Human Progress: Accumulate and Innovate

https://www.cnn.com/2016/03/17/world/gallery/tbt-albert-einstein/index.html

Human progress is based on 4 things, IMHO. We are able to abstract and generalize. We accumulate our lessons learned. We innovate. We combine our structured, accumulated knowledge with innovations. Creativity and innovation get most of the attention. Yet, the accumulation of our practical and theoretical experience in language, books, records and equations may be equally important. The ability to switch “back and forth” between a fixed structure, history, religion and culture and new innovations may be the most important aspect of all. We have divergent and convergent thinking abilities. We use inductive and deductive reasoning. We intuitively prefer “either/or” but can manage “both/and” logic. The modern history of mankind’s progress points towards the importance of creativity and “both/and” logic.

Abstraction is a relatively recent phenomenon. Democritus imagined atoms, smaller and smaller particles. Heraclitus imagined all as change. The Greeks imagined earth, water, air, and fire beneath everything. Pythagoras and Euclid provided geometric proofs and ideal figures. Aristotle offered a powerful version of formal logic. Plato defined the “forms” and the ideal realm that stands above our experienced reality. Descartes defined mind versus body and the Cartesian coordinate system. Newton rationalized the universe in terms of algebraically defined laws. Kant defined pure logic and the limits to pure logic. The great appeal of abstract rules and an implicit mechanical universe remains to this day. The “Enlightenment” produced new politics, economics, culture, science and religion based upon these powerful insights.

The accumulation of knowledge has occurred in a surprisingly wide variety of forms. Life in DNA. Sexual reproduction. Man’s biological memory. Human consciousness. Spoken language. Music. Myths. Written language. Culture. Laws. Accounting systems and records. Religious practices. Architecture. Books. Libraries. Scribes. Printing. Histories. Universities. Experimental science. Prophets. Peer-reviewed journals. Scientific societies. Mass media. Recordings. Radio. Video. Internet. Wikipedia. Zoom. 

The history of innovation is well known. I want to highlight the general trend away from simple, atomistic, “either/or”, static views to more complex, multi-level, “both/and”, dynamic, organic views that provide much better insights into our real experience.

Physics has moved from statics to dynamics. Classical mechanics has been replaced by complex, probabilistic quantum mechanics. The fixed, static, deterministic perspective has been replaced by Einstein’s relativity. In general, deterministic views are replaced by probabilistic views. The solid atoms have been replaced by waves and fields. Light exhibits both wave and particle behaviors. Heisenberg says we cannot measure everything. The background framework of an “ether” is no longer required. The mathematics required to describe physics has moved from algebra to multi-variate calculus to string theory. Only a handful of people truly understand the frontiers of physics in the last 100 years. 

Mathematics has advanced wonderfully in the last 500 years. Newton and Leibniz invented the calculus. Man could now measure, describe, imagine and control changes through time. There is an equation underlying all activities that can, in theory, predict the future and explain the past. Dynamics can be described. Three-dimensional Euclidean geometry was superseded by multiple-dimensional geometry, Riemann curved space and fractals. Probability theory was developed to clearly describe apparently random activities, providing a solid basis for evaluating the results of experiments. Set theory evolved to encompass all of mathematics and logic, including various conceptions of infinities. Goedel’s 1931 “incompleteness theorem” undercut Russel’s attempt to define a single, bottoms-up, certain, powerful mathematics.

Biology evolved from collecting, illustrating and categorizing specimens to Lamarck’s deterministic evolution to Darwin’s evolutionary survival of the fittest perspective. Society increasingly adopted a biological, process, systems theory perspective in place of a physics, mechanical, materialistic perspective. Nature versus nurture became nature and nurture. The details of genetics is better understood as a very complex process involving multiple genes and other structures.

In philosophy, Hegel defined his dynamic thesis, antithesis, synthesis model. History now ruled. Eternal universals were much less likely. Multiple perspectives were elevated. Certainty was less likely. Marx tried to use Hegel’s general framework combined with an economic, materialist determinism but he failed.

