Last year,
we estimated that pointed out that there were still 7.4 million workers missing from the labor force. The presence of so many missing workers would dampen wage growth for some time to come. Today, the number of missing workers is down slightly to 6.8 million workers as of January 2020.
And, true enough, wage growth has remained rather subdued given the low official unemployment rate of 3.6% as of January 2020.
But certain sectors of the labor market are starting to tighten. For instance, the prime age (25 to 54 years old) working group is now reflecting a shortage of workers of 191 thousand people.
This indicates that wages for this age group could tighten in the not too distant future.
The tightness of the prime working age group is not shared equally among the sexes. The labor market for Prime Age Women Workers is very tight, with an estimated shortage of almost 1 million women as of January 2020.
For men, it is an altogether a different story. There are still around 800K Prime Age men missing from the labor market..
This gap for Prime Age men is being filled very slowly, only a few thousand a month. But once that gap is filled, wages should start rising up.
Last year, we estimated that there were almost 8 million workers missing from the labor force. Because of job growth, that number is down slightly to 7.4 million.
With the exception of DC and MA, most states have not recovered their pre-recession Labor Force Participation Rates (LFPR).
Prime Age Workers (those aged 25 to 54) are within a hair's breadth of their pre-recession LFPRs, indicating that labor markets may start to tighten very soon. However, wage inflation may be muted for the time being. Why? There are huge pools of labor waiting to take up the slack, particularly in the 20-24 and teenage (16 to 19) age groups. Their LFPRs are still significantly below their pre-recession peaks. The oldest age bracket (55+) actually have a higher participation rates post-recession than pre-recession, indicating that many of them are not ready to retire and/or are working part-time jobs. All these factors serve to suppress wage inflation.
In terms of absolute numbers, there are at least 1.5 million young workers missing from the labor force, plus another 1.3 million older workers hanging on to the labor force.
It would take several more years of sustained job growth to reduce this labor slack.
Half the cumulative jobs added since the start of the Great Recession have gone to foreign born workers. As of August 2018, 4,006 jobs added went to the foreign born while native born workers accumulated only additional 4,415 jobs. This happened despite the fact that foreign born workers only amount to 14.80% of the Total Civilian Non-Institutional Population - the population eligible to work.
In other words, much of the economic recovery went to the foreign born while a significant chunk of those who disappeared from the workforce are native born.
Much of this took place during the eight years of the Obama presidency when native born workers gained 6 million jobs and foreign born workers gained over 4 million jobs.
A lot of the gains for native born workers happened in the later years of the Obama presidency. Indeed, when Trump announced his presidential candidacy in May 2015, native born workers had gained around only 237 thousand jobs while foreign born workers had gained almost 2 million jobs.
Since Trump assumed the presidency in January 2017, native born workers have gained an additional 4 million jobs while foreign born workers gained over 1 million jobs.
Obama has added 10.3 million jobs since the start of his term. He ranks just below President Clinton and President Reagan in terms of absolute number of jobs created.
This is a considerable feat, given what he had to start with since he was ushered into power right in the middle of the steepest recession since WWII.
Despite all this, people are angry. They want to vote for a guy like Donald Trump anti-immigration rhetoric that began with his Presidential Announcement last June has inspired the resurgence of white nationalists all over the country.
,
Normally, these type of comments would sound the death knell for any politician. But these are not normal times and Donald Trump is not your normal politician. Donald Trump has continued to maintain a commanding lead in the Republican primaries.
So what gives? Why are people so angry? Why has the likes of Donald Trump struck a chord with so many American voters?
One simple reason: Foreign Born Workers.
Foreign Born Workers are an ever increasing part of the Civilian Non-Institutional Population (the working age population:
Although Foreign Born and Native Born workers have similar unemployment rates:
And the proportion of unemployed Foreign Born workers has remained pretty constant:
Foreign Born workers have significantly higher labor force participation rates:
This means that more of them want jobs. Therefore they are an increasing percentage of the Total Civilian Labor Force (those who have jobs and those who don't have jobs and are looking for work.
And more of them are finding jobs at a higher rate than Native Born Workers:
As a result, Foreign Born workers are an ever increasing percentage of those with jobs.
So most of the job growth since the start of the December 2007 recession has gone to Foreign Born workers.
As a result, wages continue to stagnate:
Sources: St. Louis Federal Reserve, Calculated Risk, BLS.GOV, Pew Research, Washington Post, Real Clear Politics
