A closer look at the declining labor force participation rate in Georgia

January 3, 2014 10:45 am

by Bill Dawers · 6 comments

Pretty much every time I write about statewide trends in employment, questions arise about the labor force participation rate. So this post attempts to address some of those questions.

The Federal Reserve Bank of Atlanta has some great resources online that can be used in conjunction with the Jobs Calculator. If you click the tab that says “State By State,” you can select individual states and then click on the map for more information. If you keep clicking where possible, you’ll eventually see a graph of the labor force participation rate for Georgia (and for any other state) since 1981.

And you’ll see that the labor force participation rate in Georgia has fallen more quickly than the national average.

It’s important to note that the headline jobs numbers each month come from the survey of establishments with payrolls. The unemployment rate, labor force participation rate, and other labor market data come from the household survey. These two surveys produce different numbers that sometimes seem contradictory but show similar trends over time. From the Atlanta FRB FAQ:

The Establishment Survey estimates the number of jobs for which a paycheck was written in the United States during a particular pay period, whereas the Household Survey is a measure of individual employment status. For example, if one person holds two jobs, the Establishment Survey will count two jobs, but the Household Survey counts one person employed.

The difference arises mostly because the scope of the Household Survey is broader than the Establishment Survey. The Household Survey includes the self-employed, unpaid family workers, agricultural workers, and private household workers—all of these workers are excluded from the sample frame for the Payroll Survey.

The two employment numbers typically follow the same cyclical paths, although the gap has varied from time to time.

The participation rate is the labor force (which includes all employed persons and all unemployed persons who looked for work in the previous month) as a percent of the civilian noninstitutional population, which is comprised of “persons 16 years of age and older residing in the 50 States and the District of Columbia who are not inmates of institutions (for example, penal and mental facilities, homes for the aged), and who are not on active duty in the Armed Forces,” according to the Bureau of Labor Statistics.

After rising for many years, in large part because of the entry of women into the labor force, the participation rate in the U.S. peaked in the late 1990s at more than 67 percent. At its peak, the participation rate among 25-54 year olds was over 84 percent. Check out this post at Calculated Risk for more info. (Even after recent declines, the labor force participation rate in Nov. 2013 among men with no disabilities aged 25-64 was 82 percent. Women with no disabilities between 25 and 64 had a participation rate of 70.1 percent in Nov. 2013.)

The nation’s labor force participation rate has been falling for over a decade, with an accelerated decline since the 2007-2009 recession.

Georgia’s labor force participation rate actually peaked at over 70 percent — several points higher than the nation as a whole. But Georgia’s participation rate has fallen even more quickly than the nation’s and was 62.4 percent in November 2013, compared to the Nov. 2013 national rate of 63 percent.

I had expected the labor force participation rate to level off or even increase as the economy improved, but that has not been happening. Look at the latest labor market data for Georgia. In November 2013, every single metro area in Georgia had a smaller labor force than in November 2012. Only one metro area — Atlanta — had more “employed persons,” as defined by the household survey, than a year earlier.

Two weeks ago, I wrote about the slow, stagnant, and even declining payroll employment in most of Georgia’s metro areas over the past year, but the household survey data are even worse.

So, as Georgia’s elected officials and economic development bureaucrats tout the decline in the state’s unemployment rate, we should keep in mind that the unemployment rate is primarily declining because more and more Georgians have left the labor force over the last year.

peachpundit (@peachpundit) January 3, 2014 at 10:45 am

New post: A closer look at the declining labor force participation rate in Georgia http://t.co/WgHy4SKJnc #gapol

2g Strategies (@2gstrategies) January 3, 2014 at 11:42 am

From @peachpundit A closer look at the declining labor force participation rate in Georgia http://t.co/wPJ1DM2uk7

saltycracker January 4, 2014 at 11:07 am

Bill – thanks, interesting stuff.
Complex, making it easy to get mired in the process and loose sight of what to do about the trend as you summarized….”we should keep in mind that the unemployment rate is primarily declining because more and more Georgians have left the labor force over the last year.”

We need to better understand where they are going, how many settled on support programs, how many households reduced wage earners, how many retired, how many went into the underground economy and so on to determine best policies.

I seriously doubt the current political approach by both parties, to increase subsidies while passing out tax favors to the influential, is going to do anything but eat up the middle taxpayer.

saltycracker January 4, 2014 at 6:36 pm

More stats

From Newsweek’s cover story that stirred the pot:

“… the total number of private-sector jobs is still 4.3 million below the January 2008 peak. Meanwhile, since 2008, a staggering 3.6 million Americans have been added to Social Security’s disability insurance program. This is one of many ways unemployment is being concealed.”

“In his fiscal year 2010 budget—the first he presented—the president envisaged growth of 3.2 percent in 2010, 4.0 percent in 2011, 4.6 percent in 2012. The actual numbers were 2.4 percent in 2010 and 1.8 percent in 2011; few forecasters now expect it to be much above 2.3 percent this year.

Unemployment was supposed to be 6 percent by now. It has averaged 8.2 percent this year so far. Meanwhile real median annual household income has dropped more than 5 percent since June 2009. Nearly 110 million individuals received a welfare benefit in 2011, mostly Medicaid or food stamps.

Welcome to Obama’s America: nearly half the population is not represented on a taxable return—almost exactly the same proportion that lives in a household where at least one member receives some type of government benefit. We are becoming the 50–50 nation—half of us paying the taxes, the other half receiving the benefits.”

http://www.newsweek.com/niall-ferguson-why-barack-obama-needs-go-64419

Bill Dawers January 5, 2014 at 3:06 pm

Well I’m in the camp who thinks that cover story by Ferguson from 2012 had so many distortions that it’s hardly worth citing. (For example, he talks about the Jan. 2008 peak of unemployment and blames the decline on Obama, but Obama wasn’t even president for a full year after that and no one in their right mind thinks a president can turn around a failing economy instantly.)

This isn’t “Obama’s America” as much as “America after the worst financial crisis in generations.” Household wealth was obliterated, employment collapsed, the stock market tanked, etc. It was always going to be a long slog no matter what.

The increase in the number of people on disability is a huge concern, of course. Great multimedia reporting on the rise from NPR: http://apps.npr.org/unfit-for-work/ I suspect we’ve seen a big spike in such numbers in Georgia’s small towns, where the only jobs are retail, service, etc., like those in the places spotlighted in NPR’s report.

Some of the decline in the labor force is clearly linked to an aging work force, but Georgia’s decline is so much steeper than the nation as a whole that it definitely points to other problems. Clearly, Georgia is not one of the state’s with the most generous assistance programs, but it would be interesting to see more data. About 40,000 Georgians just lost long-term unemployment benefits, and the general consensus is that a good portion of those people will now just drop completely out of the labor force, which will lower the participation rate even more.

It’s an ugly picture, and employment is going to be a big part of the Carter and Nunn campaigns I’d bet.

saltycracker January 6, 2014 at 10:18 am

No problems – The Ferguson quoted stats were more telling than his conclusions. I agree the problems started well before Obama. I believe, by the Feds and irresponsible big financial institutions (my favorite coverage was Michael Lewis’ “The Big Short”).

The social security disability explosion is concerning. Walk into any office like the one in Marietta and there is hardly a senior in the crowd waiting. Turn on the TV and we have a constant barrage of ads by law firms or intermediaries promising to get you your benefits.

SSD & SSI have no lower age limits (SSD has work credit provisions). While a bump in the retirement age could adjust any issues with lifespans, the explosion of SSD & SSI and administering the challenges is probably not adequately accounted for by the actuaries.

Also, enforcement is either selective or absent. I base this on statements by administrators who fear hurting one innocent party in hundreds or the difficulty involved. My neighbor had his SS deposit stolen and redirected to a card out of state. Twice. He was reimbursed and told this happens all the time and his case was not worth pursuing. The offices are overwhelmed. But we bundle it all up, hiding the problem, and say SS is in big trouble.

Georgia is a growing retirement state of choice, the profile of the average retiree is positive and they are the least likely to burden the public system. The primary concern we should have about retirees may be the steady tax rise required to fund the lucrative and early out programs in the public service sector.

At the same time we interact with someone in the underground economy everyday. Some also collecting a benefit, some not. I suspect these numbers are huge and difficult to identify.

The best fix to get more folks compliant would be a complete overhaul of the tax code. Neither Republican or Democrat candidates are going to do that. They and their lobbyist are going to get us what we want from the other pocket.

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