Stat of the Day: Just Who Has Left the Workforce, Anyway?

Digging Into Unemployment Data Yields Surprising News About Who Is and Isn't Working

By Published on .

As a guy who crunches numbers all the time (which may be the reason I'm so short on friends), I get this question almost every day: "How are we supposed to sell anything in the midst of all this economic turmoil?"

My quick answer is to suggest the questioner stop paying attention to the constantly reported bad news about how many people are unemployed or have dropped out of the workforce, and start looking at the bigger picture of all American consumers.

What gets reported at the top of the news are daily swings of stock indexes, weekly changes to the job numbers and slight changes in total retail sales. Such numbers are usually followed by commentary about the political effect of such bad news.

What is almost never reported are important details about the workforce, job and income trends and what they might mean for future sales of consumer goods or services. Much is made, for example, of how many people have dropped out of the labor force. What has generally not been reported is that most of those leaving the workforce over the past five years were either teenagers or aged 65 or older.

US employment characteristics July 2011

US employment characteristics annual 2005

As of July 2011 there were 140.4 million people in the nation with a job and more than three quarters of those workers (78%) worked in the private sector. They were paid an average of almost $800 a week, which adds up to a bit over $41,000 a year. Multiply that by the 110 million private sector workers and it produces an estimate of $4.5 trillion in total annual income of just private non-farm workers.

That's where the marketing focus needs to be. Yes, there were 14.4 million people counted as unemployed this July. But 10 times that number had a job and were spending their earnings on such items as food, shelter, clothing and transportation. It's the 75.2 million working men and 65.2 million working women who are making and quickly spending the money that we in marketing and advertising need more news about. I think we know enough about the rest of the population.

Let's return for a moment to those who report on Census Bureau surveys that they have left the labor force. Back in 2005 when the unemployment rate was only 5.1%, about 76.8 million people said they were not in the workforce. By 2010 that number had grown to 83.9 million, an increase of 7.2 million to the ranks of those not counted as working or looking for work.

Most of that increase (55%) was either the 2.2 million people aged 65 or older or the 1.8 million teenagers who left the workforce, and presumably went back to school. Among older workers there are more than 3 million baby boomers will turn 65 years old every year in this decade. If just half of them retire that could add as many as 8.3 million people to the ranks of people leaving the workforce over the next five years. That's more than those of all ages who left in the past five years.

The point is that over the next few years baby boomer retirees will probably be far more responsible for a drop in the national labor force participation rate than any economic conditions. But of course a simple explanation like that can't be converted into a club to beat some political opponent over the head with, so don't expect to hear about it on the nightly news anytime soon.

As more baby boomers exit the workforce the focus of more marketing and advertising will naturally shift to the next big generation -- millennials. Over the next five to 10 years we will see more than 4 million of them a year entering the labor force, half of whom will have a two or four year college degree. They will more than make up for any loss of consumer buying power due to retiring baby boomers.

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Peter Francese is the demographic trends analyst at Ogilvy & Mather, New York, and founder of American Demographics magazine.

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