Posted by: Josh Lehner | July 18, 2014

Jobs, Labor Force and Population

Much attention is being paid to measures of labor market health like the labor force participation rate and the employment to population ratio, with good reason. However, I would caution drawing too many conclusions based on the top line comparison between the U.S. and Oregon. The reason being Oregon does have a larger Baby Boomer cohort than the average state and retirees continue to move to Oregon, thus the state is aging faster than some other areas. This has big implications on measures like LFPR and the employment to population ratio. To be sure, that does not mean the state is doing great, but neither is it doing horribly either. As with many things, the truth is somewhere in the middle and Oregon is largely following national trends once you account for demographic changes locally.

First, let’s take a look at the labor force participation rate by age cohort in Oregon relative to the U.S. As detailed thoroughly a few weeks ago, Oregon used to have a LFPR higher than average, however since 2005 those gains have vanished and the state now trails the national average in recent years. What caused the relative decline? The graphs below compare Oregon’s LFPR by age cohort to the nation. For prime working age adults in Oregon, they are participating in the labor force just as much, if not slightly more, than their national peers. Where Oregon really differs from the U.S. is in the 65+ age cohort. Not only is this group becoming bigger and bigger as the Baby Boomers age, but Oregon Baby Boomers have a lower participation rate than the national average. This, appears to be a major driver in the overall change in Oregon’s relative LFPR position. This is also not much of a concern, provided these individuals want to be retired and out of the labor force and not forced out. The concern our office has with these figures are among those prime working age groups. Oregon used to enjoy a strong LFPR advantage relative to other states. While population growth and migration continue to result in an above average growth rate here for Oregon, which overall is a good thing for longer run economic growth, the state is no longer seeing both above average growth and above average participation.

LFPRvsUShoriz

On the employment side of the ledger, the story is largely similar. For an upcoming housing report, I have been examining employment trends in 25-44 year old Oregonians (those in the so-called “root setting” years) as these ages are when many individuals get married, have kids, buy a home, enter the heart of their career and the like. However, this also means I have this data readily available. Here too you can see that Oregon’s employment to population ratio for all adults largely tracked the U.S. overall but then lags a 2-3 percentage points in recent years. Given sample size concerns, it is unclear just how much is fundamental change vs data issue changes.

EPop16plusWhere you see similar trends to the U.S. are among the younger prime working age Oregonians. The year to year volatility I would chalk up to sample size concerns with the underlying Current Population Survey data, however the trends here are clear.

EPop2544

The younger adults are OK in terms of employment trends relative to the nation, although that does not mean things are OK overall given the low ratio today. With a stronger economy, the ratio should be higher, back up around the 80 percent mark seen in previous expansions.

This does mean, however, that Oregon’s lower employment to population ratio is due to those 45+ years old. This is the bigger concern given that it is not purely due to those in and around retirement age. Primarily the decline and lack of improvement can be seen among those 45 to 54 years old, relative to the nation. It is possible it is at least partly an industry mix issue with industries like construction and manufacturing bearing the brunt of lost jobs in the Great Recession, however that cannot be the whole story. Clearly these job losses are impacting LFPR as seen above (the dark blue line, for those 45-54 years old, has seen the largest relative decline since 1990).

So putting all of this together, what is the outlook? With an improving economy will come more jobs, and likely at least a little more labor force participation. However these gains are likely to be short lived as the longer run demographic changes will weigh on these top line figures that count all adults. It is important to remember that most of these changes are demographic and/or structural and focusing on the prime working age cohorts, the economy really is, and will be, improving.  See here for more on our office’s outlook.

LFPREmpPop0614


Responses

  1. […] this does not take into account the continued high levels of the long-term unemployed, or a lower LFPR, which have been detailed […]


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