Dwindling labor force eases US joblessness
Continued economic growth will keep chipping away at the number of jobless Americans as 1984 unfolds. However, gains against unemployment will slow along with the pace of the recovery, economists say.Skip to next paragraph
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The labor market picture is brightened somewhat by a significant slowing in the growth of the labor force - those who are working or looking for work.
''We are returning to a situation in which the labor force is growing more slowly than the population,'' says William Dunkelberg, chief economist at the National Federation of Independent Business (NFIB).
Slower growth in the number of job seekers could put less upward pressure on the jobless rate in coming years. And the demographic changes that are behind the slowed growth rate - including a dramatic decline in the number of teen-agers entering the job force - may also boost industrial efficiency and change workers' relations with their employers, experts say.
Since December 1982, the civilian unemployment rate has plunged 2.4 percentage points, to 8.4 percent. Observers expect some additional progress when figures for December 1983 are released today. Data Resources Inc., a forecasting firm, was expecting an 8.2 percent civilian jobless rate for December, while NFIB's Mr. Dunkelberg said it would be at or below 8 percent.
But for 1984 as whole, both Reagan administration and private forecasters expect gains against joblessness to slow from 1983's pace. The administration expects an average 1984 unemployment rate of 7.8 percent, while Chase Econometric Associates is predicting 8 percent. Based on today's labor force, the Chase figure would leave about 9 million workers still seeking jobs.
''Even if we have another million people cut from the unemployment rolls, we will still have a huge number of unemployed,'' notes Markley Roberts, an AFL-CIO economist.
One reason joblessness may remain high is that businesses want to hold on to the efficiency gains they made by trimming their work force in the recession. A recent nationwide survey by Business Week magazine, for example, found many executives adding to their payrolls very cautiously and filling bigger sales orders by boosting their use of overtime.
If the recovery continues as expected, firms eventually will have to hire new workers or recall laid-off employees. The labor pool from which they will draw recently has been growing much more slowly than in the past.
''The pace of labor growth has been declining quite steadily since the late 1970s, when annual growth of 2.5 to 3 million was the rule,'' Janet Norwood, commissioner of Labor Statistics, recently told Congress. By comparison, in the 12 months ending in November 1983, the labor force grew by 1.3 million people.
''It is unrealistic'' to assume the labor force will grow as slowly in the next five years as it has in the past 12 months, says DRI economist Peter Duprey. DRI expects labor force growth of about 2 percent in 1984 vs. 0.9 percent in 1983. Other forecasters see annual average labor force growth in the 1980s of 1.5 to 1.8 percent. That compares to average annual growth of about 2.7 percent in the 1970s.
The return to the labor force of so-called discouraged workers is one factor expected to push up labor-force growth in 1984, and perhaps cause a temporary upward blip in the unemployment rate. Discouraged workers have stopped looking for jobs and thus are not counted among the officially unemployed.
''In 1984 there will be more returning to the labor force on the part of these people,'' as the economic outlook brightens, says Audrey Freedman, a labor economist with the Conference Board research organization.
A variety of factors is behind the expected slowing in labor-force growth. A major cause is a decline in the number of teen-agers entering the work force, as the baby-boom generation matures.
The number of teen-agers in the labor force increased by 700,000 in the year ending in November 1978 but fell by half a million in the 12 months ending this November. In addition, the number of women entering the labor force is beginning to slow now that a large portion already work outside the home.
''When the rate of entry slows down, you suddenly get (improved) productivity growth,'' notes Marc Bendick, a labor expert at the Urban Institute. The amount each worker can produce per hour grows as the average worker begins to have more experience.
A decline in the supply of replacement workers may also change the way firms deal with employees, experts say. There may be more pressure to hold on to older , experienced workers rather than retiring them, for example.
And firms, such as fast-food outlets, that counted on a steady supply of young, new workers will have to make adjustments in personnel practices, notes Barry Bosworth, a senior fellow at the Brookings Institution.
Finally, with fewer inexperienced workers to absorb, economic policy-makers may be able to shoot for a somewhat lower unemployment rate without risking an inflationary surge, Mr. Bosworth contends. ''You could knock about 1 percent'' off the 6.5 percent unemployment rate generally thought to be the lowest level possible without stoking inflation.
However, Martin Feldstein, chairman of the President's Council of Economic Advisers, says the changes in labor force growth will make less of a difference in the jobless level policymakers can target. While it is hard to be precise, ''we are probably talking a few 10ths of a percent,'' he said in a recent interview.