In practical technology, we have seen the rapid accumulation of knowledge. We have also witnessed the great importance of “both/and” solutions. For example, ships and automobiles required the invention of a clutch that provided both solid propulsion and slippage. Powered vehicles first required rails but were turned loose as motor carriages. Wheels evolved from steel to rubber to accommodate shocks, turns and rough roads. Vehicles added suspension systems. 

In economics, we advanced from mercantilism to comparative advantage and free trade. We left behind land, labor or capital as the only sources of value with the insights of the marginal productivity economists. We moved from static to dynamic perspectives and focused on the determinants of growth in advanced and developing nations. Keynes demonstrated that national economies were more than the sum of individual markets and that self-regulating equilibriums were not inherent in a market system. 

Computer systems have evolved from fully defined linear and logical systems to massively parallel systems capable of artificial intelligence and spoken interaction with humans.

Businesses have replaced assembly lines and Taylor’s experiments with a deeper understanding of individual tasks in probability terms and the sequence of events in any process. Firms have embraced Japanese style process management and improvement, delivering constantly improving results. Supply chains span the globe. Project management is now “agile”. Strategic planning is no longer deterministic, but focused on mission, vision, values, strengths, weaknesses, opportunities, threats and culture. Investments are considered within the framework of portfolios of risks and returns. Entrepreneurs and leaders are valued above technical and professional experts.

For many, religion has evolved from a legal, literal, deterministic perspective to one that emphasizes the principles, insights, opportunities, feelings, experiences and possibilities of a given creed, despite the loss of absolute certainty in a “Secular Age”. 

As humans we prefer a simpler, more deterministic view of the world. Yet the world shows us that it is more complex and that we will never fully understand it. 

Good News: Golden Age for US Jobs Growth (21st Century)

Economists prefer to measure data at business cycle peaks and troughs. After the Millenium Y2K scare, we endured a mini recession. Employment peaked at 132.8 million jobs in March, 2001. Today, in October, 2023, we have 156.9 million jobs, an increase of 24 million jobs in 22 1/2 years, almost 1.1 million new jobs created each year! This is despite the job destroying effects of the Great Recession and the Pandemic.

The longest business expansion in US history ended after 10 years in February, 2020. The pandemic eliminated almost 22 million jobs in 2 months, leaving the economy with just 130.4 million employed, barely above the trough of 129.7 million in February, 2010.

The economy replaced those jobs in just 26 months when the June, 2022 figures were reported! In addition to replacing the first 22 million jobs, the economy has added another 4.5 million jobs in the last 16 months, averaging 280,000 per month or 3.4 million per year! At the same period after the Y2K recession, the economy averaged 2.6 million new jobs per year. At the same period after the Great Recession, the economy averaged 2.8 million new jobs per year. Our economy averages 1 million new jobs per year and can accelerate to 3 million per year when recovering from a recession. The current recovery is stronger than either of the last two.

Another way to gauge progress is to measure jobs added from peak to peak. The economy added 5.6 million net new jobs by December, 2007, or 836K per year. In the 13 years until February, 2020 the economy added 22.7 million jobs, or 1.141M per year. Since then, the economy has added 4.5 million jobs, or 1.240 per year, a very solid result.

Where are the extra 4.5 million jobs? 38 states exceed their pre-Pandemic totals. Texas (1.1M), Florida (750K), California (500K), North Carolina (300K) and Georgia (250K) lead the way. Arizona, Utah, Tennessee, Nevada, South Carolina, Washington, New Jersey and Indiana each added at least 100K, for a total of 4 million by these 13 states. On the downside, New York remains 125K short and Vermont, DC, Hawaii and Rhode Island are more than 2% below February, 2020.

