Why Aren't Americans Working?

11/24/21 10:04AM EST

Below is a complimentary Demography Unplugged research note written by Hedgeye Demography analyst Neil Howe. Click here to learn more and subscribe.

Why Aren't Americans Working? - 11 24 2021 10 04 43 AM

What can the Census’s ongoing Household Pulse Survey tell us about the labor shortage? The survey tracks reasons why Americans are not working, and the results line up with our predictions and estimates. (Census Bureau)

NH: Over the last few months, we have written numerous stories on America’s persistently low LFP rate. (See "Was the October Jobs Report Good News?" and "Will the Great Resignation Last?")

Here we look at a periodic Census survey source that can help us identify motivations behind labor-force exits.

Just after Covid-19 hit, the Census Bureau began the Household Pulse Survey, designed to ask Americans how the pandemic was affecting them--economically, socially, and emotionally.

Because the respondents include a cross-section of all adults, whether or not they are working, the survey can reveal reasons why people aren't working. The answers are weighted to reflect the adult population as a whole. 

In one multi-part question, respondents are asked if they are employed. If they are not, they are asked to specify why.

In the following table, we have grouped reasons by category--for example, all people not working because they were laid off or furloughed or their employer closed are grouped together in a big bin that roughly corresponds with "involuntary unemployment."

Unfortunately, since the Census didn’t conduct this survey before Covid-19, we can't compare any recent results with pre-pandemic America. Nevertheless, the results are revealing. 

Here we show the numbers at four distinct dates: in late April 2020 (the first survey, when the economy was under lockdown); in late January 2021 (near the peak of winter infections); in late June 2021 (at the summer low point in new cases and deaths); and in early October 2021 (the most recent survey).

Why Aren't Americans Working? - Pulse

The most important bottom line is this: The number of Americans jobless due to typical unemployment reasons (laid off, employer closed, etc.) is down -39.5M from April 2020.

But the overall number jobless is down only -16.3M. That means +23.2M more people than before are non-employed for other reasons.

In other words, yes, there is a very large increase in the number of American adults who are not employed--and for reasons seemingly unrelated to involuntary separation from an employer.

So what are these reasons?

  • Covid-19: 3.7M Americans aren't working because they either have Covid-19 symptoms or are caring for someone with such symptoms. That's +2.4M more people than in April 2020, when daily deaths were 40% higher. Many of these people are probably suffering from Long Covid. And I also suspect that most of the rise in people "sick for reasons not related to the coronavirus" (+0.5M) is due to misdiagnosed or undiagnosed Long Covid. (See "The Long Shadow of Long Covid.")
  • Early Retirement: Over the last 18 months, +6.2M more Americans have retired. Much of this rise happened late last year and early this year. While we don't have a pre-pandemic comparison, the Dallas Fed estimates there have been +1.5M more retirements than expected since February 2020. (See "Is Labor Force Participation Down for Good?")
  • Disengagement: 5.5M Americans aren't working because they "don't want to be employed." That's an increase of +1.7M since April 2020. This could reflect the historic growth in real disposable income. Some people simply don't need money right now. (See "Why Nobody Knows Anything.") 
  • Other Reasons/Didn't Respond: 24.9M Americans aren't working for other reasons/did not respond. That's an increase of 10.8M. Roughly 60% of this category is people who gave "other reasons." While we don't know what those reasons are, people clearly have priorities other than being employed at the moment. One possible shift underway is what we have called a "turning away from the market economy." This includes multigenerational households in which people are "doing without (or handling themselves) some of the services and products they'd otherwise be working to pay for, whether it's childcare, meals, education, or personal care."

The Census just finished phase 3.2 of the Household Pulse Survey. It will begin another iteration of the poll in December. We will be sure to cover the changing trends.  

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Neil Howe is a renowned authority on generations and social change in America. An acclaimed bestselling author and speaker, he is the nation's leading thinker on today's generations—who they are, what motivates them, and how they will shape America's future.

A historian, economist, and demographer, Howe is also a recognized authority on global aging, long-term fiscal policy, and migration. He is a senior associate to the Center for Strategic and International Studies (CSIS) in Washington, D.C., where he helps direct the CSIS Global Aging Initiative.

Howe has written over a dozen books on generations, demographic change, and fiscal policy, many of them with William Strauss. Howe and Strauss' first book, Generations is a history of America told as a sequence of generational biographies. Vice President Al Gore called it "the most stimulating book on American history that I have ever read" and sent a copy to every member of Congress. Newt Gingrich called it "an intellectual tour de force." Of their book, The Fourth Turning, The Boston Globe wrote, "If Howe and Strauss are right, they will take their place among the great American prophets."

Howe and Strauss originally coined the term "Millennial Generation" in 1991, and wrote the pioneering book on this generation, Millennials Rising. His work has been featured frequently in the media, including USA Today, CNN, the New York Times, and CBS' 60 Minutes.

Previously, with Peter G. Peterson, Howe co-authored On Borrowed Time, a pioneering call for budgetary reform and The Graying of the Great Powers with Richard Jackson.

Howe received his B.A. at U.C. Berkeley and later earned graduate degrees in economics and history from Yale University.

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