11 states more than the first year wage for a teacher.
Once a person becomes dependent on welfare, transition to workfare becomes difficult. Loss of critical workforce skills increase proportionally to the length of time a person is not working. Most of the 6.1 million open employment positions in the United States are due to a deficit of skills and the capability to perform effectively in a working environment. Prolonged dependency generates anger, grievances, activism, violence and counter-cultural lifestyles.
In today’s consumption-based and market-driven society, there is never enough public or familial assistance to satisfy the financially disaffected. Consequently, those who need additional income often turn to temporary jobs, barter, the underground economy as well as illicit lifestyles (gangs, drugs and crime) rather than legitimate forms of long-term employment. Jobenomics contends that workfare is the only reasonable alternative to welfare. The problem is how to motivate and facilitate this transition.
The solution to growing America’s economy, healing the middle-class and strengthening the labor force involves putting the U.S. small business engine into over-drive. Energizing existing businesses and creating new small and self-employed businesses could create 20 million net new jobs within a decade. To this end, Jobenomics is working with a number of cities to implement Jobenomics Community-Based Business Generators to mass produce startup businesses.
Jobenomics Community-Based Business Generators mass-produce startup businesses by: (1) working with community leaders to identify high-potential business owners and employees, (2) executing a due diligence process to identify potential high quality business leaders and employees, (3) training and certifying these leaders and employees in targeted occupations, (4) creating highly repeatable and highly scalable “turn-key” small and self-employed businesses, (5) establishing sources of startup funding, recurring funding and contracts to provide a consistent source of revenue for new businesses after incorporation, and (6) providing mentoring and back-office support services to extend the life span and profitability of businesses created by the Jobenomics Community-Based Business Generators.
While the overall goal is to mass-produce small businesses, the Jobenomics Community-Based Business Generator will help all people who enter the program to find meaningful employment. Many of the initial candidates are likely to prefer working for existing companies rather than going through the Jobenomics process. Anticipating this, Jobenomics will implement a “pipeline” to connect these individuals who have undergone some level of due diligence to companies that are hiring. A common complaint that Jobenomics often hears from companies is that they have a very hard time finding good people who want to work and who have the right attitudes/aptitude for work. Consequently, Jobenomics Community-Based Business Generators will utilize a nationally recognized pipeline system that has recently matched hundreds of thousands veterans with employers.
In summary, the U.S. economy cannot be sustained by only 35% of the population that is eroding in terms of size, wages and income potential.
The private sector labor force produces the majority of American jobs, goods, services and revenue needed to sustain economic growth. 113 million private sector workers support 32 million government workers and contractors, 94 million able-bodied people who can work but chose not to work, 70 million who cannot work and the 16 million unemployed and underemployed. Of the 113 million employed Americans in the private sector, approximately 60% are standard full-time workers and 40% are contingency workers.
If American policy-makers and decision-leaders are serious about revitalizing the eroding middle-class, they must address the growing voluntary workforce departures, contingent workforce and below mean income issues. Jobenomics believes that the place to start is with demographics with the greatest need and potential (i.e., women, minorities, new workforce entrants and the growing cadre of poor white males). Jobenomics suggests that the 2016 Presidential candidates, in both parties, should make solutions to these labor force issues their top priority.
Jobenomics (Jobs + economics) deals with economics of business and job creation. The Jobenomics National Grassroots Movement’s goal is to facilitate an environment that will create 20 million new middle-class U.S. jobs within a decade. The Movement has a following of an estimated 15 million people. The Jobenomics website now averages 800,000 hits (80,000 page views) per month, which is 400% higher than the year prior. Jobenomics reports include quarterly employment and unemployment analyses, and specialty reports on the U.S. labor force, emerging U.S. and global business and labor force trends, and economic growth, sustainability and security.
While Jobenomics addresses big business and government employment trends, its principal focus is on highly-scalable small and self-employed businesses that employ the vast majority of Americans and create the vast amount of new jobs. Jobenomics has six state and city initiatives that are led by community leaders to mass-produce highly-scalable small businesses and jobs. To accelerate small business creation, Jobenomics is working with community leaders to promulgate local workfare initiatives, implement community-based business generators to mass-produce startup businesses, and provide workforce skills-based training, certification and funding programs.
Jobenomics prioritizes its efforts on citizens at the base of America’s socioeconomic pyramid with emphasis on engaging more women, minorities, youth (Gen Z/Y) and the working poor in the business and employment process. While Jobenomics is designed as a U.S. small business and job creation movement, other nations expressed interest in starting similar movements.
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[1] U.S. Bureau of Labor Statistics, Employment Situation Summary, http://www.bls.gov/news.release/empsit.nr0.htm
[2] Bureau of Economic Analysis, Gross Domestic Product: Third Quarter 2016 (Advance Estimate), 28 October 2016, http://www.bea.gov/newsreleases/national/gdp/gdpnewsrelease.htm
[3] Federal Reserve Bank of Atlanta, GDPNow Forecast, 27 October 2016, https://frbatlanta.org/cqer/research/gdpnow/?panel=1
[4] http://jobenomicsblog.com/wp-content/uploads/2016/05/U.S.-Contingent-Workforce-Challenge-4-April-2016.pdf
[5] http://jobenomicsblog.com/jobenomics-u-s-employment-analysis-Q3-2016/