The post-pandemic economy is creating jobs slightly faster than the post-Great Recession economy. 17 states are growing at least 2% faster than their pre-Pandemic trend rate. Idaho, Nevada, Montana, Utah and Florida are growing at least 4% faster than before. 9 states trail their prior growth rates by at least 2%. North Dakota, Hawaii, New York and DC trail their prior growth rates by 4% or more, for various reasons.

During the full 23 years, Texas (4.5M), California (3.3M), Florida (2.7M), New York (1.1M) and North Carolina (1.0M) added the most jobs. Washington, Nevada, Arizona, Utah, Colorado, Tennessee, Georgia and Virginia each added more than one-half million, for a total of 18 million in the 13 leading states. While the nation added 18% more jobs during this period, 9 states grew by 3% or less: Louisiana, Mississippi, Illinois, Michigan, Ohio, West Virginia, Rhode Island, Connecticut and Vermont. These states accounted for more than one in six citizens in 2001, so their weak performances limited the overall economy.

Summary

The economy started the 21st century slowly with a small recession and weak jobs growth during the Bush years. Obama started his first 2 years with a 9 million job deficit before starting a very strong and long 10-year recovery that added 23 million jobs. Economists did not expect the recovery to last during the Trump administration but almost 9 million net jobs were added on his watch before the pandemic. Biden refilled the 22 million lost jobs in 26 months and has added 4.5 million more in the next 16 months. With the Fed’s higher interest rates, job growth is slowing but is generally expected to exceed 1.25 million in 2024. The US economy continues to outperform.

https://www.bls.gov/web/laus/statewide_otm_oty_change.htm

https://www.cbpp.org/research/economy/tracking-the-recovery-from-the-pandemic-recession

https://www.stlouisfed.org/publications/regional-economist/2023/nov/slower-gdp-growth-falling-inflation-us-economic-outlook-2024

https://www.forbes.com/sites/jackkelly/2023/11/18/heres-why-the-job-market-will-improve-in-2024/?sh=eedb8d139ead

https://www.morningstar.com/markets/why-we-expect-job-market-slow-2024

Our Hamilton County: Peer Counties

In 1970, Hamilton County was home to just 55,000 people. It has grown 6-fold since then to more than 330,000. One percent of the nation’s 3,143 counties have experienced similar growth in this 50-year period. These 32 counties combined have grown more than 5-fold from 2.2M (1.1% of US) in 1970 to 11.8M (3.6% of US) in 2020.

8 of the counties are Sunbelt retirement areas. 4 are smaller urban areas. 20 are suburban/exurban counties within larger metropolitan areas.

Each county remains fast growing, issuing an average of 5,000 building permits in 2022 versus an average of 500 per county nationally. Hamilton County’s 5,800 permits is above average.

As a group the counties average 16% of residents aged 65+, ranging from 11% to 25-29% in retirement counties. Hamilton County’s 14% makes it a little younger than the national average of 17%.

The percentage of adults working averages 66% versus 64% for the US as a whole, ranging from 48-54% in retirement communities up to 74%. Hamilton County’s 71% ties for second place.

Median household income at $85,000 for this group is 13% higher than the national average. Hamilton County’s $115,000 is sixth highest. 5 of the retirement counties average less than $70,000. Loudon County records a stunning $170,000.

Poverty rates are the mirror image, at 9% for the group versus 12% nationally. Rates range from 3-16%. Four retirement areas have poverty rates above the national average. Hamilton County’s 4% is tied for second lowest.

The group records 38% of adults with college degrees versus 34% for the nation. 7 retirement counties and Henry County south of Atlanta report 28% or less. Hamilton County’s 61% is second to Loudon County’s 64%.

Average home values are $345,000 for this subset, a solid 22% higher than the $282,000 national average. 10 counties reported prices below the national average, 5 in retirement areas, 4 in suburban counties and Bentonville, AR. 4 suburban counties listed their median home prices above $600K: DC, Sacramento, Nashville and Denver. Hamilton County’s $351,000 was average for the high growth group.

