Manufacturing & Productivity and the US Labor Force: US Labor Force GIC Economic Outlook: First Thoughts on the Coming Decade June 2019
Leslie McGranahan The views expressed herein are those of the author and do not necessarily represent the views of the Federal Reserve System or the Federal Reserve Bank of Chicago. 1
Determinants of Economic Output • Output per hour (worker productivity) x number of hours worked • Extensive Margin (How many workers you have = the labor force) • Population • Whether folks are willing/available to work • Intensive Margin (Amount of work per member of the labor force) • How many work among the willing labor to force jobs hours • And manyagehours they� want work Total Hourshow = Working population � � population labor force job Population growth
Labor force participation rate
1-unemployment rate
Determinants of Economic Output • Output per hour (worker productivity) x number of hours worked • Extensive Margin (How many workers you have = the labor force) • Population (Growth is slowing) • Whether folks are willing/available to work (This is slowing too) • Intensive Margin (Amount of work per member of the labor force) • How many work among the willing (improving a bit) labor to force jobs hours • And manyagehours they� want work (Already Total Hourshow = Working population � �high) population labor force job Population growth
Labor force participation rate
1-unemployment rate
Changes in Population (This is Slowing) Population Changes as Share of Prior Year Population
Census Population and Population Projections 2
2.5 1.5
ulation Growth, Annual
1
2
.5
0 1990
1.5
Source: U.S. Bureau of the Census/Haver Analytics
2000 Immigrant Data Birth Data Death Data
2010 year
2020 Immigrant Forecast Birth Forecast Death Forecast
2030
Whether People are Willing to Work -- Labor Force Participation (This is slowing too) • Definition: Civilian labor force ages 16+ as a percent of the civilian noninstitutional population. • Measure of whether people are willing to work • Differs Across Groups at Point in Time • For example people aged 65 and up have different rates than 25-64
• Within Groups Over Time • For example changes in the participation rates of women, prime aged men and teens
• Across phases of the business cycle • Demographics, structural factors and the cycle combine for a top line number
Overall Labor Force Participation Labor Force Participation 16+
Labor Force Participation 16+
68
66
66
64
percent
percent
65
64
62
63
60
58
62 1950m1
1960m1
1970m1
1980m1 1990m1 Month
Source: Bureau of Labor Statistics/Haver Analytics
2000m1
2010m1
2020m1
2008m1
2010m1
2012m1
2014m1 Month
2016m1
2018m1
2020m1
Participation and Population By Age Group Labor Force Participation 16+
Population by Age Group
90
100000
80 70
thousands
percent
80000
60
60000
50
40000
40
20000
2008m1
2010m1
2012m1
2014m1 Month 16-24 35-44 55+
2016m1
2018m1
2020m1
25-34 45-54
Source: Bureau of Labor Statistics, U.S. Bureau of the Census/Haver Analytics
1990
2000
2010 year 16-24 35-44 55+
2020 25-34 45-54
2030
Labor Force Participation Rate 68 Trend with cyclical component 66
Boomers Age
64
Long Run Trend
Women enter Labor Force
May-2019
62
60
Cycl e
58 2 3 4 5 6 7 9 0 1 2 3 4 6 7 8 9 0 1 3 4 5 6 7 8 0 1 2 3 4 5 7 8 9 0 1 2 4 5 6 7 8 9 '8 '8 '8 '8 '8 '8 '8 '9 '9 '9 '9 '9 '9 '9 '9 '9 '0 '0 '0 '0 '0 '0 '0 '0 '1 '1 '1 '1 '1 '1 '1 '1 '1 '2 '2 '2 '2 '2 '2 '2 '2 '2
Source: Chicago Fed Calculations based on Bureau of Labor Statistics, U.S. Bureau of the Census/Haver Analytics
Participation By Sex x Age Labor Force Participation
Labor Force Participation
100
100
80
percent
percent
95 60
90
40
20
85 1950m1
1960m1
1970m1
1980m1 1990m1 Month
Men 25-54 Women 25-54
2000m1
2010m1
2020m1
Men 55+ Women 55+
Source: Bureau of Labor Statistics, U.S. Bureau of the Census/Haver Analytics
1950m1
1960m1
1970m1
1980m1 1990m1 Month
Men 25-34 Men 45-54
2000m1
Men 35-44
2010m1
2020m1
Composition of the NILF Population (16-64) June 1976
May 2019 21% 9% 16%
39%
15% 17%
6% 6%
13%
17%
29% 11%
45% 16%
Men 16-24 Men 55-64 Women 25-54
Men 25-54 Women 16-24 Women 55-64
Source: Bureau of Labor Statistics, U.S. Bureau of the Census/Haver Analytics
Men 16-24 Men 55-64 Women 25-54
Men 25-54 Women 16-24 Women 55-64
The Employed Share of the Labor Force (improving a bit) • Demographics
CBO Natural Rate of Unemployment Natural Rate of Unemployment [CBO] (%)
5.2
• Sex, age, education groups • Changes
5
• Fewer teens, more older people • More people with higher education
4.8
• Policy • Particularly unemployment insurance
4.6
4.4 2010
2015
2020 year
Source: Congressional Budget Office/Haver Analytics
2025
2030
Hours (Already high) • Average Annual Hours Worked
39
38
37
36
35
34 2008m1
2010m1
2012m1
2014m1 time
Household Survey (NSA)
2016m1
2018m1
Private Employers (SA)
Source: Bureau of Labor Statistics/Haver Analytics, OECD
2020m1
Where Does this Leave us? • Population growth • Participation • Demographics are a strong headwind • Within group changes • Particularly prime aged men
• What we’ve learned from the cycle
• Natural Rate of Unemployment • Hours • Could increase? Incentives?
Appendix
Labor force participation rate (OECD) 15 year-olds or more, % in same age group, 2017 or latest available
Labor Force Participation by Age Group • 15-64
• 65+
Talk About Quantity: What About Quality? Education Share of 25+ Population
Education Spending to GDP
.8
6
.6
percent
4 .4
2
.2
0 1940
1960
1980 time
Less than High School Some College
2000 High School Grad College or More
2020
0 1960
1980
time
Households
2000 Government
2020