62.9%: Labor Force Participation Rate Improves in January; Those Not in Labor Force Declines by 736,000

By Susan Jones | February 3, 2017 | 8:42am EST
“In this administration, our allegiance will be to the American workers and to American businesses, like Harley-Davidson,” Trump told reporters as he met with a group of Harley-Davidson employees who came to the White House from Wisconsin on Thursday, Feb. 2, 2017. (AP Photo)

(CNSNews.com) - The Labor Department's Bureau of Labor Statistics on Friday released its first look at employment since Donald Trump became president, and although that report does not reflect actual Trump policy changes, it does include the period just before Trump became president and was tweeting about jobs saved.

According to BLS, the labor force participation rate improved in January, increasing two-tenths of a point to 62.9 percent, its best showing in four months.

BLS said 152,081,000 Americans were employed in January, close to last month’s record 152,111,000. At the same time, the number of Americans not in the labor force went in the right direction, dropping to 94,366,000, which is 736,000 fewer than last month’s record 95,102,000.

In January, the nation’s civilian noninstitutionalized population, consisting of all people age 16 or older who were not in the military or an institution, reached 254,082,000.  Of those, 159,716,000 participated in the labor force by either holding a job or actively seeking one.

The 159,716,000 who participated in the labor force equaled 62.9 percent of the 254,082,000 civilian noninstitutionalized population.

According to BLS, total nonfarm payroll employment rose 227,000, and the unemployment rate ticked up a tenth of a point to 4.8 percent.

The Labor Department's Employment Situation report is released monthly, and it reflects data gathered in the pay period that includes the 12th of the month. So today's report reflects the situation as it was shortly before Trump was sworn in on Jan. 20.

However, the January report undoubtedly reflects anticipation of Trump’s policies, as he was already discussing his intention to repeal Obamacare as well as taking credit for auto companies expanding in the U.S. (Jan. 9 tweets) during the period covered by today’s report.

Baby boomers retiring, Obamacare

The participation rate dropped to a 38-year low of 62.4 percent on Obama's watch, in September 2015. It is now half a point higher.

In testimony before Congress yesterday, Congressional Budget Office Director Keith Hall said the retirement of baby boomers is one reason for what has been a declining labor force participation rate. But he also noted that the labor force participation rate has been lower for "every cohort in the United States," including working-age people.

According to Hall, "our working-age people just aren't entering the labor force like they have in the past." He called it a "puzzle." He suggested that "federal investment in things like education and training" might address that issue.

Hall said "implicit taxes on work" are another reason for the lower labor force participation rate.

"There are a number of things that are implicit taxes on work, where we reduce benefits when income goes up," Hall explained. He specifically mentioned Obamacare: The ACA [Affordable Care Act] itself, probably reduces labor force participation, that's a drag as well. There are a number of things like that."

Under the ACA, people don't need a job to get health insurance.

On Jan. 24, the CBO released its economic and budget outlook for 2017-2017, noting that its projections, based on current law, were completed before the Trump administration took office on Jan. 20. It was this report that brought CBO Director Keith Hall to Capitol Hill.

The report projects that the labor force participation rate will average 62.8 percent this year -- roughly where it has stood since 2014 -- and slowly decline over the following ten years.

That 62.8 percent rate is 0.7 percentage points below CBO’s estimate of the potential rate. CBO projects that the actual rate will fall to 62.4 percent in 2020.

As Hall told Congress, the report says various factors have been pushing down the labor force participation rate over the past two decades, and they are expected to keep doing so during the next 10 years, as follows:

-- Members of the baby-boom generation will continue to retire from the labor force in large numbers; this factor is the most important, CBO said.

-- The lingering effects of the 2007–2009 recession and ensuing weak recovery will continue to hold down participation slightly, in CBO’s view. Despite recent declines in long-term unemployment, some of the people who lost jobs in the recession left the labor force and will not return.

-- Federal tax and spending policies are expected to lower participation rates slightly. In particular, under the current-law assumptions that govern its projections, CBO anticipates that people would keep responding to provisions of the Affordable Care Act by reducing the amount of labor that they are willing to supply over the next few years. The structure of the tax code, which pushes some people with rising income into higher tax brackets, would also lower participation rates.

-- Long-term trends involving particular groups of people, such as a growing number of people with disabilities, are projected to push down the overall participation rate slightly.

CBO also notes that those long-term factors pushing down the labor force participation rate are expected to be largely offset in 2017 and 2018 by continued improvement in hiring, as solid employment growth and rising wages draw some workers back into the labor force and keep others from leaving.

In January, among the major worker groups, BLS said the unemployment rate for Asians (3.7 percent) increased in January. The jobless rates for adult men (4.4 percent), adult women (4.4 percent), teenagers (15.0 percent), Whites (4.3 percent), Blacks (7.7 percent), and Hispanics (5.9 percent) showed little or no change over the month.

Employment increased in retail trade, construction, and financial activities.

The business and economic reporting of CNSNews.com is funded in part with a gift made in memory of Dr. Keith C. Wold.

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