The group averaged 68% non-Hispanic White versus 59% for the nation as a whole. 4 counties had more minorities than non-Hispanic Whites: Ocala, FL, Henry/Atlanta, Prince William/DC and Brazoria/Houston. St. Charles County in the St. Louis Metro area had the highest non-Hispanic White share at 85%. Hamilton County’s 81% was 6th highest.

These 32 counties averaged 10% foreign born, much below the 14% national average. St. Charles County recorded only 3% foreign born. 5 counties reported 20% or higher foreign born: Forsyth/Atlanta, Ocala and Naples, FL, and Loudon and Prince William/DC. Hamilton County’s 9% is a little below the group average.

Summary

Hamilton County is one of 32 counties that have recorded tremendous growth across 50 years. It is relatively young and less diverse than most. It has higher incomes and average housing costs compared with its peers.

Our Hamilton County: Job Growth Is Even Faster than Population Growth

https://www.indystar.com/picture-gallery/news/local/hamilton-county/2023/02/28/inside-republic-airways-new-aviation-campus-carmel/11282362002/

Hamilton County’s employment has grown 16-fold since 1970 from 15,000 to 243,000. This is a 52-year compounded 5.5% growth rate. You aren’t likely to find that growth rate in your stock or mutual fund portfolio!

This growth started from a low base of 1,500 new jobs per year and accelerated to 5,000 new jobs per year by 2000. Hamilton County has maintained this growth rate for 2 decades with some extra results recently!

Hamilton County’s population doubled from 1970 to 1990. Metro Indy, excluding Hamilton County, grew by the same 50,000 people. In the next 30 years, Hamilton County added more than 250,000 people and the rest of metro Indy added a very solid 475,000 people (almost 2X). Hamilton County benefits from the Midwest leading growth of metro Indy.

Hamilton County employment growth has been a little faster than population growth.

Metro US population has grown by 1% annually and employment has grown by 1.6% annually. The Indy metro area has grown at similar rates. Hamilton County has grown 3-4 times faster.

As Hamilton County has grown, its annual growth rate has declined from 7% to 4%, still far above the 1.5-2% baseline growth rate.

Hamilton County has grown from 1/3,000 US people and 1/5,000 US employees to 1/800 citizens and workers. (4-6X growth).

Metro Indianapolis has been a solid job creator. Hamilton County has grown alongside the metro area.

Hamilton County was a “bedroom suburb” in its early days but reached the national level of jobs to population by 1992 and tracked the national average thereafter.

Good News: Metro Indy is a Midwest Jobs Leader, 1990-22

Between 1990 and 2008 US jobs grew by 22% but trailed in Midwest metro areas, increasing by only 14%. US jobs have grown by 9% since the Great Recession, with the Midwest trailing slightly at 8%. Metro Indianapolis has been a percentage growth leader in both periods, at 27% and 18%. Columbus and Kansas City show similar figures. Minneapolis has higher actual jobs added but slightly lower percentage growth on its twice as large base.

Chicago has added more total jobs, but its 18% growth is far behind Indy’s 49% and most of its growth took place back in the 1990’s. Nashville is typically grouped with the Southeastern states but if it was included in the Midwest, it would be the clear winner, nearly doubling its job base in 3 decades.

Personal Value Creation and Capture

http://awakeningcenter.blogspot.com/2017/08/one-word-plastics.html

Join a Growth Industry

This 1967 lesson in “The Graduate” remains relevant today. A rising tide lifts all boats.

Live a Great Life

Establish your priorities for life. What is negotiable or non-negotiable? How much is incremental income, wealth and financial security worth to you and your family?

Invest

The opportunity to own your own firm is greater today than ever before. Entrepreneurship is a high risk/high reward option. It requires a financial investment. Internet partners are ready to provide most support services. Licensing and franchising provide other options. Niche products and services have a global market.

