Since the start of the millennium, the United States’ labour force participation has been declining.
The number of people working in the job market is at its lowest than ever before.
The participation rate is currently below the nation’s long-standing average of 63 percent. This is the lowest percentage the U.S. has seen since the mid-1970s.
Chief Global Strategist Dr. David Kelly of J.P. Morgan Funds believes that structural aspects have mainly contributed to the country’s falling numbers—specifically relating to demographics.
Here are the five groups that are currently causing slow growth in the job market.
1. The Younger Generation
Within the past three decades, the participation rate from younger workers has decreased. The study says that a large portion of adults ranging from the age of 16 to 24 have decided to pursue college rather than jumping right into the workforce. From March 2000 to October 2014, the nation’s official employment rate—including the younger group of working people—fell by 4.6 percent or 67.4 percent to 62.8 percent.
2. The Felons & Ex-Convicts
The criminal record population in America is also rising. This plays a major factor in determining if a person will be considered for a job. From 1991 to 2012, the number of ex-convicts or felons in America increased by 8 percent. Over 20 years ago, people with criminal records made up 13 percent of the U.S. population. As of 2012, 22 percent ex-convicts are counted for in the job market or as unemployed.
3. The Discouraged Job Seekers
People who have given up searching for work after 12 months of looking are classified as discouraged job seekers. The number of discouraged job seekers in the labour market doesn’t make up a large portion of the plunge in employment participation. This group only made up 0.3 percent of the nation’s 3.5 percent drop. Yet, it still plays a role in its shrinkage.
4. The Disabled
The disable play a part as well. More people are applying for disability benefits. The percentage of people receiving help from the government is now around 2.6 percent—a 0.3 percent increase from 2.3 percent in 2000.
5. The Baby Boomers
The baby boomers are steadily leaving the workforce and creating a hole in the U.S. labour force. The number of baby boomers hitting 65 has increased by 33 percent. Economists believe these retirees have affected the job market participation rate the most.
As the employment rate continues to fall, economists are afraid that the job market will never revert to what it was three decades ago. For the most part, this comes as a major concern for investors and stockholders.
A failing labour market means that the U.S. will experience "more significant inflation pressures and more rapid Federal Reserve tightening than markets currently expect."
Since this issue is more so of a structural matter, a sudden economic growth will unfortunately not improve the unemployment rate.
Furthermore, economists predict that a "slow labor force growth could potentially limit future growth in both GDP and corporate earnings."
It looks like the workforce participation rate will only get worse moving forward.