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An Entire Generation Looking for a Job

February 6th, 2010 · No Comments · Economics

Last week the Bureau of Labor Statistics (BLS) released the January 2010 employment summary with a positive message that the “unemployment rate fell from 10.0 to 9.7 percent.” The mainstream media neglected to truly analyze the data and quickly reported that this may be the inflection point of a recovery. But the headline number doesn’t tell the whole story – especially when you don’t look at the broader time frame of “employment” and consider the number of jobs in the economy.

(Note: For this post, I won’t go into details about the infamous Birth/Death Model adjustments made by the BLS, but suffice to say the adjustment in January is ludicrous. The BLS added 427,000 jobs when all indications are they should be adjusting downward! If you want to research more, check out Bloomberg’s latest interactive graphic on the Birth/Death Model. So even the .3% drop in the unemployment rate is misleading, at best. Why can’t the mainstream media hire an economist to analyze the data?)

When you step back from the small time slice of monthly unemployment numbers and look at the broader time perspective, you discover that an entire generation (basically my generation) has been added to the workforce without any increase in the number of jobs in the economy! From the former Merrill Lynch North Amercian economist David Rosenberg (all emphasis added), “the reality is that the level of employment today, at 129.5 million, is the exact same level it was in 1999. And, during this 11-year span of Japanese-like labour market stagnation, the working-age population has risen 29 million. Contemplate that for a moment; fully 29 million people competing for the same number of jobs that existed more than a decade ago.

Having graduated from college in 1989, this chart by David for the 25-54 year-old male category basically represents my generation:

US Employment: Men 25-54 Years Old

So for the past fourteen years, Gen X’ers (and now Gen Y’ers) have been flowing into an economy that is not adding jobs. And while I realize that in reality many jobs have probably shifted from older generations to these younger workers, it still doesn’t bode well for our economy. Remember that we’re just now seeing the addition of Gen Y members to the workforce and they’re a huge population.

I expect one of the major consequences (and opportunity) of the stagnant job growth is that more members of Gen X/Y will start their own businesses or freelance. Anecdotally, this is what I see with my clients, vendors and friends. And it’s also one of the many reasons that I think Obama’s healthcare reform is off the mark. Any improvement of the healthcare system needs to include the ability for individuals and small businesses to have equal access and competitive rates for health insurance. Basically, take health insurance out of the hands of the employer and put it into the hands of the individual. Not only are 29 million people looking jobs, but healthcare, too.

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