Trade-offs

How many hours? Physical risks? Work the firm’s top priority every minute? Firm risks – seasonality, stability, leverage, industry risk, start-up. Serve as a representative for a group? Grey ethics, whatever it takes? Consultant, gig worker, cross-team, project member.

Profession

Degree(s), time, cost, intern, resident, trainee, junior, dues, investment, licensed, certified, valued, next best option for firms, international outsourcing, AI outsourcing.

Talent

The very best of the best. Creative, sports, intellectual, selling, persuading, appearance, arts, counselling, investing. Ability to leverage business wins. Ability to monetize output broadly.

Managing

Managing the conflicts between people and tasks. Great managers are well compensated for buffering between these contrasting forces. Adequate managers “get by” or are demoted in competitive industries.

Analysis

STEM skills applied are highly valued today. Specialized “analyst” skills. Technocracy. Problem-solving in unstructured situations. Choosing the right tool to structure the situation so that a decision is clear. Analysis applied to large value deals, decisions, contracts and acquisitions. Strategic choices, competitive advantage, sustainable moats, value extraction.

Sales

Customers have choices. They value quality, speed, flexibility, features, price, ease of doing business, risk reduction and personal relationships (QSFVIP). Great salespeople are well compensated for connecting a firm’s value proposition to customers in a sticky fashion. They play the game in 3 dimensions: firm, customer and salesperson. Commissioned sales and agent models. New business acquisition.

Influence/Politics

Communications skills. Relationship skills. Influence skills. Negotiating skills. Political relationships applied – internally and externally.

“Rent” from Specific Skills, Knowledge, or Relations

Industry, firm, profession, language, international, expert, technical, customer, regulator, supplier, or consultant knowledge, understanding, influence. A combination of skills required for a role. Holding a position in the firm.

Responsibility

Raise your hand. Manager. Project manager. Project member. Value added leader for new products, customer markets, structures and processes. Line manager in a measurable success role. Resource manager for broadly defined suppliers, customers or staff resources. Second level or higher management role responsible for results largely beyond your control.

Leadership

A mythical beast. Charisma. IQ. Confidence. Elite education and experience. Progressive successful role. General management ability to lead multiple functions, teams, divisions, geographies, product lines without being an expert. Social status and ease.

Summary

We live in a complex world of many firms, products and services competing for the attention of consumers. Firms employ people to make sales and profits. Firms employ people who they believe provide them with the greatest “marginal product of labor”, the greatest value added. Firms pay as little as they can. Their interest is to employ labor for less than their marginal value added and capture the difference. Set your moral limits. Work on your own. Determine the best path to be a value-added resource. Pick an industry. Pick a profession. Exploit your own extreme talents, sales, influence, specific knowledge, analysis, responsibility or general management abilities. No one has ALL of these skills. You have some talents. Leverage your talents.

I started writing this article thinking about the ratio of incomes of large firm CEOs to shop floor/outsourced workers. It has risen from 20X to 300X to 2,000X through time. Beginning with “essential workers” as the baseline, somewhere between the effective $10/hour minimum wage, and the $20/hour median income, others earn incomes in the US many times above the median. What incremental value do they provide to their firms or to society? in “order of magnitude” terms, I think that hours and flexibility are worth 50%. Professional, management, analysis, sales, influence and specific knowledge add 100% each, or 250% in combination. “Higher level” responsibility and leadership skills add another 200-300% of added value, reaching a combined 500-600% premium above median incomes (IMHO).

Historian Will Durant emphasized the need for all civilizations to incentivize their most talented individuals to engage in the work that coheres and advances their lives. First, political unity, commitment and loyalty. Second, material progress. Our society must be attractive and deeply engage the top 20%, 10%, 5%, and 1%. Does this require a 5X income advantage? 20X? 200X? 2,000X?

