THE DEEPER DIVE: Employment Data and Decline in Labor Force Shows the US Is in a Stealth Recession.
A video I posted on Monday (and have reposted below), which I said we would get back to, provides a big piece of the truth about the stealth recession I’ve been saying the US is experiencing. It explains why the usual jobs reports and unemployment reports are not a fair representation of the true state of the labor market, proving the US economy is nowhere near as robust as analysts have been claiming. Here is a summary of the points in the video if you don’t have time to watch it:
We have to go back about fifty years to find another time when the labor participation rate was this low. (The percentage of the population that is willing and able to work.)
Mainstream financial media recently reported the silver lining on the employment report was that the unemployment rate had dropped from 4.3% to 4.2%.
The intended impression of those articles was to present an image of the US labor market as showing a slightly improving economy, even though unemployment is higher than we had in better times.
What really happened was 720,000 Americans disappeared from the US labor force in just a single month. So, the real story is about Americans giving up.
Simply put, 720,000 people actually stopped looking for work or even being available for work. Now when people stop applying for jobs or are no longer available for work, the government does not count them as unemployed. So, all those people can drop out of the labor force and not bump unemployment up even the tiniest bit. You have to be actively seeking a job to be considered unemployed. Worse still, on a year-on-year basis, the labor force has plummeted by over a million workers!
Clearly, if 720,000 people dropped out of the labor force in just one month, a 0.1% drop in the unemployment rate does not indicate the labor market is improving. The greater and more important number is the 720,000 people who evaporated. With nearly three-quarters of a million fewer people in the workforce in just one month’s time, its surprising the unemployment rate didn’t fall by a lot more since all of those people either left jobs without going on unemployment or were already unemployed and exited the unemployment rolls by leaving the available workforce altogether. So, of course, unemployment is down with that many people jettisoning the workforce altogether. If you’re not collecting unemployment because you are not available for work, you are not counted as unemployed, even though you are fully unemployed.
The biggest decline came from prime-age workers (25-54 years old), not people hitting retirement age. Likely the multitude of people disappearing completely from the labor force in the month reported includes some illegal immigrants. Obviously, if you are either deported on detained, you cannot apply for work in the US, so you just fall out of the labor force without going onto unemployment because you don't meet the minimum requirements of unemployment.
By another measure—the employment-to-population ratio—the percentage of working-age Americans who actually have jobs fell to 59%, the lowest level since the forced unemployment period of the Covidcrash back in October, 2021. Trump’s golden era is not showing up.
So, when you hear that the economy remains resilient because unemployment remains relatively low, you can now factor in how messed up the unemployment rate is by the huge loss of actually unemployed people who are simply not looking for work, so simply not counted as unemployed. That’s one of the big reasons I’ve been saying we are in “stealth recession.” The truth about the labor market is not “resilience;” it’s “retreat.” It’s either giving up, being deported, becoming too ill to work or dying. The labor force (all the people who are working or are unemployed but seeking jobs) has been declining all year, but now it is plunging.
Now let’s really dig down to reveal the ugly truth about our slacking economy that appears throughout multiple labor metrics … and then you’ll understand why this is the “most hated expansion in history,” as many have called it (because it is NOT an expansion). We’ll see that the labor market does not look robust. It looks decrepit. In fact, it looks like a rickety structure about to topple: