Why Male Workers Are Disappearing in America
FORECASTS & TRENDS E-LETTER
IN THIS ISSUE:
1. December Unemployment Report Was a Stunner
2. Four Million Americans Are Still Long-Term Unemployed
3. Why Male Workers Are Disappearing in America
4. Absentee Dads – Single-Parent Households Soar
5. More Americans Say They’re Financially Worse Off
6. Niemann Capital Management WEBINAR January 30
Last month’s unemployment rate plunged from 7% in November all the way to 6.7% in December, which was lower than any of the pre-report estimates. That should be a great thing, right? Wrong! The unemployment rate fell because more Americans gave up looking for work and dropped out of the labor force entirely.
Even worse, new jobs created in December were a fraction of what they were in recent months at only 74,000 versus over 200,000+ in the last several months. Even the Obama administration could not avoid admitting that the latest unemployment report was grim when you look into the internals. That’s pretty bad!
The plunge in new jobs to only 74,000 in December is worrisome enough, but if you dig deeper into the data, you find something even more disturbing. Only 71.8% of working-age men have a job or are looking for work. That’s a huge decline from 80% in 1970! The question is, why are so many men disappearing from the workforce? That’s what we’ll talk about today.
December Unemployment Report Was a Stunner
The US unemployment rate report for December was released on Friday, January 10 by the Labor Department. You will recall that the unemployment rate had declined to 7.0% in November, and based on weekly jobs data in December, most forecasters expected the number to rise slightly to 7.1% last month. That was the pre-report consensus.
So you can imagine how surprised forecasters and the markets were when the January 10 report stated that the official unemployment rate had plunged to 6.7% in December, the lowest level since October 2008. Everyone was stunned! After the initial exhilaration, analysts began drilling down into the internals of the jobs report to see what caused the big drop in the unemployment rate. What they found was ugly.
The US economy added only a paltry 74,000 jobs in December, the smallest increase since January 2011, according to the Labor Department. That was a far cry from the 200,000 or so new jobs forecasters had expected, as has been the case in recent months. For all of 2013, the average pace of monthly job gains was 182,000. What could have happened in December?
Here’s what. The labor force participation rate, which gauges the proportion of the working-age population in the labor force, slipped to 62.8% in December, down 0.8% from a year ago, and the lowest in 35 years (since February 1978). No one expected this.
As usual, many in the mainstream media tried to make excuses for the terrible December jobs report, with most citing the very bad weather in December that caused many Americans to stay home rather than looking for work. As a result, many expect the December jobs report to be revised higher next month. But even if the new jobs created in December are revised to 100,000 from 74,000, it will still be a huge negative development as compared to recent months.
Now it remains to be seen if the shocking December jobs report was a one-off glitch in the data, and it will be revised significantly in the next report, or if job creation will be significantly lower in the months ahead as well. We’ll know early next month. Let’s hope for the former.
Four Million Americans Are Still Long-Term Unemployed
Since the Department of Labor began keeping track in 1948, the US has rarely had more than two million workers go without a job for more than six months. However, at the height of the Great Recession, nearly seven million people were unemployed for six months or more.
During the recession, the share of the labor force that was unemployed for more than 26 weeks rose higher than at any point in the past six decades. Today that number still sits at four million, as noted in the December unemployment report.
Long-term unemployment remains a significant concern: 37.7% of the 10.4 million people who were unemployed in December 2013 had been looking for work for 27 weeks or longer. Now let’s move on to our main topic today.
Why Male Workers Are Disappearing in America
The plunge in new jobs to only 74,000 in December is worrisome enough, but if you dig deeper into the data, you find something even more disturbing. Only 71.8% of working-age men have a job or are looking for work. That’s a huge decline from 80% in 1970! The question is, why are so many men disappearing from the workforce?
Male workers were definitely the hardest hit by the Great Recession, and their employment prospects have not improved significantly even though we are technically in a “recovery.” As a result, many men have simply given up looking for work. Perversely, the Labor Department does not count you as unemployed if you haven’t looked for work recently.
Specifically, if you have not looked for work in the last four weeks, the Labor Department simply drops you from its records, as if you don’t exist. You are no longer a part of the labor force participation rate – unless and until you decide to actively look for a job again.
As a result, there are millions of Americans who are not counted as unemployed when in fact they have been jobless for over a month, or in many cases much longer. As noted above, only 71.8% of working-age men (16 and older) have a job or are actively looking for work today.
The female labor participation rate, on the other hand, has improved dramatically since 1970 when it stood at only 43%. Over the next three decades, the female participation rate soared to 58% by the year 2000, as more and more women elected to get into the workforce. Since 2000, the female participation rate has drifted mildly lower to 54.9% as of the end of last year.
The Institute for Women’s Policy Research now estimates that 91% of women who lost their jobs in the wake of the Great Recession have found new employment. Unfortunately, only 68% of US males can make the same claim.
Thus, the drop in the overall worker-participation rate to 62.8% in December – a 35-year low – is almost entirely due to men, not women, dropping out of the job market. The US numbers for men are resembling those in Spain and Italy. The Pew Research Center explains this phenomenon as follows:
“Women are less likely than they were in the past to leave a job and drop out of the labor force to raise a family, take care of aging parents or family members, or for other reasons. Men, on the other hand, are increasingly more likely to quit, be laid off or fired, or otherwise leave a job and opt not to look for another.” [Emphasis added, GDH]
But why are men having an increasingly hard time entering or staying in the labor market – and why are so many dropping out entirely? MIT economists David Autor and Melanie Wasserman think they know one of the reasons why.
In a recent study for the Third Way think tank, they found that men are falling behind women in acquiring the necessary job skills to keep pace in the global economy. One reason is the fact that fewer American men (as a percentage of the population) are graduating from high school and obtaining college degrees. This is reflected in the lower-skilled kinds of work they get, the lower wages they are paid and in their diminished chances of finding and keeping a job. Little wonder guys are discouraged. Autor and Wasserman conclude:
“Over the last three decades the labor market trajectory of males in the U.S. has turned downward along four dimensions: skills acquisition; employment rates; occupational stature; and real wage levels.”
Researchers acknowledge that they don’t yet know all of the causes of these changes. Some suggest it may be due in part to globalization, diminished labor unions and the dizzying pace of technological change that may pose barriers to stable employment and raise frustration levels among men. Other scholars have cited institutional changes that have made it easier for mothers to work over the last few decades.
Changes in family structure, immigration and the aging of the Baby Boom generation also may contribute to these trends. Add to that the simple fact that some men – particularly those with a working wife – may feel that they don’t need to work as long or as hard these days to support a family, or in some cases, to even work at all.
As a result of all these factors, more and more men are simply vanishing from the US workforce. If they haven’t actively looked for work in the last four weeks, they are simply dropped from the unemployment rolls and disappear from the records. As noted above, as of the end of last year, only 71.8% of working-age men had a job or were looking for work.
Absentee Dads – Single-Parent Households Soar
According to US Census Bureau data, single parents have more than tripled as a share of American households since 1960. The data also show that over 20 million American children are in single-parent households, with over 15 million being raised without a father and more than 5 million more without a mother.
Getting back to our topic of disappearing males, researchers Autor and Wasserman sifted through Census data and found that a significant share of this troubling shift in employment outcomes is largely occurring in one group: men born into single-parent households, most of which are headed by women. As a group, these boys are significantly less likely to graduate from high school or go to college than other children.
Even girls raised by a single parent fare better in later life than boys who grew up in similar circumstances, even though both tended to suffer from lower incomes, less advantageous schools and neighborhood environments and higher stress levels than other children. And they add that:
“Boys in single female-headed families are particularly at risk for adverse outcomes across many domains, including high school dropout, criminality and violence… Male parental absence may appear to differentially disadvantage boys because boys are more sensitive than girls to either male role models or these other forces.”
More Americans Say They’re Financially Worse Off
In my January 7 E-Letter, I wrote about the big, unexpected jump in the Consumer Confidence Index in December. You may recall that the much-followed index soared from a reading of just 72.0 in November, which was a decline from the October reading, to 78.1 in December. You may also recall that I was more than a little skeptical of that number.
It was just the week before that, on December 31, I wrote about the latest polls showing that 63.5% of Americans believe the country is on the “Wrong Track” versus only 30.4% who said America is headed in the “Right Direction.” How, I asked, could the Consumer Confidence Index jump so much with the Right Direction/Wrong Track polls still in the doldrums?
Now along comes a new poll from Gallup which keeps me asking the same question. The latest poll was taken in the first week of January asking the following question:
“Would you say that you are financially better off now than you were a year ago, or are you financially worse off now?”
A total of 42% percent said they are in worse financial shape than a year ago, compared with only 35% who said they’re in better shape. In the same poll taken in late 2012, 38% said they were better off than the previous year, and 34% said they were worse off.
The 42% of people saying their finances are worse off now is 8 percentage points above the 1976-2014 average of 34%, while the 35% total for people who say they're in better financial shape, compares with a 38% average for that period. Gallup commented:
“Despite Americans’ more positive views of the overall U.S. economy in 2013, nearly two-thirds believe their personal financial situation deteriorated or was stable [unchanged] over the past year.
The share of Americans saying they are financially worse off compared with a year ago is, by historical standards, high -- eight percentage points above the average.”
Gallup asked a second question: “Looking ahead, do you expect that at this time next year you will be financially better off than now, or worse off than now?” On this question, 55% said “better off” and 27% said “worse off.” Gallup commented:
Optimism about the future may still be the predominant feeling, but the overall positivity of the nation's personal financial predictions appears to be easing,
I would also note that the 55% “better off” number is down from 66% in June of last year when Gallup did the same survey. I would attribute much of that drop to the disastrous rollout of Obamacare.
Niemann Capital Management WEBINAR January 30
In last week’s E-Letter, I discussed the concept of investment “alpha” and how Niemann Capital Management‘s Risk Managed Program was a good example of how a money manager can add “alpha” over time. In 2013, Risk Managed produced an annual return of over 43%, and that’s net of all fees and expenses. Since its inception in September of 1996, Risk Managed has outperformed the S&P 500 Index by more than 2.7 percentage points on an annualized basis, net of fees. You can see actual performance details here.
(As always, past performance is no guarantee of future results. Be sure to read Important Disclosures before making a decision to invest.)
Yet Risk Managed also has the ability to become defensive in bear markets by moving to cash. Successful money managers are often able to generate alpha by not only outperforming the indexes in bull markets but also incurring smaller losses in down markets. You wouldn’t buy a car without brakes, would you? Then why not invest with a professional Advisor who can take the foot off of the gas in bear markets?
If you are among the many investors today who are concerned about which direction the market may go in 2014, you need to sit in on our next free WEBINAR highlighting a strategy designed to handle whatever the market may have in store. The webinar will feature Niemann Capital Management and will be held on Thursday, January 30 at 2:00 PM Eastern Time (11:00 AM Pacific).
The presentation will last apprx. 30 minutes with plenty of time to ask any questions you may have. Just click on the link below to register for the event. I think you’ll be glad you did.
Gary D. Halbert
Forecasts & Trends E-Letter is published by ProFutures, Inc. Gary D. Halbert is the president and CEO of ProFutures, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, ProFutures, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.