We currently live in a “winner takes all” society that is comfortable with 1,000X discrepancies between the winners and the workers. Is this required to incentivize the “best and the brightest” to work hard to provide incremental value for society? I think not. This is a political choice we have accepted since Reagan. Our society is incredibly productive because it is comprised of productive and highly educated individuals. The political choice of how much the most successful people retain is a separate issue.

Our Hamilton County: Low Unemployment

https://www.misoenergy.org/about/

One of the “control centers” at MISO Energy in Hamilton County.

Hamilton County’s unemployment rate has averaged 3.1% since 1990, a little more than one-half of the nation’s 5.8% average. The Indy metro area has averaged 4.6%. In the last decade, Hamilton County has still averaged 2.0% lower than the national average of 5.3%.

https://fred.stlouisfed.org/series/UNRATE#0

https://fred.stlouisfed.org/series/INHAMI5URN#0

https://fred.stlouisfed.org/series/INDI918URN

Statistical Illiteracy and Logical Fallacy

The stock market overreacted today. Job openings increased by 700,000 between July and August. Oh no! The labor market is too strong! Wages will increase! Cost-push inflation will build. The Fed will increase interest rates. We’ll be in recession soon! Boo!

Job openings are clearly falling. From an all-time high of 11.5 million to about 9.5 million in 18 months. With another 18 months of a “cooling” labor market, there will still be an historically high 8 million open positions in February, 2025. The labor market is slowly returning to “normal” after the Pandemic disruption.

This is a solid labor market, not an overheated labor market. Real wages finally grew during 2016-2020, by 7%. They spiked during the pandemic but have been flat for the last 18 months.

The number of unemployed people remains at 6 million, low by history, but not declining to unsustainable levels. 6 million is better than 8 or 15 or 23 million.

It’s a great time to be a job seeker, 3 jobs for every 2 job seekers. This is an historically positive ratio. It has been maintained for 2 years.

The unemployment rate remains at an historical low of 3.5% but is not falling.

Low unemployment is a widespread phenomenon. 22 states are below 3%. Only California, Nevada and DC are above 4.1%.

The labor force participation rate is at a 15 year high, with positive hiring and wage conditions attracting greater participation.

The quit rate remains above the pre-pandemic high, indicating that employees still see a positive labor market, but not an exploding market.

Total employment was flat for the first 11 years of the new millennium, parked at 132 million. Job growth accelerated for the next 8- and one-half years, adding a very solid 20 million new jobs. Post-pandemic, the economy has added another 4 million jobs.

Summary

This remains a Goldilocks labor market, neither too weak nor too strong. The Millennium pause, Great Recession and Pandemic have made us gun-shy. We don’t want to claim victory for fear of disturbing the labor market gods. But we are enjoying victory. 156 million employed versus 132 million employed a dozen years ago. An 18% increase.

Mostly Good News Since the 2008 Great Recession

https://content.time.com/time/specials/2007/article/0,28804,1733748_1733756_1735278,00.html

Real, after inflation, Gross Domestic Product is up by one-third, despite the pandemic. That’s 2% annually, despite the Great Recession and the pandemic. The US economy is very solid.

A 21% increase in per capita income during this time. Quite solid and constant growth.

Inflation averaged a bit less than 2% before the pandemic, spiked to 8%, and has since declined to 4%. Experts disagree on whether it will return to 2% soon.

Gas prices are the most obvious component of inflation. They are largely driven by global supply and demand. Prices today are the same as in 2011-14, despite the general inflation increase of more than 20% since then.

Despite the pandemic, US unemployment is at a 50 year low!

Job seekers today encounter 3 times as many job openings.

Core age labor force participation has snapped back after the pandemic.

Investment values have doubled.

The number of millionaires and billionaires in the US has continued to increase.

Personal savings rates rose from 6% to 9% before the pandemic, shot up and fell back down to just 4% recently.

Housing values have doubled since the Great Recession.

