Financial Advisor Dennis Tubbergen: A 35-Year Low for Workforce Participation
Tubbergen's radio shows are available as podcasts.
Grand Rapids, MI -- (SBWire) -- 07/31/2013 --Financial advisor Dennis Tubbergen can be counted on to give the latest U.S. and world happenings when it comes to the U.S. economy and general financial news. However, Tubbergen has also spent a lot of time discussing our currency.
Tubbergen, who is a financial advisor, author, radio show host and CEO of PLP Advisors, LLC pens a monthly newsletter at www.moving-markets.com and writes a blog that can be viewed at http://www.dennistubbergen.com. On August 2, 2013, his blog was titled Workforce Participation Hits 35 Year Low.
“Time magazine ran a story recently about the workforce participation rate, explaining that the current unemployment rate is as much a function of a lower workforce participation rate as anything," began Tubbergen.
Below he quotes from the July 22, 2013 article.
With last year’s presidential election so focused on jobs and the economy, the American public probably knows more about the nuances of the unemployment rate than they ever have before. One particular of the official unemployment rate that received attention last year is that the Labor Department counts someone as unemployed only if he or she is actively looking for employment. Other folks who, for whatever reason, aren’t searching for work are considered not in the labor force.
The ratio between those considered in the labor force and the total working-age population is known as the “labor-force-participation rate.” And the reason why the unemployment rate has been able to fall from more than 10% in 2009 to 7.6% today despite middling job growth is that more and more Americans are dropping out of the labor force altogether.
As you can see from the chart below, this decline in the labor-force-participation rate is a trend that’s been going on for many years now. The primary driver of the overall trend is the aging workforce — many of those dropping out are simply retiring at around the normal age. But the trend accelerated during the recession, suggesting that many more people dropped out of the workforce than otherwise would have if the economy were in better shape.
As the economy improves, however, should we expect to see the participation rate bounce back? According to new analysis from Macroeconomic Advisers, it’s not likely. They estimate that roughly 45% of the recent decline in labor-force participation is a result of a weak economy, and the rest because of demographic factors. But as the economy improves, the workforce is going to continue to age, meaning that by 2015, when the Federal Reserve expects the economy to be back near full employment, the participation rate will remain where it is today.
In one sense this is good news because the economy doesn’t need to produce as many jobs per month to see reductions in the unemployment rate. But on a deeper level, it’s evidence that the high labor-participation rates that helped spur economic growth from the 1970s through the 1990s is a thing of the past. To put it another way, our economy is going to have to produce more with fewer people going forward, which — all else being equal — will slow economic growth.
"While the article makes a very important point, there is one point not made," notes Tubbergen. "Under current unemployment rate calculations, if one is working part-time but would prefer to work full-time, that person is not counted as unemployed. If that factor were to be illustrated as well as work force participation rate, the unemployment picture would look far different."
To read the blog in its entirety go to http://www.dennistubbergen.com and select his August 2, 2013 entry.
Tubbergen’s syndicated radio show can be heard on metro Michigan stations WTKG 1230 AM and WOOD Newsradio1300 AM and 106.9 FM. To listen to his shows as podcasts go to http://www.everythingfinancialradio.com
About Dennis Tubbergen
Dennis Tubbergen has been in the financial industry for over 25 years and has his corporate offices in Grand Rapids, Michigan. Tubbergen is CEO of PLP Advisors, LLC and has an online blog that can be read at http://www.dennistubbergen.com. To view Tubbergen’s latest Moving Markets? newsletter, go to www.moving-markets.com.
The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.
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