It was a highly curious change in the shape of the labor force. Beginning October 2015 and lasting until March 2016, for six months Americans came flooding back into the labor market. Or, so they said. When the BLS’s various surveyors working on the Current Population Survey (known as the Household Survey) came calling for answers each month, all of a sudden, a whole lot more previously out of the workforce declared themselves back in.
They didn’t all find jobs; hardly any of them would. That didn’t matter, however, since for the bean counting purposes of the government’s stat-managers they merely needed to report they’d looked for a job to be included within the official labor force.
It was an astonishing leap, though more astounding its timing. Just over 2 million were added again in the space of just six months. Up until October 2015, it had taken the “recovery” – including 2014’s “best jobs market in decades” – two full years to gain back the same number.
So, why late 2015?
For those reading bond yields wrong, thinking the Fed had achieved liftoff, this was a very welcome development. Ever since October 2008 when the labor force itself began to decline for the first time since the Great Depression (leading anyone honest to the two easiest dots ever to connect), Economists as well as policymakers at the Fed (same thing) had expected their successful, powerful QE’s would achieve just this outcome.
As the US economy healed, those millions of workers who had lost jobs during the Great “Recession” and then stopped searching for a replacement opportunity (while telling the BLS just that) because there was no work to be found, it had always been expected (by Economists) once the recovery did ignite they’d all flood back in the official labor force (by telling the BLS they changed their minds and were seeking employment).
Not only those millions, the several millions more who never had a chance to even look in the first place; the population expansion, slowing as it may have been, those who sadly came of age in this age when legit growth remained no better than a distant memory. They never once reported to work as they reported to the BLS there was never any point in even looking for it.
But was October 2015 really the start of something great? The Long-Awaited Great Labor Flood of Full Recovery! Of course not.
Instead, again, the timing. SNAP to it:
What we have, then, is a statutory requirement potentially applying to millions of Americans to at least start reporting that they are working on October 1, 2015, in order to remain eligible for SNAP by January 1, 2016. The BLS’ figures for the labor force show us that starting with the month of October, the number of people in the sample who reported being both employed (HH Survey) and part of the labor force suddenly and sharply increased at exactly that moment.
Not just October to end of December, the flux extended into the first three months of the following year. This had meant that from October 2015 to the end of March 2016, exactly coinciding with this statistical jump in the labor force, in order to remain eligible for what used to be called food stamps these unfortunate former American workers still stung by gross economic incompetence all those years later almost certainly had to at least fib to stay with benefits.
I don’t make these charges lightly (which is why I have waited quite a long time to publish my suspicions) as I fully realize it amounts to suggesting widespread fraud. Given that, however, it would at least be consistent as to why people who aren’t actually working would report themselves that way; being contacted by the BLS in an employment survey, would one risk telling the BLS one thing contrary to what one told the state “welfare” officials even if the reason for contact from the BLS had nothing to do with SNAP? Most people would, I believe, answer consistently in both government contacts if for no other reason than great (unfounded) caution lest one be able to verify with the other.
I even wrote the BLS at the time to see what they might have found from their own data; and in return I got an unhelpful bureaucratic response containing a veiled accusation I was inquiring for partisan reasoning.
The point of this review is thus: it really is a simple matter of response. When the BLS comes calling as part of its monthly panel survey, if you say you are no longer looking for work and haven’t in more than four weeks, you’re out of their headline tallies. No longer counted in the official labor force, therefore missing from the unemployment rate entirely.
Why you are no longer looking for work, the BLS doesn’t ask that question and survey answers continue to be lacking. Like the SNAP matter, when talking to the questioner these former American workers more than half of them (roughly) also say they don’t even want a job – but without saying why. The other (less than) half say they aren’t seeking a job but would if they thought there was any point.
While the entire focus of this month’s Payroll Friday ritual has been on the huge Establishment Survey “miss”, only +235,000 instead of three times that number forecast, the real labor market story is told in these multitudes who aren’t even included in any of these.
Here’s the numbers for you: since February 2020, the “recession” technically began in the BLS data last March, the number of those shoehorned into the category Not in the Labor Force has exploded by nearly 5 million. More to the point, that’s down only a few million from the worst month (April 2020) and barely changed since last August. A full year.
The number counted as within the official Labor Force has shrunk by almost 3 million. Again, as above, there was an initial flood of workers back in during the middle months last year but only a trickle ever since also last August. There has been an increase in the labor force over the past three months, including a small one in August 2021, though nothing at all like what should have happened if the prior months payroll reports were to be taken at face value.
The last number is the Civilian Non-institutional Population, which is the pool of potential workers containing all those either in or out of the labor force. This has increased by nearly 2 million since last February.
Combined, these three stats are simply reproducing the pattern which had been established in the post-2008 environment when no actual recovery took place. Even by 2015, after seven years, statistical processing produced a more pronounced recovery-like introduction than the “recovery” itself ever would.
Since last February, there just haven’t been nearly enough jobs coming back (let alone created) such that millions of formerly employed Americans still aren’t employed and are no longer even looking while, statistically speaking, every single one of these new potential workers who came of age couldn’t join the labor market/force, either.
Like the 2015-19 period, anyone looking for an inflationary tight labor market in 2021 or 2022 is almost certain to be disappointed in the same exact manner as before. This includes one prior actor, Jay Powell, who never heeded his predecessor’s warning of sorts which still applies to this day.
In fact, it applies even more today than it had when she spoke the truth (she didn’t do it often, but she did do it more often than either Bernanke or Powell) a long time ago:
Ms. YELLEN. But when we see diminished labor force participation among prime-age men and women, that suggests something that is not just demographic. And so my personal view is that a portion of the decline in labor force participation we have seen is a kind of hidden slack or unemployment.
Now there’s so much more.
The unemployment rate in August 2021 tumbled another 0.2 points and is lower by almost a full point in just the last three months. It is now down to just 5.2% which is about where it had been in late 2015 when Yellen forgot her own words from the year before and succumbed to the allure of this inadvertently doctored ratio.
Hidden slack isn’t actually hidden; it is conveniently dismissed as a LABOR SHORTAGE!!!! which sounds so much better, so much more recovery-y and inflationist. Convenient for commentary, disastrous for the economy and an ongoing, outrageous tragedy for Americans.
There doesn’t seem to be, however, any 2015-16 SNAP-like rearranging on the horizon which could at least shuffle a few million in the same accounting sense to make it seem much more like the labor market is doing what the labor market would be doing if the labor market was actually doing what “everyone” says.
This should, in the absence of being dazzled by COVID and QE, get people asking why isn’t the labor market doing what it should be doing. And this is where taper actually comes into it; taper like QE, because what’s being tapered is QE, matters little or nothing to the real economy either way, but it does add that special touch of mainstream legitimacy for the recovery story which merely continues the tradition of such major disservice to the more than 20-plus million who aren’t really “missing.”
These poor souls really do count. It’s Economics which can’t.