Mortgage rates averaged 4% after the Great Recession, dropped to 3% and then increased to 6%+ as the Federal Reserve raised interest rates.

US exports have nearly doubled in 14 years.

Despite the Trump tariffs, which Biden has maintained, imports have also nearly doubled.

Despite historically slower growth rates, higher budget deficits and looser monetary policies, the US dollar is more highly valued today than in 2008.

Foreign countries still see the US as a positive ally, despite their concerns during the Trump era.

Obama returned the budget deficit to a “reasonable” 3% by 2016. Trump expanded it to 5% and then 15% as the pandemic struck. Biden drove some recovery to 5% by 2022, but has not driven further reductions.

US coal production is in a long-term decline.

Natural gas production has nearly doubled in 14 years.

Net farm income has been significantly above the base for 6 of the last 14 years, despite lavish Trump farm subsidies.

Manufacturing employment has continued to rise slowly in the last 14 years against the headwinds of international competition.

It’s difficult to put the pandemic in perspective, but here we see a 2-year reduction in expected lifespans. Opioid deaths and so-called “deaths of despair”, alcohol, drugs, suicide, also play a role.

Birth rates continue to drift lower as seen in all regions of the world.

The number of retirees has increased by more than 50%.

Retiree incomes are up by one-third, matching inflation.

Prospective retirees have doubled their cumulative savings.

The abortion rate has continued to fall in the last 30 years.

Church attendance has dropped from 40% to 30%.

Summary

The US economy recovered slowly after the Great Recession and then very quickly after the pandemic. Real, after inflation, output and per capita output increased. The labor market became very tight. Asset prices (investments and housing) rose for intrinsic and monetary reasons. The US remained a competitive international producer. The federal budget deficit was better at the end of the Obama period but worse for Trump and Biden. The pandemic reduced life expectancy and households had fewer children. Successful retirements grew and will grow. Social trends continue, uninterrupted by political positioning and policies.

Perceptions of the country and the economy are increasingly shaped by partisan political party views. Nonetheless, the US economy continues to grow and thrive.

Good News: Labor Force Participation Recovers from the Pandemic

https://chicago.suntimes.com/2022/6/10/23162642/best-photos-of-the-week-chicago

Overall labor force participation rate dropped by 1.5% in the pandemic and has recovered by 1%, still 0.5% below the recent history. However, the prime age category and several market segments no meet or exceed their pre-pandemic levels. Many details to consider.

Hispanic participation is now 1% higher than the 2018-19 average before the pandemic.

The Asian participation rate is up 1%.

The Black participation rate is up 0.5%.

The White participation rate dropped by 1.5% and has recovered by half: 0.75% better but 0.75% below history.

The Women’s participation rate has essentially recovered to the 2018-19 average but is a half point lower than the peak levels seen just before the pandemic.

The male participation rate dropped by 1.5% but has only recovered by 0.5%, a major 1% below pre-pandemic times. Part of this is due to the long-term downward trend. Part of this is a “mix variance” driven by the very high number of “baby boomers” moving into normal retirement age or retiring early.

https://www.richmondfed.org/publications/research/econ_focus/2021/q1/district_digest

Black men are back to their pre-pandemic participation rate.

Black women are more active labor force participants.

Hispanic men remain 1% below their pre-pandemic labor force participation rate.

Latino women have recovered to their historically high 61% participation ratio.

The White male participation rate dropped by 2% and has not recovered. Again, part is due to the long-run downward trend. Part is the aging of baby boomers into retirement. The remainder appears to be a response to the pandemic experience. “I’m not working unless you make it worth my while.”

White women remain a little below their 2018-19 average and three-quarters of a point behind their pre-pandemic peak level.

Teenage work participation has increased by 1.5% as entry level wages have risen.

College grad age participation rate has mostly recovered but remains 1% below the pre-pandemic high.

