There is one stubborn
issue in the American labor force that the Federal Reserve has been powerless to fix
with their monetary alchemy; the disappearance of prime working age men from
the workforce. What is particularly interesting is that this
disappearance has continued, unabated during both economic expansions and
economic contractions, crossing the boundaries that separate generations of
workers.
Here
is a graph from FRED showing the labor force participation rate for men between
the ages of 25 and 54 going back to 1948:
At 69.3 percent, the
current male labor force participation rate is 18.1 percentage points below its
peak of 87.4 percent seen back in October 1949 and 3.9 percentage points below
its level of 73.1 percent experienced in December 2007, just as the Great Recession
began. You can also see that, since the Great Recession, the contraction
in the prime-age male labor force participation rate accelerated substantially,
particularly during the period from 2009 to 2011.
Here is a graph showing
the same data with the year-over-year percent difference since 2000:
As you can see, the
participation rate of prime-age males dropped by as much as 2 percent on a
year-over-year basis after the Great Recession, a rather remarkable
contraction.
Here is a graphic showing the dropping
employment rate for prime-age males between 1955 and 2014:
At the most recent rate
of 83.6 percent, the employment rate for prime-age males has fallen by 11.1 percentage points from its 1967 peak of 94.7 percent.
During the period immediately after the Great Recession, it fell further to a 55
year low of 80.9 percent.
Here is a graphic showing
the percent of prime-age men who are currently not in the labor force who did
not work at all in the past year:
Here is a graphic showing
how the United States is an outlier when it comes to the dropping labor force
participation rate for prime-age men when compared to its OECD peers:
The United States had the
second largest decrease in prime-age male participation among OECD peers and
now ranks in third last place out of 34 when it comes to prime-age male labor
force participation.
And, last of all, here is
a graphic showing how the prime-age male labor force participation rate varies
with race and ethnicity:
According to a 2016 study by the Executive Office of the
President of the United States, the drop in male prime-age labor force
participation is linked to educational attainment. In 1964, 98 percent of
prime-age men with a college degree or more were part of the labor force
compared to 97 percent of men with a high school diploma or less. By
2015, the rate for college-educated men had fallen slightly to 94 percent while
the rate for men with a high school education or less had plunged to 83 percent
as shown here:
As I noted at the opening
of this posting, this evolving phenomenon has developed through at least three
generations and will have a significant impact on the American economy on a
going-forward basis. This issue is a grave concern for America of the future since these out-of-work men will not be contributing to the social safety net that has been promised by Washington, nor will they be saving for their own futures. While it appears that at least some of the problem
was created by the gutting of America's manufacturing sector, traditionally the
haunt of prime-age men with less formal education, it is unlikely that
manufacturing jobs will return to the United States any time soon. From
the data in this posting, it seems that the monetary alchemy practiced by the
Federal Reserve will continue to have no impact whatsoever on the unemployment
crisis facing millions of prime-age male American workers, perhaps one of the
greatest economic issues of the new millennium.
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