September 2015 was one of hottest seasons on record — just not for jobs
Here we are, rounding out the first week of October, and we’ve got September on the mind. As much as we’d like to say it’s because we contracted an Earth, Wind & Fire earworm from the radio, we’re specifically referencing the tepid jobs report released by the U.S. Department of Labor. Analysts had projected a gain of 200,000 non-farm jobs, yet the seasonally adjusted tally fell short of that figure by nearly 60,000. The totals for August fared worse. This disappointing cycle raises doubts among economists that the Federal Reserve will increase interest rates at all now, given the chilly employment outlook that overshadowed the end of a scorching summer.
Still, some market watchers and business media are attempting to present a rosier outcome, suggesting instead, in their somewhat abstruse econo-speak, that the slump is merely a byproduct of something called “residual seasonality.” Bloomberg recently championed this notion of financial seasonal affective disorder:
“The initial September print may suffer from the same ‘downward bias’ as the previous month, according to analysts at Stone & McCarthy Research Associates. August and September payroll readings have each been revised up by the Labor Department in 12 of the past 14 years, they said in a note. For that reason, economists may dismiss a lower-than-projected reading, particularly if hiring in August is revised up.”
To further downplay the sense of gloom, they also tout the unchanged unemployment rate of 5.1 percent. And that would seem to indicate a generally healthy overview of the market — jobs are still being created, albeit at a slower clip, and nobody’s getting sacked. Unfortunately, data for jobless claims don’t paint the whole picture. The labor force participation rate (LFPR), which measures the number of Americans in the workforce, plummeted to its lowest level since 1977. That means an alarming chunk of the population isn’t considering a job. Yet there’s another aspect that analysts and pundits are ignoring — the rise of a voluntarily independent workforce and the power it has to reshape the outdated employment models that are withering in this new century’s economy.
Not participating is different than not employed
So what’s the difference between the unemployment rate, which we hear about regularly, and the less publicized LFPR? Unemployment statistics track the number of jobless people who’ve filed claims, are actively seeking work and haven’t found or been offered a position. The LFPR depicts the count of individuals who’ve simply dropped out of the workforce altogether. To put it another way, pretend you’re an actor on “Game of Thrones.” It’s probably fair to say that you’re the ultimate at-will employee. And odds are that your character’s virtual mortality rate isn’t good.
After a few episodes, your on-screen alter ego gets decapitated or meets some equally horrific medieval end. You cash your last check, offer vague goodbyes to the press, call your agent and start looking for new roles. You are unemployed.
Now let’s say you were so vocationally traumatized by your character’s unexpected and gruesome demise that you curse HBO, George R.R. Martin and the entire entertainment industry, vowing never to act again. In this scenario, you’ve opted not to work at all for the foreseeable future. You are now among the ranks of those included in the LFPR.
As it stands, according to government data, barely six in 10 Americans eligible to work are currently looking. That means there are approximately 100 million capable candidates who have abandoned their job searches. With a mass of unfilled and languishing job openings across industries, coupled with a relatively stabilized economy, one would expect an influx of tech-savvy Millennials to be grabbing up positions. Yet, that hasn’t happened. As MarketWatch reports, citing Lindsey Piegza, chief economist at Stifel Fixed Income: “A further decline in the participation rate suggests the U.S. labor market is undergoing a significant slowdown in the second half of the year.”
What’s driving non-participation?
One of the most interesting things about media coverage of the historic LFPR crash is the almost dismissive and laconic way they attempt to rationalize it. Remember, participation hasn’t been this low since 1977 — practically a year before the country soured at the economy under Carter. In fact, the LFPR rose significantly during that time — despite the energy crisis, stagflation and a recession in the spring of 1980 — primarily due to the volume of women entering the workforce. However, as the United States becomes an older and wealthier society, that trend appears to have reached its conclusion. Why? To hear some insiders tell it, such as the officials at the Atlanta Fed, it’s because 40 percent of us don’t feel like working: “The decrease in labor force participation among prime-age individuals has been driven mostly by the share who currently say they don’t want a job.”
That explanation seems incomplete and even a bit disingenuous. One leading factor concerns the aging workforce. Meanwhile, though, the batch of so-called adults reaching “prime age” — between 25 and 54 — has been declining since the 1990s. Of course, there are several other catalysts contributing to the waning LFPR.
- Small businesses typically drive 80 percent of U.S. employment, yet the formation of small businesses has fallen: exit rates now surpass entry rates.
- With rampant income inequality — most evidenced by historically high profits and CEO salaries in the face of job and wage cuts for the working classes; increased competition from skilled, educated and cheaper labor abroad; and more companies spending money to buy back their own stocks than attract talent — some workers truly have become disenfranchised and disenchanted.
- The millennial generation is burdened with debt — about $1 trillion collectively. Many choose to remain in college longer, piling on more debt, in the vague hope of landing a job that compensates them well enough to pay down these mounting financial obligations.
- Despite the anticipated exodus of older talent, millions of Americans aged 55 and up are refusing to leave because they don’t have the savings or long-term security their forebears did. This prevents younger workers from climbing the ranks, developing leadership skills and creating opportunities for better positions that command higher pay.
It’s become clear that employers and investors desire a fluid, on-demand workforce to contain overhead operating costs and maximize profits. At the same time, they also fret over unfilled job openings, skills shortages and an increasingly dismal participation rate. Many argue that these very attitudes are fueling the gloomy outlook among talent who are dropping out of the market. However, everyone in this debate seems to be forgetting one crucial and optimistic byproduct: the growth of independent workers is booming.
Self-motivated, self-employed talent are actively participating in this next-generation economy
“We’re in the middle of a sea change in how American employment works, and that’s a very good thing,” says Gene Zaino, CEO of MBO Partners. Rapid innovation, the spread of technologies and the globalization of business have spawned a new economy where the traditional stability of employment has eroded. However, these same conditions have given rise to a thriving population of independent talent and freelancers — individuals who understand that they are responsible for ensuring their own security and success.
According to MBO Partners 2015 State of Independence in America, the most comprehensive report of its kind in the industry, the independent talent force continues to grow at twice the speed of traditional U.S. employment. Although the LFPR has raised some hackles, most people view it in the sense of traditional work arrangements. The independent group, on the other hand, is solid and holding steady at 30.2 million. If you factor in those freelancers who work occasionally, on a non-weekly basis, the number shoots up to 42.1 million. Should the trend continue, we could see the number of independents spike at 54 percent by 2020.
The sharing economy can work, and it’s most likely here to stay. The reasons for its appeal and endurance have as much to do with the desires of today’s talent as they do with the needs of business leaders. Change can be frightening, yet by shaking the trees we often discover more fruit. There will arise new opportunities for independent workers, staffing providers and MSPs, who will evolve as curators of this on-demand talent marketplace.
In our next article, we’re going to look at the potential role staffing professionals can play in this push toward independence.
(Image Source: Getty)
This article was syndicated from Business 2 Community: Will There Be an Indian Summer on the Jobs Front? Here’s Hoping.
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