Courtesy of Mish.
On Monday, my “question of the day” was What will the unemployment rate look like for the rest of the decade?
Click on the above link to see an interactive map that lets you select the rate of job growth up to January of 2020.
The base assumptions for the interactive map regarding the noninstitutional population, the labor force, and the participation rate came from revised BLS projections by Mitra Toossi in January 2012: Labor force projections to 2020: a more slowly growing workforce
Note that the accuracy of the unemployment forecast depends on the accuracy of the assumptions.
What if the BLS is Wrong?
Today we concern ourselves with the question “What if the BLS assumptions are wrong?”
We do have to start somewhere, and the assumption for the charts below is that the BLS is right about the size of the age 16 and older noninstitutional population, but wrong regarding the participation rate and the size of the labor force.
Certainly boomer dynamics are now understood well enough that the age 16 and older noninstitutional population projections are likely to be quite accurate. How fast baby boomers retire or drop out of the labor force is certainly much harder to predict.
Definitions and Notes
- The participation rate is the ratio of the civilian labor force to the total noninstitutionalized civilian population 16 years of age and over.
- The noninstitutionalized civilian population consists of civilians not in prison, mental facilities, wards of the state, etc.
- The labor force consists of those who have a job or are seeking a job, are at least 16 years old, are not serving in the military and are not institutionalized.
- There are strict requirements on what constitutes “seeking a job”. Reading want-ads or jobs on “Monster” does not count. One actually needs to apply for a job, go on an interview, or send in a resume.
- Please see Reader Question Regarding “Dropping Out of the Workforce” for an explanation of how the BLS determines someone is actively seeking a job.
As you can see, projecting the population accurately and projecting the labor force accurately are two different things.
Starting with the assumption that Toossi is correct regarding the noninstitutionalized civilian population, I asked Doug Short at Advisor Perspectives if he would plot unemployment rates at various rates of job growth with a participation rate of 62.5 (the base Toossi model), as well as participation rates of 60.0 and 65.0….