The retirement age workforce reduced its participation rate by 1.5% and has stayed there after a brief pseudo-recovery.

https://www.whitehouse.gov/cea/written-materials/2023/04/17/the-labor-supply-rebound-from-the-pandemic/

The prime age work force is now above even the elevated pre-pandemic level and a full one percent above the 2018-19 average. This is very good news, reflecting a strong economy an labor market.

Prime aged men have returned to the workforce.

Prime aged women are the “rock stars”, increasing their participation by 2% from 2019.

Brookings has combined all of the race and age data. Major declines for white men in all 3 age groups and for white women aged 65+. Major improvements for prime age white, black and other women and for prime age black men.

Non- high school graduates have added 1% to their labor force participation as real wages have increased.

High school graduate participation dropped by three points before recovering by two points.

Individuals with some post-high school education, but not a bachelor’s degree, are in the middle range of US educational attainment. Their labor force participation rate had declined by almost 3 points in the 6 years before the pandemic, dropped by another 2 points during the pandemic and has not “recovered”.

Labor force participation by bachelor’s degree holders was stable before the pandemic, then dropped by 2 points and has since recovered by a little more than 1 point, remaining about one-half point below the prior average.

Individuals with a high school degree or higher have displayed drops of 10 points in labor force participation across the last 30 years. Most of this change is due to the “mix variance” of lower participation by an increasingly older and retired population, but some reflects other causes.

https://www.census.gov/library/stories/2021/06/why-did-labor-force-participation-rate-decline-when-economy-was-good.html

Foreign born members of the US labor force have fully “returned to work” after the pandemic.

https://www.whitehouse.gov/cea/written-materials/2023/04/17/the-labor-supply-rebound-from-the-pandemic/

This participation growth improvement has taken place as the foreign-born population has increased to its trend growth rate.

https://www.ers.usda.gov/topics/rural-economy-population/employment-education/rural-employment-and-unemployment/

https://www.ers.usda.gov/data-products/chart-gallery/gallery/chart-detail/?chartId=103862

In general, rural labor markets have grown more slowly in the last 15 years and shown greater reductions in labor force participation. Some of the increased labor force participation in the last 2 years may reflect a recovery from these declines.

https://www.bostonfed.org/publications/new-england-economic-conditions/2023/april.aspx

Most states show a similar pattern of labor force participation in the years before the pandemic, declining by 2-4% and afterwards recovering to their pre-pandemic level. California’s recovery has been slower. The New England states had an unusual increase in labor force participation before the pandemic and have not seen a major recovery after the pandemic.

Summary

Several sources decry the decline in the number of workers and the labor force participation rate, noting that it holds back the economic recovery and taints the 3.5% unemployment rate.

https://www.forbes.com/sites/qai/2023/01/25/unemployment-is-low-but-so-is-the-labor-force-participation-rate—whats-going-on-in-the-us-labor-market/?sh=72f0035b244e

https://www.gspublishing.com/content/research/en/reports/2021/11/12/4f72d573-c573-4c4b-8812-1d32ce3b973e.html

https://www.uschamber.com/workforce/understanding-americas-labor-shortage

Other sources point to the long-term downward trends in participation as the biggest factor, mostly driven by an aging workforce and recent higher than normal retirement rates. Pre-pandemic forecasts showed a one-half point decline in participation, matching the actual 2023 data. Detailed analysis shows that the age adjusted participation rate is a little higher. The core group, aged 25-54 population, also shows labor force participation recovery to relatively high pre-pandemic levels. So … there are demographic, racial, education, birth country, rural/urban, location and state differences in participation. There are opportunities for higher participation in a strong economy and labor market. However, the recovery from the pandemic is complete, reflecting this strong economy and labor market.

https://www.whitehouse.gov/cea/written-materials/2023/04/17/the-labor-supply-rebound-from-the-pandemic/

https://www.axios.com/2023/06/02/jobs-report-workers-prime-age-labor-force-participation

https://www.atlantafed.org/chcs/labor-force-participation-dynamics