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Tightening Labor Market
Consensus Economic Forecasting CommissionOctober 26, 2015
Glenn MillsChief Economist
Center for Workforce ResearchMaine Dept. of Labor
www.maine.gov/labor/[email protected]
207-621-5192
The unemployment rate was 4.4% in September. It has been lower only for short periods in the last 40 years.
Labor force participation continues to decline as thousands of baby boomers retire
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400,000
450,000
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Civi
lian
Labo
r For
ceThe labor force has declined more than 15,000 since 2013
Baby boomers beginning to exit workforce
Baby boomers entering workforce
Maine has had no real GDP growth in a decade
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2009
2011
2013
75%
100%
125%
150%
175%
200%
225%
250%
United StatesMaineIn
dex
of G
DP
in 2
013
$ (1
975
=100
)
Baby boomers beginning to exit workforce
Baby boomers entering workforce
September 2014At 5.8% of the labor force, we currently have 40,000 unemployed. At a healthier 4.5% there would be 32,000 unemployed based on the size of the labor force today. For the near-term forecast, the question is if a gain of 8,000 (or more) jobs from lower unemployment will exceed reductions in labor force participation due to retirements. If so, by how much and for how long?
March 2015At 5.0% of the labor force, we currently have 34,400 unemployed. If the rate declined to a very low 4% there would be fewer than 28,000 unemployed. The question is, will a gain of 6,000+ jobs from lower unemployment and several thousand more from higher labor force participation of younger people be enough to offset labor force exits due to retirement? If so, by how much? For how long?
October 2015At 4.4% of the labor force, we currently have 30,200 unemployed. If the rate declined to a very low 3.5% there would be fewer than 24,200 unemployed. The question is, will a gain of 6,000 jobs from lower unemployment plus some number from higher labor force participation of younger people be enough to offset labor force exits due to retirement? If so, by how much? For how long?
In light of now very low unemployment and a contracting labor force, it seems unlikely job growth will match the
current forecast, especially after 2016
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CEFCT
ota
l N
on
farm
Jo
bs
In light of now very low unemployment and a contracting labor force, it seems unlikely job growth will match the
current forecast, especially after 2016
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
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2019
580
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600
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630
CEFC
To
tal N
on
farm
Jo
bs
Inflation-adjusted total wages have started to rise faster than employment. This is primarily due to near zero
inflation. In nominal dollars the recent increases are about in line with previous quarters.
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.1
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00
.4
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01
.3
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02
.2
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.1
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03
.4
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.3
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.2
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.1
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.4
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.3
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.2
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.1
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.4
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.3
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.2
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.1
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.4
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.3
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.2
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.1
560,000
580,000
600,000
620,000
$5.6
$5.8
$6.0
$6.2
Jobs (left scale)
Total Wages (right scale)
Wag
e &
Sal
ary
Jobs
Tot
al W
ages
(in
Bill
ions
of
2014
Q2
$)
In current dollars, over the year increases in quarterly average wages are up slightly from two years ago
2001
.1
2001
.4
2002
.3
2003
.2
2004
.1
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.4
2005
.3
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.2
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.1
2007
.4
2008
.3
2009
.2
2010
.1
2010
.4
2011
.3
2012
.2
2013
.1
2013
.4
2014
.3 0
-2%
0%
2%
4%
6%
Over the Year Change
4Q moving average
Ove
r Y
ear
Cha
nge
in A
vera
ge W
ages
(In
curr
ent
$)
After inflation adjustment the rise is more pronounced. It will be some time before we know the extent to which a
tightening labor market may or may not be pushing wages up.20
01.1
2001
.4
2002
.3
2003
.2
2004
.1
2004
.4
2005
.3
2006
.2
2007
.1
2007
.4
2008
.3
2009
.2
2010
.1
2010
.4
2011
.3
2012
.2
2013
.1
2013
.4
2014
.3 0
-6%
-4%
-2%
0%
2%
4%
Over the Year Change4Q moving average
Ove
r Y
ear
Cha
nge
in A
vera
ge W
ages
(In
2014
Q2
$)
For the revenue forecast, the big question is the extent to which a contracting labor force will impact the rate
of change in personal income
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 201595%
100%
105%
110%Real GDPReal PILabor Force
Inde
x, 2
004
= 10
0
Maine
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 201595%
100%
105%
110%
115%
120%
125%Real GDPReal PILabor Force
Inde
x, 2
004
= 10
0
United States
